New Tax Treaty between Malta and China
The Double Taxation Agreement (DTA) between Malta and China was published by means of Legal Notice 423 of 2011.
The Maltese Minister of Finance, the Economy and Investment Tonio Fenech and Minister for Taxation of the People’s Republic of China Xiao Jie had signed the new Agreement for the Avoidance of Double Taxation on 23 October 2010. The Agreement entered into force on 25 August 2011.
This Agreement replaces another DTA between Malta and China signed on February 2, 1993, It will provide investors from both countries with more attractive conditions for investment in Malta or China.
Indeed the withholding tax rate for dividends for a holding of at least 25% of the company paying the dividends has been established at 5% as opposed to 10% under the previous treaty. The withholding tax rate on dividends remains at 10% in case the 25% threshold is not satisfied.
The withholding tax rate on interest is 10% whereas the withholding tax rate for certain royalties has been reduced from 10% to 7%.
The provisions of this DTA are in line with the Organization for Economic Cooperation and Development Model Tax Convention on Income and Capital and recent tax treaties concluded by both countries.
The DTA introduces certain provisions to prevent tax avoidance through treaty abuse and updates the exchange of information article in accordance with current internationally agreed standards.