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Archives for DTT

The end of Single Malt structures

On the 27 November 2018, it was announced that an agreement was reached between Malta and Ireland which ends the Single Malt structures.  These were being used through the transfer of the management and control of Irish incorporated entities to Malta.   Through a Competent Authority Agreement, Malta and Ireland agreed that the purpose of the Double Taxation Convention (DTC) is to eliminate double taxation and not create the opportunity for double non-taxation.  Thus, deeming a company incorporated in Ireland but managed and controlled in Malta to be tax resident only in Malta, does not serve the purposes of the Double Taxation Convention as income was not being brought to charge in neither Malta nor Ireland when the income was not remitted to Malta.  Accordingly, such an Irish-incorporated company will be tax resident in Ireland and the relevant payments to it will come within the charge to Irish corporation tax.

 

The agreement will come into force with effect from taxable periods beginning on or after the expiration of a period of six months from the later of the dates on which the Multilateral Instrument (MLI) enters into force in Ireland and Malta.  Malta endorsed its agreement with reservations to the MLI through Subsidiary Legislation 123.183 however, to date, the effective date marking the date when such legislation will come into force is yet to be announced.

 

The Agreement provides the following:

From the coming into effect of the MLI with respect to the DTC between Ireland and Malta (the “Contracting States” in relation to that DTC), where – 

  • for the purpose of avoiding double taxation, under paragraph 3 of Article 4 of the Ireland-Malta DTC a company would be deemed to be only resident in one of the Contracting States, but
  • in the circumstances concerned – 
    • there is no double taxation to be avoided, and
    • it is reasonable to conclude that an opportunity for double non-taxation would otherwise arise,

then any such deeming of the company to be resident only in one of the Contracting States shall not be for the purposes of the Ireland-Malta DTC – as it would serve no such purposes.  It would be superfluous to, and redundant for, those purposes.  

The Competent Authorities shall notify each other in a timely manner where they become aware of circumstances to which this Competent Authority Agreement refers.

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Malta signs a tax treaty with Mauritius

On 15 October 2014 Malta signed a tax treaty with Mauritius.  The treaty was published by means of legal notice 409 of 2014.

The tax treaty is modelled on the OECD model convention.  However, it is interesting to note that no withholding tax is levied on dividends, interest and royalties and therefore the source state will not tax dividend income, interest or royalties and the residence state will have exclusive jurisdiction to tax such income.  The treaty provides that the source state will have taxing rights with respect to capital gains on immovable property and movable property.

The tax treaty also contains ‘standard articles’ with respect to the elimination of double taxation (under the credit method), mutual agreement procedure, exchange of information and a rather detailed article with respect to assistance in the collection of taxes.

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Malta signs a tax treaty with Moldova

Malta and Moldova signed a double taxation agreement.  The agreement was signed on 10 April 2014 between Foreign Minister George Vella and his Moldovian counterpart Natalia Gherman.

Malta and Moldova also signed a joint declaration on European Integration.  Malta promises to offer Moldova its assistance in many areas including tourism, education, and ICT based on its own experience of recent European integration.

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Malta signs a tax treaty with Macau

Malta and Macau agreed to work together to prevent tax evasion and tax avoidance.  Macau’s Secretary for Economy and Finance Francis Tam Pak Yuen and the Maltese ambassador to China, Joseph Cassar, signed a tax treaty in Beijing on May 30.

All the legal arrangements between both jurisdictions have been completed and the treaty is likely to come into force in January 2014.

The treaty allows the authorities in Macau and Malta access to other’s data on the financial position and income of their citizens that owe tax, and may reveal undeclared assets and earnings.  Such data will include information relevant “to the determination, assessment and collection of taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters”, the treaty says.  The authorities may share information held by banks or other financial institutions.  They may share information about the direct or indirect ownership of companies, trusts and foundations, and about partnerships.

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Malta and USA conclude FATCA negotiations

Malta and the USA concluded negotiations with respect to an Intergovernmental Agreement (IGA) in relation to US Foreign Account Tax Compliance Act Regulations (FATCA).

FATCA was enacted in 2010 by the US Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA requires non-US financial institutions to report to the US Internal Revenue Service (IRS) information about financial accounts held by US taxpayers, or by non-US entities in which US taxpayers hold a substantial ownership interest.

The IGA has been negotiated on the basis of the latest Model 1 IGA (reciprocal version) issued by the US. The basic purpose of this IGA is to ensure that financial institutions which are resident (or carrying on business) in Malta or the US, will comply with certain prescribed reporting obligations. The IGA will require financial institutions in both Malta and the US to submit the required information to their own tax authorities, which in turn will automatically share such information with the other tax authority. Such shared information will be used by the tax authorities to ensure that the relevant tax laws of the two countries are being complied with.

As a consequence of compliance with the IGA, financial institutions that are resident or operating in Malta and that comply with the terms of the IGA will benefit in that they will not be subject to the FATCA 30 per cent withholding tax on the payments they receive. The IGA is also intended to reduce the administrative burden of complying with the FATCA regulations as well as to provide a mechanism for Malta financial institutions to comply with their obligations without breaching the data protection laws.

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Malta signs a tax treaty with Turkey

An income tax treaty for the avoidance of double taxation between Malta and Turkey, which was signed in 2011, come into force on 13 June 2013.

The treaty provides for a 10% withholding tax on dividends paid by a Turkish resident company to a Maltese company in which it has at least a 25% stake. In all other cases a maximum withholding tax of 15% will be applied.  Malta will not tax dividends paid by a Maltese resident company to a Turkish resident company.

A maximum Turkish withholding tax of 10% will apply to interest and royalties paid by a Turkish resident to a Maltese resident beneficial owner of the interest or royalties.

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Malta – Liechtenstein tax treaty

Liechtenstein’s Foreign Minister Aurelia Frick and the Maltese counterpart George Vella signed a bilateral double taxation agreement (DTA) between the two countries in respect of taxes on income and on wealth.  The DTA was signed in New York.

The treaty is based on the Organisation for Economic Cooperation and Development’s (OECD) Model Convention.

Both countries have agreed to waive withholding taxes on dividends, interest, and royalties.  The treaty also contains provisions clarifying and governing the entitlement to tax treaty benefits of Liechtenstein pension funds, charitable organisations, and investment funds.  In addition, the treaty guarantees national taxing rights for the taxation of natural persons, and includes an information exchange clause. The residency of trusts is regulated separately.  Finally, the DTA makes provision for an arbitration clause to ensure that within the framework of a specified process, a binding solution is achieved for both treaty partner states in the event of an interpretation or application dispute.

The treaty requires the parliamentary approval of both jurisdictions and is expected to apply from January 1, 2014.

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