Although Malta and Russia have a long history of bilateral relations, they did not conclude a double taxation agreement until the 24th of April 2014. The treaty was signed in an effort to avoid double taxation as well as to prevent fiscal evasion in regards to taxes on capital and income charged on companies conducting business in the two countries. It came into effect on the 22nd of May 2014.
What are the provisions of the Ireland-Malta DTA?
It is important to know that the provisions offered by the double taxation treaty between Malta and Russia are generally built on the 2008 OECD Model Tax Convention. Nonetheless, there are a few differences you would find compared to the Model Convention.
The provisions of the double taxation treaty between Malta and Russia will still continue to be relevant even if the two countries introduce new tax regimes. As a general rule, Maltese and Russian authorities will notify each other each year about any changes that may have transpired in their respective taxation regulations during the year.
Russian Tax scheme
A Russian resident company with dividends distributed to a Maltese resident company which holds at least 25% share capital of the Russian-resident company is liable to pay a maximum of 5% Russian Tax.
However, in all other cases, the Russian tax is set at a maximum of 10%
Dividend tax will be exempted if the beneficial owner happens to be a pension fund residing in Malta.
In the case whereby a Russian citizen pays interest to a Maltese resident who happens to be the also the beneficial owner, the tax is capped at 5% the gross amount of the interest.
When a Russian resident pays a royalty to a Maltese resident who also happens to be a beneficial owner, the royalty is capped at 5% the gross amount of the royalties.
- Other income
Malta’s Tax scheme
Fortunately, the Maltese government does not impose a tax on dividends distributed by Maltese-resident companies to non-residents. Neither does the Maltese jurisdiction impose any tax on interest and royalties obtained from non-residents so long they comply with the statutory stipulations, especially that their respective income is not effectively linked with a permanent establishment by which the non-resident uses to conduct business operations.
As a general rule, any taxes incurred by a resident of either Malta or Russia, arising in one of the two countries—and that is not dealt with in any of the other provisions of the treaty—it can be taxed in the country in which it resides. It is an offense to apply any of the advantages given by the convention to a citizen of either Russia or Malta solely for the purpose of benefiting from the terms of the treaty
Presently, there are over 300 companies with Russian shareholding in Malta. The signing of the Double taxation treaty between Malta and Russia has made doing business easier for companies operating in the two countries. For a deeper and more detailed explanation of the double taxation treaty between Malta and Luxembourg, feel free to get in touch with SIGTAX Agents. Our expert team of lawyers, accountants and consultants is ready to assist you in each step. Our lawyers can provide you with finer details on the legal aspects pertaining to the double taxation system in Malta so that you don’t skip any necessary steps.