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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 FATCA

Malta signed intergovernmental agreements with the US Treasury Department to implement the Foreign Account Tax Compliance Act (FATCA).  Malta signed the Model 1A agreements.  Under these agreements, Foreign Financial Institutions (FFIs) will report the information required under FATCA about US accounts to their home governments, which in turn will report the information to the IRS.  These agreements are reciprocal, meaning that the United States will also provide similar tax information to these governments regarding individuals and entities from their jurisdictions with accounts in the United States.

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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 ratifies Convention on Mutual Administrative Assistance

Legal Notice 282 of 2013 entitled JOINT COUNCIL OF EUROPE/OECD CONVENTION ON MUTUAL ADMINISTRATIVE ASSISTANCE IN TAX MATTERS ORDER, 2013 brings into force the Joint Convention on Mutual Assistance ratified by Malta on May 23.

The Convention provides that state parties to the Convention must provide each other with administrative assistance in tax matters. Administrative assistance comprises exchange of information, assistance in recovery including measures of conservancy and service of documents.

The Convention applies to taxes on profits and capital gains, taxes on wealth, compulsory social security contributions.   It provides for exchange of information on request, automatic exchange of information and spontaneous exchange of information.  It also provides for simultaneous tax examinations, tax examinations abroad, assistance in recovery measures of conservancy, time-limits and service of documents.

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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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