Malta first agreed on a double taxation agreement with the USA in 1980 but due to changes in their tax model, the deal could not last through 1997 after their collaborator pulled out. Almost a decade later, the two signed yet another pact in 2006 which this time was framed based on the US tax model. This deal went into effect the following year although it was subject to further improvements which came in 2010. Of more significance was the facilitation for fighting tax evasion that made the greater worth for this change.
Motivation for the Double taxation deal
The push factors that motivated the two collaborators into signing a double tax treaty was to boost commerce between Malta and the US. In order to make that happen the deal had to protect revenues from being taxed twice between the two nations. The Malta-US double tax treaty offers an eye-catching cut on taxes for business transactions made between the two nations. It has allowed a significant reduction in tax charges on payment of royalties, interests, and dividends across the two nations.
Rules of engagement
The double tax treaty comes with a plethora of benefits for both Maltese and US investors. Maltese investors won’t be charged with tax when they pay revenues to a US tenant (unless they surpass the agreed threshold). However, a tenant of the USA can be charged with a tax of 15% if paying revenues to a resident of Malta. There is however a slight tax bargain, a reduction by 10% if the receiver has a minimum of 10% the voting power of the client. Malta’s impressive network of double taxation agreements together with its investment incentives have left Malta a marvel to the world of business—especially including the tax breaks that are made to returns payments from pension funds
As with regard to transacting interests and royalties, both nations are charged with the same rate of 10% and the payer takes the charge. Tax on earned income by a tenant of one state in the other state is charged by the country of residence of the employee unless if the employee has worked in the other nation for a period surpassing 183 days of that year—in this case, the other nation becomes obliged to take over the taxation responsibility. To benefits from the Malta-US double tax treaty, the residents of the two countries have to be eligible personnel— that is, they have to be residents of either state. They also could be pension funds or listed organizations or companies on the Stock Exchange.
For a deeper and more detailed explanation of the double taxation treaty between Malta and the United States, 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.