The American Chamber of Commerce of Malta, in collaboration with the U.S. Embassy in Malta, organized a forum on the theme “Malta Double Taxation Agreement – What it means for Maltase businesses?”. Dr. Juanita Brockdorff`s presentation on the subject on this forum can be downloaded here (.ppt 1.12 mb). The purpose of the new double taxation treaty between the United States and Malta is to promote and facilitate trade and investment between the two countries. The main objective of the Convention is to avoid double taxation of income generated in one State for a resident of the other State. However, it also provides for reduced withholding tax rates for cross-border payments of dividends, interest and royalties, as well as the abolition of withholding taxes on cross-border dividends paid to pension funds. The agreement provides that countries must not discriminate, that is: they cannot tax an inhabitant of the other country at a higher rate than they would have taxed their own citizens in the same circumstances. An article entitled Malta Double Taxation Convention already exists in stored items The double taxation convention cannot be applied in a way that denies any taxable person from one of the two countries any advantage to which he would be entitled under the national law of his country or another convention between Malta and the United States.
After years of negotiations, the double taxation agreement between the United States and Malta was signed on Tuesday, November 2, 2010 and ratified with effect from January 1, 2011. The double taxation convention replaces an earlier convention that was denounced in 1997. This is a welcome step to further strengthen the ever-growing presence of US companies participating in the Maltese economy. So far, an estimated 1-2% of the Maltese workforce in the US is in the US, mainly in hotel chains, ICT services, and production and service facilities. The agreement aims to remove barriers to cross-border trade and investment, while avoiding tax evasion. The aim is to ensure that US and Maltese citizens are taxed only once on their profits and income and limits source payments to dividends, royalties and other unensed income. In order to stimulate the growth of international trade, including financial services, successive Maltese governments have attempted to conclude double taxation agreements with important trading partners as well as with emerging countries. These bilateral agreements resolve the issues of double taxation of passive and active income. Current tax treaties can be found here. Under the agreement, pensions and similar payments are taxable only by the country paying them, even if the person resides in the other country.
Some payments, such as dividends and royalties, are taxable by both countries, but there is a maximum source value of 10 percent. However, a tax credit must be allowed in the other country if, for example, the landkreis from which a dividend originates assesses the tax at the time of payment. As a result of this agreement, the U.S. and Maltese authorities have agreed not to tax business income from sources within their country by residents of the other country, unless the activity of the foreign person or foreign enterprise is sufficiently significant to constitute a permanent establishment. . . .
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