Malta: Malta's Double Tax Treaties - January 2015

Last Updated: 17 March 2015
Article by André Zarb, Anthony Pace, Juanita Brockdorff and Doreen Fenech

In order to encourage the growth of international trade including that of financial services, successive Maltese governments have sought to conclude double tax treaties with important trading partners as well as with emerging countries. This policy is expected to continue in the future. To date, treaties are in force with 68 countries.

The following table illustrates the treaty and non-treaty withholding tax rates when dividends, interest and royalties are paid from treaty countries to Maltese residents. In general there is no withholding tax under Maltese law on dividends, interest and royalties even where a treaty allows such tax.



Treaties signed but not yet in force

Mauritius, Moldova and Ukraine protocol to the treaty with Belgium.

Treaties being (re)negotiated

Azerbaijan, Bosnia and Herzegovina, Oman and Thailand.

Treaty

  1. 0% for the use of, or right to use copyrights of literary, artistic or scientific work
  2. 0% for interest on commercial debt-claims
  3. 0% for the production or reproduction of literary, educational, dramatic, muscial or artistic work
  4. Tax on royalties derived as a consideration for the use of, or right to use, industrial, commercial, or scientific equipment shall not exceed 10% on an amount corresponding to 70% of the gross amount of the royalties
  5. Held for a 12 month period prior to the date the dividends are declared
  6. 0% applies to interest paid by the Government of that Contracting State, a political subdivision, a local authority or the Central Bank thereof and interest paid to a resident of the other Contracting State on corporate bonds traded on a Stock Exchange in the first- mentioned State.
  7. 0% for the use of or right to use, any copyright of literary, artistic or scientific work, cinematographic films or tapes for television or broadcasting
  8. 0% for interest paid in connection with the sale on credit of any industrial, commercial or scientific equipment or paid in connection with the sale on credit of any merchandise by one enterprise to another
  9. The 0% rate applies to interest paid on loans as defined in the Malaysian Income Tax Act
  10. 5% applies to the use of or, the right to use copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for radio or television broadcasting
  11. Held for an uninterrupted period of 24 months. This period can also be met after the payment of dividends is made
  12. 5% applies to royalties paid for the use of or the right to use, industrial, commercial or scientific equipment
  13. 7% applies if the interest is received by a bank, 10% in all other cases
  14. Held for at least 12 months and provided both companies:

    1. are not resident for tax purposes in a third state under any double taxation agreement; and
    2. are not resident for tax purposes in a third state under any double taxation agreement; and
    3. have adopted the form of a limited liability company.
  15. 0% applies to interest paid between associated companies and to interest paid in connection with the sale on credit of any industrial, commercial or scientific equipment; in connection with the sale of any merchandise by one enterprise to another enterprise; or on any loan of whatever kind granted by a bank
  16. Lower rate of 5% also applies if the beneficial owner is a Collective Investment Scheme
  17. 5% for the use of or the right to use, any industrial, commercial or scientific equipment, and copyright of literary, artistic or scientific work
  18. 15% applies to interest that does not quality as portfolio interest
  19. 0% applies in four given scenarios, 5% applies to interest from loans granted by certain banks, 10% applies in all other cases

Non-Treaty

  1. 0% for fully franked dividends, distributions of conduit income, etc. 30% for unfranked dividends
  2. 0% applies if paid out of foreign sourced income, 25% applies if paid out of profits that are exempt or have not been taxed and 15% applies in all other cases
  3. 0% applies to arm's length payments
  4. 5% applies to film royalties and 10% applies to any other royalties
  5. 30% of profits multiplied by the applicable corporate tax rate
  6. 20% applies to patent royalties
  7. 25% applies where the shareholding is less than 10% and where the payor is a company resident in Israel whose shares are listed and traded on a stock exchange. 30% applies where the shareholding is equal to or more than 10%.
  8. 5% applies to interest paid to an associated company resident in another EU Member State or to a Permanent Establishment of such a company
  9. Royalties paid to non-resident companies are subject to a withholding tax of 30% on 75% of the gross royalty i.e. resulting in a final tax of 22.5%
  10. 15% applies to dividends distributed by fund managers, investment custodians and corporate bodies
  11. 5% applies to interest paid to an associated company resident in another EU Member State or to a Permanent Establishment of such company
  12. 15% applies to copyright, royalties, this is reduced to 5% if paid to an associated company resident in another EU Member State or to a Permanent Establishment of such company. For other royalties the 5% rate applies
  13. The 5% rate applies to interest on debts, deposits and guarantees
  14. The 0% rate applies to governemnt securities issued in the international markets, deposit interest and interest payments to companies resident in EEA
  15. 0% applies when the domestic exemption applies, that is, when dividends are paid by a Swedish company to a foreign company on business related shares
  16. The applicable rates of withholding tax are: 0%, 1%, 3%, 5%, 7%, 10%, 12%, 13%, 15% and 18%. Each rate of withholding tax applies according to the source from which the interest income arises
  17. 0% for film copyright royalties
  18. 3% applies to interest paid by financial institutions out of deposits in domestic currency or indexed units with more than a 1-year term, interest on bonds with a term of more than 3 years issued through a public offer and quoted on the stock exchange and on income certificates issued by financial trusts through public subscription and stock price for periods which exceed 3 years, 5% applies to interest from 1-year term or less deposits and 12% applies to any other interest
  19. 9% for certain mortgage and long-term municipal bonds, 15% for state and other municipal bonds, and 20% in other cases.
  20. 0% applies to interest income paid to a non- resident company from traded government bonds, loans provided by a foreign resident to the state in foreign currency, and deposits of foreign currency bank accounts, provided that no business or profession is conducted in Israel by the foreign resident. 35% applies to interest paid by a bank or financial institution on debentures or on state loans issued before 8 May 2000. 25% applies in all other cases
  21. 10% applies to interest paid to financial institutions, or to publicly traded securities, 15% applies to reinsurance companies, 21% applies to non-resident suppliers of machinery and equipment or paid by financial institutions, 40% applies to entities subject to preferential tax regime, 35% applies to other interest payments
  22. 5% applies to railroad wagons, 35% applies to patents, trademarks and advertising, 40% applies to royalties paid to entities subject to preferential tax regime and 25% applies to other royalties

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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