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Relief from Double Taxation in Malta

The provisions of the Income Tax Act allows companies which derived income or gains deemed to be sourced outside Malta to claim one of the following types of relief:

  • Double Tax Relief
  • Unilateral Relief
  • Flat Rate Foreign Tax Credit

Double Tax Relief

Double tax relief may be claimed by virtue of the applicable provisions of Malta’s double tax treaties. Malta currently has 45 double tax treaties in force, most of which are based on the OECD Model Convention. Given that Malta is a credit country, in most of its tax treaties, Malta has agreed to relieve double taxation using the credit method. Domestic tax law further provides that relief should be provided on a country-per-country basis. Most of the treaties provide for a reduced withholding tax on dividends, interest and royalties paid to a resident of Malta as set out in the table below:

Country

Dividends

% of Majority
Shareholding

Interest

Royalties

Minor Shareholding

Major Shareholding

Albania

15

5

25

5

5

Australia

15

15

-

15

10

Austria

15

15

-

5

10

Barbados

15

5

5

0/5

0/5

Belgium

15

15

-

10

10

Bulgaria

0

0

-

15

10

Canada

15

15

-

15

10

China

10

10

-

10

10

Croatia

5

5

-

0

0

Cyprus

15

15

-

10

10

Czech Rep.

5

5

-

nil

5

Denmark

15

0

25

nil

nil

Egypt

10

10

-

10

12

Estonia

15

5

25

10

10

Finland

15

5

25

10

10

France

15

5

10

10

10

Germany

15

5

25

10

10

Hungary

15

5

25

10

10

Iceland

15

5

10

0

0

India

15

10

25

10

15

Italy

15

15

-

10

10

Korea

15

5

25

10

nil

Kuwait

0

0

-

0

10

Latvia

10

5

25

10

10

Lebanon

5

5

-

0

5

Libya

15

15

-

15

15

Lithuania

15

5

25

10

10

Luxembourg

15

5

25

nil

10

Malaysia

0

0

-

15

15

Morocco

10

6.5

25

10

10

Netherlands

15

5

25

10

10

Norway

15

15

-

10

10

Pakistan

15

15

20

10

10

Poland

15

5

20

10

10

Portugal

15

10

25

10

10

Romania

5

5

-

5

5

San Marino

5

10

25

0

0

Slovakia

5

5

-

0

5

Slovenia

5

15

25

5

5

South Africa

15

5

-

10

10

Spain

5

0

25

0

0

Sweden

15

nil

10

0

0

Syria

0

0

-

10

18

Tunisia

10

10

-

12

12

UK

0

0

-

10

10

 

Unilateral Relief

Unilateral relief is a domestic type of relief which may be claimed by a Maltese resident person who derives income arising outside Malta. Unilateral relief may be claimed when a tax treaty is not in force between Malta and the State where the income has been sourced. Unilateral relief may be claimed the following persons:

  • Individuals resident in Malta
  • Companies resident in Malta
  • Maltese branches of oversea companies

Conditions to claim unilateral relief

Unilateral relief may not be claimed unless the person claiming the relief provides documentary evidence to the Commissioner of Inland Revenue which demonstrates that:

  • Income has been derived outside Malta
  • Income has been subject to tax which is similar to income tax
  • Income tax was paid outside Malta
  • The amount of tax paid

Credit for the Underlying tax

A credit for the underlying tax paid on the profits distributed as dividends may be claimed under the unilateral relief provisions. The underlying tax may be claimed on multi-tier structures provided that the Maltese company is related to the oversea company.

 


Flat Rate Foreign Tax Credit (FRFTC)

A Flat Rate Foreign Tax Credit may be claimed by a company registered in Malta with respect to income and gains arising outside Malta. The FRFTC is a 25% tax credit on the net foreign sourced income received from abroad.

Conditions to claim FRFTC:

  • The company is expressly empowered to receive and allocate income to its foreign income tax account
  • Documentary evidence is available which indicates that such income or gains fall to be allocated to the foreign income account
  • The company is in possession of a certificate from a certified public accountant and auditor certifying that the income in question stands to be allocated to the foreign income account.

The FRFTC may be claimed by:

  • Companies resident and domiciled in Malta
  • Companies resident in Malta
  • Branches of oversea companies

 

 

For more information, kindly contact:

Neville Cutajar - Managing Partner: This email address is being protected from spambots. You need JavaScript enabled to view it.