Malta has made deals with over 70 countries to prevent double taxation. Currently, more than 60 of these agreements are in effect. As a result, these deals help foreign businesses and individuals avoid being taxed twice on the same income. This, in turn, makes Malta an attractive destination for international investors. Double taxation can be a significant burden; therefore, these agreements offer much-needed relief. They provide clarity and fairness in tax matters between countries. If you need more details on these treaties, our Maltese lawyers can provide you with comprehensive information.
Key Points of Malta Double Tax Agreements
Most of Malta’s double tax agreements include:
- Which taxes are covered in both countries
- How to determine residency for individuals and companies
- Ways to avoid double tax, like tax credits, exemptions, or refunds
- Special rules for enforcing and ending the agreement
Many of these treaties also include the exchange of tax information.
Permanent Establishments
The following are considered permanent establishments under Malta’s treaties:
- Fixed business locations such as branches and offices
- Factories, construction sites, and workshops
- Oil and gas wells, mines, and quarries
- Agricultural and pastoral land plots
These places must operate for at least 183 days in a year to be considered permanent establishments in Malta.
Tax Rates in Malta
Malta’s double tax agreements generally have similar tax rates and exemptions, such as:
- Lower tax rates on profits sent back to the home country
- Tax exemptions on certain incomes from Maltese subsidiaries or branches
Common tax rates in these agreements include:
- Dividends: 0% to 15%
- Royalties: 0% to 10%
- Interest: 0% to 15%
- Other types of income may also get reduced rates
Startups and Malta’s Double Tax Agreements
Startups looking to establish themselves in Malta can benefit greatly from the country’s double tax agreements. These treaties can help reduce the tax burden on new businesses, making it easier for them to grow. Additionally, Malta offers incentives for startups, including favorable tax rates and support for innovative businesses. Our experts can guide startups through the process and ensure they take full advantage of these agreements.
Countries with Double Tax Treaties with Malta
Malta has double tax treaties with many countries, including:
- Europe: Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, Finland, France, Germany, Greece, Italy, Latvia, Luxembourg, Netherlands, Switzerland
- Middle East: Bahrain, Hong Kong, Singapore, Qatar, Saudi Arabia, UAE
Malta also has agreements with Russia, China, the USA, Canada, Australia, and several African and South American countries.
US-Malta Tax Treaty Facts
The US-Malta tax treaty, signed in 2008, aims to improve tax compliance and information exchange. Key points include:
- Reciprocity for automatic information exchange
- Coverage for individuals and entities in both countries
- Taxation based on the place of permanent establishment
- Tax rates: 5% on dividends, 10% on interest and royalties
This treaty helps prevent tax evasion and ensures transparency.
Canada-Malta Tax Treaty Facts
The Canada-Malta tax treaty, signed in 1986, aims to avoid double tax and prevent tax evasion. Key points include:
- Income tax for Canadian companies in Malta and vice versa
- Definition of “permanent establishment” including branches, factories, offices, etc.
- Taxation based on the company’s registration or establishment location
- Tax rates: 15% on dividends, 10% on interest and royalties
For more details on the Canada-Malta tax treaty and its implications, talk to our experts.
Malta: A Popular Business Destination
Malta, despite being a small island, is a top business destination due to its favorable tax system, political and economic stability, and a skilled workforce. In 2020, Malta attracted about USD 241 billion in foreign direct investment, mainly in financial and insurance activities. The 2020 Doing Business report ranked Malta 88th out of 190 global economies for optimal business conditions.
FAQs
- What is a double taxation agreement? A double taxation agreement (DTA) is a treaty between two countries designed to prevent the same income from being taxed twice. Essentially, these agreements help provide clarity and fairness in tax matters between countries.
- How can I benefit from Malta’s double tax treaties? If you are a foreign investor or business operating in Malta, you can benefit in several ways. Specifically, these treaties can help you avoid being taxed both in Malta and your home country. Consequently, this can lead to significant tax savings and better financial planning.
- What are the common tax rates? Common tax rates under these treaties typically include 0% to 15% on dividends, 0% to 10% on royalties, and 0% to 15% on interest. However, these rates can vary depending on the specific agreement between Malta and the other country.
- How do I know if my business qualifies as a permanent establishment in Malta? Your business is considered a permanent establishment if it has a fixed location in Malta, such as an office, branch, factory, or construction site, and operates there for at least 183 days in a calendar year. For specific advice, you can consult our Maltese lawyers who can provide detailed guidance.
