In order to avoid the double taxation of income and to provide low withholding taxes on dividends, interests and royalties for foreigners who operate their business in Malta, the country has signed over 60 double tax treaties with various other states.
The income may be exempt from Maltese taxation, or it can be taxed and received a refund in the country of residence, in the limit if the sum that would have been taxed locally, according to the double tax treaty in order.
The withholding tax on dividends, interests and royalties may vary, as it depends on many factors, however, there are lower taxes for countries that have signed a double tax treaty with Malta.
Most of the double tax treaties signed with Malta are based on the OECD model. In the absence of a tax treaty, double taxation relief is still available under the unilateral relief provisions for foreign tax incurred on income arising outside of Malta.
Companies may claim double taxation relief under the flat rate foreign tax credit instead of other forms double tax reliefs, under certain conditions. This situation may be beneficial for those cases when the foreign income has been exempt from tax or taxed at a reduced rate.
Taxes applied to foreign investors in Malta
According to the provisions of the double tax treaties, the taxes may vary depending on the country of residence for foreign investors.
If a non – resident entity holds at least 25% of a Maltese company’s capital and has its residency in China, Germany, Finland, Albania, Hungary, Latvia, Luxembourg, Korea, Netherlands or Kuwait, the withholding tax on dividends has a 5% rate, while in the ret of the cases the tax rate is 15%.
A company with at least 25% of the capital held by a Denmark resident does not have to pay a withholding tax on dividends and a tax rate of 15% in the rest of the cases.
If a resident of France, Sweden, Poland or Switzerland holds at least 10% of the capital of a Maltese company, they will benefit from an exemption on the dividends’ tax.
These are just some examples, as the tax rates may vary for each country that has signed a double tax treaty with Malta. However, the withholding taxes on interests and royalties don’t exceed a tax rate of 15% and in many cases they are not charged at all.
Besides, these specific provisions on tax dividends, double tax treaties also specify what the necessary conditions are to make exchange of taxpayer’s lists between Malta and other countries that have signed double tax treaties.
Countries that have signed double tax treaties with Malta
So far, these are the countries that have signed double tax treaties with Malta: Albania, Australia, Austria, Bahrain, Barbados, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Jordan, Korea, Kuwait, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Malaysia, Montenegro, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Qatar, Romania, San Marino, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Thailand, Tunisia, Turkey, United Arab Emirates, United Kingdom, United States of America.