Double Taxation Relief (Taxes on Income) (Canada) Order, 1988

L.N. 12of 1988

INCOME TAX ACT , 1948

(ACT NO. LlV m' 1948)

Double Taxation Relief (Taxes on Income) (Canada) Order, 1988

IN exercise of the powers conferred by scctio ll 68A of the Inoome

Tax Act. 1948, the Mini ster of Fin ance has made the followingorder:-

I. This Order may be cited as the Double Taxation Re lief (Taxes Ci,.,.",

on Income) (Canada) Orde r, 1988.

An'"IC""'."

It is hereby declared -

to ha"" effect.

(a) that the arra ngements specified in the Agreement set

out in the Schedule \0 this Order have been made with the

Governm ent of Canada wit h a view to afford in g relief from double

taxation in relation to the following taxes imposed by the laws of

Canada

the income taxes im posed by the Govern ment of Canada

(hereinafter referred to as "Canadian tax")

that it is expedient Ihal those arrangements should have

(b)

effect.

SC HED U LE

AGREE MENT

BETWEE N

THE REPUBLIC OF MALTA AND CANADA

FOR THE AVOIDAN CE O F DOUBLE TAXATION

AND T HE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES O N INCOME AND ON CAPITAL

The Government of the Republic of Malta and the Govern ment of Canada

desiring to conclude an Agreement for the avoidance of double taxation and the

prevention of fiscal evasion with respect to taxes on income and on capital, have

agreed as follows

I. Scope of the Agreement

ARTICLE I

Personal Scope

This Agreement shall appl y to persons who are residents of one or bot h of the

Contracting States.

A RTICLE 2-

T(Uts Co,'ered

(I) This Agreement shall apply 10 taxes on income and on capital imposed on

beha lf of each Coll1racting State, irrespective of the manner in which they are levied.

(2) There shall be regarded as talles On income and on capital all taxes imposed

on total income, on total capital, or on elements o f income or of capital, includi ng

taxes on gains from the alienation of movable or immovable propen y. taxes on the

total amounts of wages o r roalari es paid by enterprises. as well as taxes on capital

appreciation.

(3)

The existing taxes to which the Agreement shall apply are, in particular

(a) in the case of Canada

the income taxes imposed by the Government of Canada, (hereinafter referred

to as "Canadian Tax~);

(b) in the <.:ase of Malta

the income lax, including prepayments of tax whether made by deduction at

source or otherwise, (hereinafter referred to as ~Malta tax").

(4) The Agreemellt shall apply also to any identical or substantially similar

taxes and to taxes on capilal which are imposed after the date of signature of the

Agreement in addition to, or ill place of. the existing taxes. The Contracting States

shall notify each other of significant cha nges which havc been made in their respective

taxation laws.

Definitions

A RTiCLE 3

General Definitions

(i)

In this Agreement, un less the context otherwise requires

(a) (i) the term "Canada" used ill a geographical sense, means the

territory of Canada, including any area beyond the territorial seas of Canada

which, under the la ws of Canada, is an area within which Canada may

exercise rights with respect to the seabed and subsoil and their natural

resources;

(ii) the tenn "'Malta" means the Republic of Malta and when used in

a geographical se nse. the tenn '"Malta" means the Island of Malta, the island

of Gozo and the other islands of the Maltese archipelago, including the

territorial waters thereof, and any area outside the territorial sea of Malta

which, in accordance with international law, has been or may hereafter be

designated, under the law of Malta concerni ng the Continental Shelf, as an

area within which the rights of Malta wi th respect to the seabed and subsoil

and their natural resources may be exercised

(b) the terms '"a Contracti ng State" and "the other Contracting State"

mean, as the context requires, Canada or Malta;

(c) the tenn "'person"' includes an individual, an estate, a trust, a company,

a part nership alld allY other body of persons;

(d) the term "company" means any body corporate or any entity which is

treated as a body corporate for tax purposes; in French , the term ~$()Cielr also

means a "corporation" within the meaning of Canadian law

(cl the terms "enterprise of a Contracting Stale" and "enterprise of the

other O:mlracting State" mean respectively an enterprise carried on by a resident

of a Contracting State and an enlerpri,e carried on by a resident of the other

Contracting State

(f)

the term "competent authority" means

(i) in the case of Canada. the Minister of National Revenue or his

authorited representative,

(ii) in the case of Malta, the Minister responsible for finance or his

authorised representative

(g) the term "imemational traffic" means any transpon by a ship or aircraft

operated by an ente rprise of a Colllracling Slate, except whcn the ship or aircraft

is operated solely between places in the other Contracting State;

the tenn "national~ means

(h)

(i) in the case of Ca nada, any individual possessing the nationality o f

Canada and any legal person, partnership and association deriving its status

as such from th e laws in force in Canada

Cii) in the case of Malta, any citizen of Malta as provided for in Chapter

III of the Constitution of Malta and in the Maltese Citizenship Act, 1965,

and any legal pe rson, partnership and association deriving its status as such

from the law in force in Malta.

(2) As regards the application of the Agreemcnt by a Contracting Slate any

term not defined therein shall. unless the context ot herwise requires , have the meaning

which it has under the law of that State concerning the taxes to which the Agreement

applies.

ARTICLE 4

Fiscal Domicile

(1) For the purposes of this Agreement, the tenn "resident of a Contracting

State" means any person who, under the laws of that State, is liable to tax therein

by reason of his domicile, residence , place of management or any other criterion of

a simi lar nature.

(2) Where by reason of Ihe provisions of paragraph (1) an individual is a resident

of both Contracting Stales, then his status shall be detennined as follows

(a) he shall be deemed to be a resident of the State in whiCh he has a

pennanent home availabl e 10 him ; if he has a permanent home available to him

in both States, he shall be deemed to be a residen t of the State with Which his

personal and economic relations are closer (centre of vital interests);

(b) if the State in which he has his celll re of vi tal interests cannot be

determined , or if he has not a pennanent hom e avai lable to him in either State,

he shall be deemed to be a resident of the State in which he has an habitual abode;

(c) if he has an habitual abode in both States or in neither of them, he

shall be deemed to be a resident of the Slate of which he is a national;

B "

(d) if he is a national of both States or of neither of them, the competent

authorities of the Contracting Slates shall settle the question by mutual agreement.

(3) Where by reason of the provisions of paragraph (I) a person other than an

individual is a resident of both Contmcting States, the competent authorities of the

Contracting States shall ende3YOUr to settle the question by mutual agreement having

regard in particula r to its place of effective management, the place where it is

incorporated or otherwise constituted and any other relevant factors. In the absence

of such agreement, such person shall be deemed not to be a resident of either

Contracting Stale for the purposes of Articles 6 to 22 inclusive and Article 24.

ARTI CLE 5

Permanent Establishments

(I) For the purposes of IlIis Agreement, the term "permanent establishment"

means a fixed place of husiness through which the business of an enterprise is wholly

or partly carried on .

(2) The term "permanent establishment" includes especially

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop; and

(f) a mine, an oil or gas well, a quarry or any other place of extraction of

natural resources.

(3) A building site or construction or installation project, or an installation or

drilling rig or sh ip used for the exploration or development of natural resources, or

supervisory activities connected therewith, constitutes a pe rmanent establishment but

only if such siTe, project or activiTy continues for a period or periods aggregating more

Than 183 da)'$ in any twelve month period, includi ng the period of any supervisory

activity connected Therewith.

(4) Notwithstanding the preceding proVISIons of this Article. the term

"pcrmanent establishment" shall be deemed nOT to include

(a) the use of facilities solely for the purpose of storage, display or delivery

of goods or mercha ndise belonging to the enterprise;

(b) the maimenanee of a slOck of goods or me rchandise belonging to the

enterprise solely for the purpose o f storage, display or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to the

enterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose of

purchasing goods or merchandise or for collecting information, for the enterprise;

(e) the mainTenance of a fixed place of business solely for the purpose of

carrying on, for the enterprise, any other activity of a preparatory or auxiliary

character;

• 47

(I) the maintenance of a fixed place of business solely for any combination

of activities mentioned in subparagraphs (a) to (cl provided that the overall

activity of the fixed place of business resulting from this combination is of a

preparatory or auxiliary character.

(5) Notwithstanding the provisions of paragraphs (1) and (2) , where a person

- other than an agent of an independent status to whom paragraph (6) applies - is

acting on behalf of an enterprise and has , and habitually exercises in a Contracting

Slate an authority 10 conclude contracts in the name of the enterprise. that enterprise

shall be deemed to have a pennane"! establishment in that State in respect of any

activities which that person undcnakcs for the enterprise, unless the activities of such

person aTe limited to those mentioned in panlgraph (4) which. if exercised through

a fixed place of business. would not make this fixed place of business a permanent

establishment under the provisions of that paragraph.

(6) An enterprise shall not be deemed to have a permanent estab lishment in a

Contracting State merely because it carries on business in that State through 3 broker,

general commission agent or any other agent of an independent status , provided that

such perwns are acting in the ordinary coup.;e of their bu,iness.

(7) The fact that a company which is a resident of a Contracting State controls

or is controlled by a company which is resident of the other Contracting State, or

which carries on business in that othe r State (whether through a permanent

establishment or otherwise), shaH not of itself constitute either company a permanent

establishment of the o ther .

Taxation of In come

Ill.

ARTICLE 6

{"come from /mmov(Jble Property

(1) Income derived by a resident of a Contracting State from immovable property

situated in the other Contracting State may be taxed in that other State.

(2) For the purposes of this Agreement, the term "immovable property" shall

have the meaning which it has under the law of the Contracting State in which the

property in question is situated. Th e term shall in any case include property accessory

to immovable property. rights to which the provisions of general law respecting

immovable property apply. usufruet of immovable property and rights to variable or

fixed payments as consideration for the working of, or the right to work , mineral

deposits. sources and other natural resources; ships, boats and aircraft shall not be

regarded as immovable property.

(3) The provisions of paragraph (I) shall apply to income derived from the

direct use, letting. or use in any other form of immovable property and to profits or

income from the alienation of such prope rty.

(4) The provisions of paragraphs (I) and (3) shall also apply to the income from

immovable property of an enterprise and to income from immovable property used

for the pe rformance of independent perwnal services.

ARTICLE 7

Business Profits

(I) The profits of an enterprise of a Comracting State shall be taxable only in

that State unless the enterprise carries on b usiness in Ihe other Contracting State

through a permanent establishment situated therein. If the enterprise carries on or

has carried on business as aforesaid. the profits of Ihe enterprise may be taxed in the

other State but on Iy so much of them as is attributable to that permanent establishment.

(2) Subject to the provisions of paragraph (3), where an enterprise of a

Contracting State carries on business in the other Contracting State through a

permanent establishment situated therein. there shall in each Contracting State be

attributable to tha t pcnnanent establishment the profits which it might be expected

to mak e if it were a distinct and separate enterprise engaged in the sa me or similar

activities under the same or similar cond itions and dealing wholly independently with

the enterprise of which it is a permanent establishment.

(3) In the determination of the profits of a permanent establishment , there shall

be allowed those deductible expenses which are incurred for the purposes of the

permanent establishment induding e~ecu tive and general administrative expenses,

whether incurred in the State in which the permanent establishment is situated or

elsewhere.

(4) Insofar as it has been customary in a Contracting State to determine the

profits to be attributed to a permanent establishment on the basis of an apportionment

of the total profits of the enterprise to its various parts, nothing in paragmph (2) shall

preclude that Omtracting State from determining the profits to be ta~ed by such an

apportionment as may be customary. The method of apport ionment adopted shall,

however. be such that the result shall be in accordance with the principles contained

in th is Article.

(5) No profits. shall be at tributed to a permanent establi shment by reason of

the mere purchase by that permanent establish ment of goods or merchandise for th e

enterprise.

(6) For the purpose of the preceding paragraphs. the profits to be amibuted

to the permanent establish ment shall be determined by the same method year by year

unless there is good lUld sufficient reason to the contrary.

(7) The provisions of this Article shall nOI affect the provisions of the law of a

Contracting State regarding the ta~ation of profits from the business of insurance

carried on in that State.

(8) Where profits include items of income which are dealt with separately in

other Articles of this Agreement then. the provisions of those Articles shall not be

affe<:ted by the provisions of this Article.

ARTICLE 8

Shipping and Ai, T,anspofl

(I) Profits derived by an enterprise of a Contracting State from the operation

of ships or aircraft in inlemational traffic shall be taxable only in that State.

(2) For the purposes of this Article, profits from the operation in intcroaiional

traffic of ships or aircraft include profits derived from the rental on a full or bare boat

basis of ships or aircraft if operated in international traffic by the lessee or if such

rental profi ts are incidental to other protits described in paragraph (I).

(3) Profits of an enterprise of a Contracting Stale from the use. maintenance

OT rental of containers (indud ing trailers , barges and rehllcd equipme nt for the

transport of containers) used for the transport in intemational traffic of goods or

merchandise shall be taxable only in that Slate.

(4) NOLwithst;lndiog the provisio ns of paragraphs (1), (2) and (3) a nd Article

7, profits derived from the operation of ships o r aircraft used principally \0 transport

passengers or goods exclusively between places in a Contracting State may be taxed

in that State.

(5) The provisions of paragraphs (I), (3) and (4) shall also apply to profits

referred to in those paragraphs de rived by an enterprise of a Contracting State from

its panicipation in a pool, a joint business or an international operating agency.

ARTICLE 9

Associated Enterprises

(I)

Whcre -

(a) an enterprise of a Conlracting State partici pates directly or indirectly

in the ma nagement, control or capital of an enterprise of the other Contracting

State, or

(b) the same persons panicipate directly o r indirectly in the management ,

control or capital of an enterprise of a Contracting Stat", and an en terprise of

the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in

their commercial or financial relations which differ from those which would be mad",

between independent enterprises, then any profits which WOUld, but for those

cond itions, have accrued to onc of the enterprises, but, by reason of those conditions,

have not accrued, may be included in the profits of that enterprise and taxed

accord ingly.

(2) Where a Contracting State includes in the profits of an enterprise of that

State - and taxes accordingly - profits on which an enterprise oflhe other Contracting

State has been charged to tax in that other State and the profits so include<.l arc profits

which would have accrued to the enterprise of the first-mentioned State if the

condi tions made between the two enterprises had been those which would have been

made between independent enterprises, then that othe r State shall ma ke an

appropriate adjustment to the amount of tax charged therein on those profits. In

determining such adjustment , due regard shall be had to the other provisions of this

Agree ment.

(3) A Contracting State shall not change the profi ts of an enterprise in the

circumstanccs referred to in paragraph (I) after the expiry of the time limits provided

in its nat ional laws a lld, in any case, after five years from the end of the year in whi ch

B so

the profits which would be subject to such change would ha~e aeemed to an enterprise

of that State.

(4) The provisions of paragraphs (2) and (3) shall not apply in the case offraud.

wilful defau lt OT neglect.

ARTICLE 10

Dividends

(I) Dividellds paid by a com pany which is a resident of a Contracting State to

a resident of the other Contracting State may be taxed in that o ther State.

(2) However, such dividends may also be taxed in the Contracting State of

which {he company paying the dividends is a resident , and according 10 Ihe laws of

that State, hut

(3) whe re the dividends are paid by a company which ;5 a resident of

Canada 10 a resident of Malta wh.o is the beneficial owner of the dividends the

tax so charged shall not exceed 15 per cent of the gross amount of the dividends;

(b) where th e dividends are paid by a company which is a resident of Malta

to a resident of Canada who is the beneficial owner thereof;

(i) Malt a ta:t on the gross amount of the dividends shall not e xceed

that chargeable on the profits out of which the dividends are paid;

(ii) whe re such dividends are paid out of profits of a company in receipt

of tax benefits under the provisions of the Aids to Industries Ordinance,

1959, the rate of Malta ta:< on the dividends shall be that applicable under

the Fifth Schedule of the said Ordinance.

The provisions of this paragraph shall not affect the taution of the

company o n the profits out of whi ch the dividends are paid.

(3) The tenn "dividends" as used in this Article means income from shares ,

"jouissance" shares or "jouissance" rights , mining shares. founders' shares or other

rights, not be ing debt-claims, pa rticipating in profits, as well as inoome whiCh is

subjected to the same taxation treatmen t as inoome from shares by the laws of the

State of which the company making the distribution is a resident.

(4) '[be provisions of paragraph (2) shaH not apply if the beneficial owner of

the dividends, being a resident of a Contracting State, eanies on busin ess in the other

Contracting State of wh ich the company paying the dividends is a resident, through

a permanent establishment situated thercin, or performs in that oth er State

independent personal services from a fixed base situated therein. and the holding in

respect of which the dividends are paid is effectively connected with such permane ll1

establishment or fixed base. In such case the p rovisions of Article 1 or Article 14. as

the case may be, shall apply.

(5) Where a company which is resident of a Cont racting State derives profits

or income from the other Contracting State. that other State may not impose any ta:<

on the dividends paid by the company, except insofar as such dividends are paid to

a resident of that other State or insofar as the holdi ng in respect of which the dividends

arc paid is effcctively oonnceted with a permanent establishment or a Ihcd base

situated in that other Statr., nor subject the company's undistribut ed prOfilS 10 a tax

on undistributed profits, even if the dividends paid or the undistrihuted profits consist

wholly or partly of profits or inoome arising in such olher State.

(6) Nothing in this Agreement shall be construed as prevent ing a Contracting

State from imposing on the earnings of a company attributable to a permanent

establishment in that Slate, la;( in addition to the tax which would be chargeable on

the earnings of a company which is a national of that State, provided Ihal any such

additional tax so imposed shaH not exceed 15 per cent of the amount of such earnings

which have nOI been subjected to such additional tax in previous taxation years. FOT

the purpose of this provision, the Icnn "earnings" means the profits attributable to

a pennanen\ establishment in a Contracting State in a year and previous years after

deducting thcrefrom allt3xcs. other than the additional tax referred to herein. imposed

on such profits by that State.

ARTICLE II

'merest

(I) Interest arising in a O)ntracting State and paid to a resident of the other

Comracting State may be taxed in that other State.

(2) However, such interest may also be taxed in the Contracting State in which

it arises , and according to the laws of that State, but if the recipient is the beneficial

owner of the interest the tax so charged shaH not exceed 15 per cent of the gross

amoum of the interest.

(3)

Notwithstanding the provisions of paragraph (2),

(a) interest arising in a Comracting Slate and paid to the Govcrnment or

the Central Ba nk of the other Contracting State shall be exempt from tax in the

first-mentioned State;

(b) interest arising in Malta and paid to the Export Development

Corporation shall be exempt from Malta tax;

(c) interest arising in Canada and paid to the Malta Development

Corporation shall be exempt from Canadian tax .

(4) The term "interest" as used in this Article means income from debt-claims

of every kind. whether or not secured by mortgage, and whether or not carrying a

right to participate in the debtor's profits, and in particular. income from government

securities and income from bonds or debent ures. including premiums and prizes

attaching 10 such securities, bonds or debentures, as well as income which is subjected

to th e same taxation treatment as inco me from money h:nt by the laws of the State

in which the income arises. However. the term "inlerest~ does not include income

dealt with in Article 10.

(5) Th e provisions of paragraph (2) shall not apply if the beneficial owner of

the interest, being a resident of a Contracting State, carries on business in the other

Contracting State in which the interest arises through a permanent establiShment

situated therein , or performs in that other State independent personal services from

a fixed base situatcd therein, and the debt-claim in respect of which the interest is

paid is effectively connecterl; with such permanent establishment or fixed base. In such

case the provisions of Article 7 o r Article 14, as the case may be , shaH apply.

(6) Inte rest shall be dee med to arise in a Contracting State when the payer is

that State itself, a political subdivision, a local authority or a resident of that State.

Where , however, the person paying the interest, whcther he is a resident of a

Contracting State or not, has in a Contracting Slate a permanent establishment or a

fixed base in connection with which the indebtedness on which Ihe inte rest is paid

was incurred, and such intercst is borne by such permane nt establishmctll or fixed

base, then such inte rest sllalllx: deemed to a rise in the State in which the pennancnt

establishment or fixed base is situated.

(7) Where , by reason of a special re lationsh ip between the payer and the

beneficial owner or betwee n both of them and some other person, the amo unt of the

interest, having regard to the debt-claim for which it is paid, exceeds the amoun t

which would have been agreed upon by the payer and the beneficial owner in the

absence of such relationship. the provisions of this Article shall apply only to the last

mentioned amount. In such case, the excess pan of the payments shall remain taxable

according to the laws of each Contracting State. due regard being had to the other

provisions of this Agree ment.

A RTICLE 12

Royaltin

(1) Royalties arising in a Con tractin g State and paid to a resident of the other

Co nt racting State may be taxed in that other State.

(2) However. such royalties may also be taxed in Ihe Contracting Slate in which

Ihey arise . and according 10 the laws of thal State, but .f the recipient is the beneficial

ow ner of the royalties the tax so charged ~hall not exceed iO per cent of the gross

amount of the royal ties.

(3) Notwithstanding Ihe provisions of paragraph (2). co pyright royalties and

olher like payments in respect of the production or reproduction of any literary.

educational. dramatic , musical or artistic work (but not including royalties in respect

of motion picture films and works on film or videotape for use in connection with

lelevision) arising in a Contracting Slate and paid 10 a resident ohhe olherContracling

Slate who is subject to tax thereon sha ll be taxable only in that other State.

(4) The term "royalties" as used in this A rticle means payme nts of any kind

received as a consideration for Ille use of, or the right to use, any copyright, patent,

trade mark. design or model, plan. secret formula or process, or for tile use of, o r

the right to use, ind ustrial, commercial o r scientific equipm ent, or for information

concerning industrial, commercial or scientific experience. and includes payments of

any kind in respect of motion picture films and works on fi lm o r videotape for use in

con nectio n with television.

(5) The provisions of paragraph (2) and (3) shall not apply if the beneficial

ow ner of the royalties, being a reside nt of a Con lracting State. carries on busi ness in

tile other Contracting State in which the royalties arise through a permanent

establishment situatcd therein, or performs in that other State independent personal

serv ices from a fixed base situated therein . and the right or properly in respect of

which the royalties arc paid is effectively connected with such permanent establishment

or fixed base. In such case the provisions of Article 7 or Article 14, as the case may

be, shall apply.

(6) Royalties shall be deemed to arise in a Contracting Slate when the payer

is that State itself, a political subdivision, a local authority or a re~ide nt of that State.

Where , howeve r, the person paying the royalties, whether he is a resident of a

Contracting State Or nnt , has in a Contracting State a permanent establishment or a

"

fixed base in connection with which the obligation to pay the royalties was incurred,

and such royalties are borne by such permanent establishment or fixed base, then

such royalties shall be deemed to arise in the State in which the permanent

establishment or fixed base is situated.

(7) Where , by reason of a special relationship between the payer and the

beneficial owner Or between both of them and some othe r person, the amount of the

royalties , having regard 10 the use, right or information for which they are paid,

exceeds the amount which would have been agreed upon by the payer and the beneficial

owner in the absence of such relationship. the provisions of this Ankle shall apply

only \0 the last-mentioned amount. In such case, the excess part of the payments

shall remain taJOable according to the laws uf each Contracting State. due regard being

had to the other provisions of this Agreement.

ARTICLE 13

Capital Gains

(1) Gains derived by a resident of a Contracting State from the alienation of

immovab le property sit uated in the other Contracting State may be ta~ed in that

other State.

(2) Gains from the alienation of immovable property forming part of the business

property o f a pe rmanent establishment which an enterprise of a Contracting State

has in the ot her Contracting State or o f movable property pe rtaining to a fi~ed base

available 10 a resident of a Contracting State in the o ther Contracting State for the

purpose of perform ing independent personal services, including such gains from the

alienation of such a pennanent establishme nt (alon e or with the whole enterprise) or

of such a fixed base, may be taxed in that other State.

(3) Gains from the alienation of ships or aircra ft operated in international traffic

and movable property pertaining to the operation of such ships or aircraft. ~haH be

ta~able only in the Contracting Stale in whi ch such properly is taxable accord in g 10

paragraph (3) of Article 22.

(4)

Gains from the alienation of -

(a) sh ares o f th e capital stock of a company the property of which consists

principally of immovab le property si tu ated in a Contracting State. and

(b) an interest in a partnership, trust or estate, the properly of which

consists principally of immovable property situated in a Co ntracting Slate,

may be ta~ed in that State, For the purposes of this paragraph. the term "immovabl e

property" includes the shares of a company referred to in subparagraph (a) or an

in terest in a partnership, trust or estate refe rred to in subparagraph (b) but shall not

include property, other than re nta l property, in which the business of the company,

partnership, trust or estate is carried on.

(5) Gains from the alienati on of any property, other than th at referred 10 in

paragraphs (I), (2), (3) and (4) shall be taxable only in the Contracting State of which

the alienator is a resident.

(6) The provisions o f paragraph (5) , hall oot affect tile right of either of the

Contracting States to levy, according to its law, a tax on gains from the alienation of

any property derived by an individual who is a resident of the other Contracting State

and has been a reside nt of the fi~Hnentioned State at any time during the si" years

immediately preceding the alienation of the property.

ARTICLE 14

Indepcndem Personal Services

(I) Income derived by an individual who is a resident of a Qmtracting State

from the perfonn ance of professional services or other activities of an independent

character shall be taxable only in that Stale unless such services arc perfonncd in the

other Contracting State and

(a) the individual is present in Ihal othe r State for a period or periods

aggregating more than 90 days in the tauble year concerned, or

(b) Ihe individ ua l has or had a fixed basc regularly available 10 him in thal

ot her State for the purpose of performing his activities. but only so mllch of the

income as isattribulable to Ihat fixed base may be taxed in such other State. or

(c) the remuneration for his services in the olher Contracti ng Slate is de-

rived from residents of that Slate and exceeds ten Ihousand Canadian dolla rs or

the equivalen t in Malta currency during the taxable year.

(2) The term "professional services'" includes especially indepe ndent scientific.

literary, anist;c, educational or teachi ng activities as well as the independent activities

of physicians. lawyers. engineers, architects, dentists and accountants.

A RTI CLE 15

Dependenl Personal Services

(1) Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other

similar remuneration derived by a resident of a Contracti ng State in respect of an

e mployment shall be taxable only in Ihal State unless the employment is exercised in

the other Contracting State. If the employment is so exercised, such remune ration

as is derived the refrom may be taxed in that other State.

(2) Notwithstanding the provisions of paragraph (I) , remuneration derived by

a resident of a COll tracting State in respcx:t of an employment exercised in the ot her

Contracting Stale shall be taxable o nly in the first-mention ed State if the recipient is

present in the o ther State for a period or periods not exceeding in the aggrega te 183

days in the calendar ye ar concerned . and eit he r

(a) the remuneration earned in the other Contracting State in the calendar

year conce rned does not exceed five thousand Canadian dollars (S 5 ,0IXl) or its

eq uivalent in Malta currency; or

(b) the remuneration is pa id by. or on behalf of. an e mploye r who is not

a resident of the other State, and such remuneration is not borne by a permanent

establishment or a fixed base whi ch the employer has in the other State.

(3) Notwithstanding the preceding provisions of this Article, remuneration in

respect of an employment exercised aboard a sh ip or aircraft operated in international

traffic by an enterprise of a Contracting State, shall be taxable only in that State.

ARTICLE ]6

Directors' f ees

Directors' fees and other sim il ar payments derived by a resident of a Contracting

State in his capacity as a me mber of the board o f directors o r a similar organ of 3

company which is a resident of the other Contracting State. may be taxed in that

olher State.

ARTICLE 17

A rtistes and A th/e/es

(1) Notwi thstandin g the provisions of Articles 7, 14 and IS, income derived by

a resident of a Contracting State as an entertainer, such as a theatre, motion picture,

radio or televisi on artiste, or a musicia n, or as an athlete, from his personal activities

as such exercised in the other Contracting State, may be taxed in that other State.

(2) Where income in respect of personal activities exercised by an entertainer

or an athlete in his capacity as such accrues not to the e ntertainer or athlete himself

but to another person, that income may, notwithstanding the provisions of Articles

7, 14 a nd 15 , be taxed in the Contracting State in which the activities of the e ntertainer

or athlete are exer<:ised.

(3) The provisions of paragraph (2) shall not apply ifit is established that neither

the entertainer or the athl ete nor persons related thereto, participate d irectly or

indirectly in the profits of the person referred to in that paragraph.

ARTICLE 18

I'ensions and Annuities

( I) Pensions and annuilies arisi ng in a Contracting State and paid to a resident

of the other Contracting State may be taxed in that other State.

(2) Pensions arising in a Contracting State and paid to a resi dent of the other

Contracting State may also be taxed in th e State in whi ch they arise, and according

to the law of that State. However, in the case of periodic pension payments, the tax

so charged shall not e xceed tile lesser of

(a)

15 per cent of the gross amount of the payment. and

(b) the rate determined by reference to the amount of tax that the recipient

of the payment would otherwise be required to pay for the year on the total

amount of the periodic pension payments received by him in the year, if he were

resident in the Contracting State in which the payment arises and if such total

amount were his only income in that year.

(3) Annuities arising in a Contracting State and paid to a resident of the other

Contracting Slale may also be taxed in the Slate in which they arise, and according

to the Jaw of that State; but the tax so charged shall not exceed 15 per cent of the

portion thereof that is subject to tax in that Stale. However , this limitation does not

apply to lump-sum payments arising on the surrender, cancellation, redemption, sale

or olher alienation of an annuity, or 10 payments of any kind under an income-averag-

ing annuity contract.

(4)

Notwithstanding anything in this Agreement

(a) war veterans pensions o r allowa nces o r war &;ability benefits received

from a Contracting State shall not be taxable in the other Contracting State so

long as they are not subject to tax in the first-mentioned State;

(b) alimony and othe r similar payments arising in a Contracting State and

paid to a resident of the other Contracting State who is subject to tax therein in

respect thereof, shall be taxable o nly in that other State.

ARTICLE 19

Govemmenl Service

(I) (a)

Remuneration , other than a pension. paid by a Contracting State or

a political subdivision or a local authority thereof to an individua l in respect of services

rendered to that State or subdivision or authority shall be taxable only in that State.

(b) However, such remuneration shall be laxableonly in the other Contract-

ing State if the services are rendered in that State and the individua l is a resident

of that State who

( i)

is a national of that State; o r

(ii) did not become a resident of that State solely for the purpose of

rendering the services.

(2) The provisions of Articles 15, 16 and 17 sha ll apply to remuneration in

respect of scrvices rendered in connection wi th a business carried 011 by a Contracti ng

State or a political subdivisioll or a local authority thereof.

(3) Where remuneration is paid under a deve lopment assistance programme of

a Contracting State, out of funds cxc lusivcly supplied by that State to a specialist or

volunteer seconded 10 the other Contracting State with the consent of that othe r

State. such remuneration shall be deemed to have been paid by the first-mentioned

State and shall be taxable on ly in that State.

ARTICLE 20

Students

Payments which a student, apprentice or business trainee who is, or was Im-

mediately before visiting a Contracting State. a resident of the other Contracting

State and who is present in the first- mentioned State solely for the purpose of his

education ort raining receives for the purpose of his mainte nance, education or train ;Ilg

shall not be taxed in that State. provided that such payments arise from sou rces

outside that State.

ARTICLE 21

Other Income

(I) Subject \0 the provisions of pa ragraph (2), items of income of a resident of

a Contracting State , wherever arising, not dealt with in the foregoing Articles of this

Agreement shall be taxable ordy in that State.

(2) However. if such income is derived by a resident of a Contracting State

from sources in the other Contracting State, such income may also be taxed in the

State in which it arises , and according to the law of that Stale. However, in the case

of income from an estate or trw;t, the tax so charged shall, provided th at the income

is taxable in the Contracti ng State in which the recipient resides. not exceed 15 per

cent of the gross amount of th e income.

IV.

Tantion of Capital

ARTIC LE 22

Capital

(1) Capital represented by immovable properly owned by a resident of a Con·

traeting State and situated in the other Contracting State, may be taxed in that other

State.

(2) Capital represented by movable property forming part of the business prop-

erty of a permanent establishmem which an enterprise of a Comracting State has in

the other Con tracting State or by movable properly pertaining to a fixed base available

to a rcsident of a Contracting Stale in the other Contracting State for the purpose of

performing independent personal services. may be taxed in that other State.

(3) Capital represented by ships and aircraft operated by an ente rprise of a

Contracting State in imemational traffic and by movable property pertai nin g 10 the

operation of such ships and aircraft. shall be taxable onl y in that State.

(4)

All other elements of capi tal of a resident of a Contracting State shall be

ta~able only in that State.

Methods for Pre.entlon of Double Ta~ation

V.

ARTICLE 23

Elimination of Double Taxation

(I)

In the case of Canada, lioubJe taxation shaU be avoided as follows

(a) Subject to the existing provisions of the law of Canada regardin g the

deduction from tax payable in Canada of lax paid in a terri tory outside Canada

and to any subsequent modification of those provisions ~ which shall not affect

the gene ral principle hereof ~and unless a greater deductioll or relief is provided

under the laws of Canada, la)!: payable in Malta on profits, income or gains arising

in Malta shall be deducted from any Canadian tax payable in respect of such

profits, income or gains.

(b) Subject to the e:<isting provisions of the law of Ca nada regarding the

detenn in ation of the exempt surpl us of a foreign affiliate and 10 any subsequent

modification of those provisions ~ which shall not aUee! the general principle

hereof ~ for the purpose of computing Canadian tax , a company reside nt in

Canada shall be allowed to deduel in computing its taxable incom e any dividend

received by it o ut of the exempt su rplus of a foreign affiliate residen t in Malta.

(2) For the purposes of paragraph (1) (a), tax payable in Malta by a resident

of Canada in respect of dividends, interest or royalties received by it from a compan y

which is a reside nt of Malta, shall be deemed to include any amount which would

have bee n payable as Malta tax for any year but for an exemption from, or reduction

of, tax granted for that year or any part thereof under

(a) th e provisions of section 68 of the Aids to Industri es Ordinance, 1959,

so far as they were in force on. and have not been modified since, the date of

signature of this Agreeme nt. or have been modified only in minor respect so as

not fO affcct the ir genera l character;

(b) any other special provisions of the law of Malta designed 10 promote

investments necessary for the economi c development of Malta which may su b-

seq uently. be made granting an exe mption or reduction of tax which is agreed by

the compete", authoritles of the Co ntract ing States to be of a substant ially similar

character , if it has not been modified thereafter or has been modified only in

minor respects so as not to affect its general character;

provided that any deduct ion from Canadian tax granted in a<».>rdancc with the pro-

visions of this paragraph shalt not exceed 15 per cent o f the gross amount of the

dividends, interest or royalties.

(3)

In the case of Malta, double taxation shall be avoided as follows

Subject to the provisio ns of the law of Malta regarding the allowance of a

credit against Malta tax in respect of foreign tax , where , in accordance with the

provisions of this Agreement , there is incl uded in a Malta assessment incom e

from sources within Canada, o r elements of capital situ ated in Canada , the

Canadian tax on such income or elements of capital. as the case may be, shall

be allowed as a credit against the relative Ma lta tax payable the reon.

(4) For the purposes of this Article, profi ts, income or gains of a resident of a

Colltracting State which are taxed in the other Con tracting State in accordance with

this Agreement shall be deemed to arise from sources in that ot her State,

VI .

Special Provisions

ARTICLE 24

NOfl-diJcrimiMr;on

(1) The nationals of a Contracting State shall nOl be subjected in the olher

Contracting Stale to any taxation or any requirement connected therewith whi ch is

other or more burdensome than the taxation and connected requirements to which

nationals of that other State in the same circumstances are or may be subjected.

(2) The taxatio n on a permanent establishment which an enterprise o f a Con-

tracting Slate has in the other Contracting State shall not be less favourably levied

in that other State than the taxation levied o n enterprises of Ihal other Stale carrying

o n the same activities.

(3) Nothing in this Article shall be construed as obliging a Contracting State

to grant to residents of tlie other Contracting State any personal allowances. reliefs

and reductions (or taxation purposes on account of civil status or family responsibilitics

which it grants to its own residents.

(4) Ente rprises of a Contracting Slate, the capital of which is wholly or panl)!

owned or controlled, directly or indirectly, by one or more residents of th e other

Contracting Stale, shall not be subjected in the first-mentioned State to any taxation

or any requirement connected therewith which is other or more burdensome than the

taxation and co nnccted requ irements to which OI lier simila r enterprises df the first-

mentioned Slate. Ihe capital of which is wholly or partly owned or controlled . dire<:t ly

or indirectly. by one o r more residents of a third State. are o r may be subjected.

(5) In tllis Article. the term "taxation" means taxes which are the subject of

this Agreement.

ARTICLE 25

MUIUIlI Agrument Procedure

(I) Whe re a perwn considers Ihalthe actio ns of o ne o r bolh of the Contracting

States result or will result for him in taxation not in accordance wi th the provisions

of Ihis Agreement. he may. irrespective of lhe remedies provided by Ihe domestic

law of those States, address to the competent authority of the Contracting State of

which he is a resident an app lication in writing stating the grounds for claiming the

revision of such taxatio n. To be admissible , the said application must be submitted

within two years from the fir.;t notification o f the action which gives rise to taxation

not in accordance with the Agreeme nt.

(2) The competent authority referred to in paragraph (1) sllall endeavour, if

the objection appear.; to it to be jU5tified and if it is not itself able to arrive at an

appropria te solution , to resolve the case by mutual agreement with the competent

authority of the ot her Contracting State, with a view to the avoidance of taxation not

in accordance with the Agreement.

(3) A Contracting State shall nOI, after the expiry o f th e time limits provided

in its national laws and, in any case, after five year.; from the end of the taxable

" 60

period in which the income concerned has accrued, increase the tax base of a resident

of either of the Contracting States by including therein items of income which have

also been charged !O tax in th e other Contracting State. This paragraph shall not

apply in the case of fraud, wilful default or neglect.

(4) The competcllI authori ties of the Contracting States shall endeavour to

resolve by mutual agrccmellt any difficulties or doubts arising as to the interpretation

or application of the Agreement. In particular, the competent authori ties of the

Contracting States may consul t together to endeavour to agree

(a) to the same attribution of profits to a resident of a Contracting State

and its permanent establishment situated in the other Con tracting State;

(b) to the same allocatioll of inco me between a resident of a Contracting

State and any associated person provided for in Article 9.

(5) The competent authorities of the Contracting States may consult together

for the elimination of double taxation in cases not provided for in the Agreement.

They may also communicate with each other directly for the purpose of applying the

Agreement.

ARTICLE 26

Exchange af Information

(I) Th e oompelellt authorities of the Contracting States shall exchange such

information as is necessary for carrying out the provisions of this Agreement or o f

the domestic laws of the Contracting States concerning taxes covered by the Agreement

insofar as the taxation thereunder is not contrary to the Agreement. Any infonnation

received by a Contracti ng State shall be treated as ~ecret in the same manner as

infonnation obtained under the domestic laws of that State and shall be disclosed

on ly 10 persons or authorities (includi llg courts and administrative bod ies) involved

in the assessmcnt or collection of. the enforcement in respect of, or the detenninatio n

of appeals in relation to. the taxes covered by the Agreement. Such persons or

authorities shall use Ihe information only for such purposes.

(2) In no case shall the provisions of paragraph (I) be construed so as to impose

on a Contracting State the obligation

(a) to carry out administrative measures at variance wit h the laws or the

administrative practice of that or of the othcr Contracting State ;

(b) to supply infonnation which is not obtainable under the laws or in the

nonnal course of the administration of that or of the other Contracting State;

(c) to supply information which would disclose any trade, business. indus-

trial. commercial or professional secret or trade process. or information, the

disclosure of which would be contrary to public policy (ordre public).

ARTICLE 27

Diplomatic Agellts and COl1Su/ar Officers

(I) Nothing in this Agreement shall affect the fiscal privileges of diplomatic

agents or consular officers under the general rules of international law or under the

provisions of special agreements.

B 6J

(2) Notwi thstanding Arlicle 4. an individual who is a member of a diplomatic

mission, consular post or permanent mission of a Contracting State which is situated

in the othe r Conlmcti ng Slate or in a th ird State shall be deemed for the purposes

of the Agreement to be a resident of th e sending State if he is liable in the sending

State 10 Ihe same obligations in relation to tax on his total income as are residents

of Ihat sending Slate.

(3) The Agreement sllall not apply to International Organizations, 10 organs

or officials thereof and to persons who are members of a diplomatic mi ssion, consular

posl or pennanen! mission of a third State, being present in a Contracting State and

who are not liable in either Contracting State 10 the same obligatio ns in relation to

lax on their total income as are residents thereof.

ARTICLE 28

Miscellan~ous Provisions

(\) The provisions of this Agreement shall not be construed to restrict in any

manner any exclusion, exemption, deduction, credit, or other allowance now or he reaf·

ter accorded by the laws of a Contracting State in the delenninalion of the tax imposed

by that State,

(2)

Not hing in the Agreemen t sh all be construed as preventing

(a) Canada from imposing a tax on amounts included in the income of a

resident o f Canada according to section 91 of the Canadia n Incom e Tax Act ;

(b) Malta from applying the provisions of Section 8 (2) of the Income Tax

Act, 1948,

(3) Where the Agreement provides that income arising in a Contracting State

shall be relieved from tax in that State, e ither in full or in part, and, under the law

in force in the other Contracting State, sueh incom e is subject to tax by reference to

the amount thereof which is remitted to o r received in that other State and not by

reference to the full amount thereof, then the relief to be allowed in the fi , .t,mentio ned

Slate shall apply only to 50 mueh of income as is remitted to or received in the other

State.

(4) Th is Agreement shall not apply to any company, trust or pa rtnership that

is a resident of a Contracting State and is beneficially owned or controlled directly

or indirectly by one or more persons who are not residents of that State , if the amount

of the tax imposed on the income o r capital o f the company, trust o r partnershi p by

that State is substantially lower than th e amount that would be imposed by that State

if all of the shares of the capital stoc\( of the company or all of the interests in the

trust or partnership, as the ease may be, were beneficially owned by one or more

residents of that State.

VII ,

FInal Proy lslons

ART ICLE 29

Entry into Force

(\) This Agreement shall be ratified and the instruments of ratification shall be

exchanged at Valie tla , Malta .

(2) The Agreement shaH enter into force 30 days after the exchange of instru-

ments of ratification and its provisions sha ll have effect

(a)

in Canada

(i) in respect of la" withhe ld at the source on amo unts paid or credited

to non-residents on or afte r the firsl day of January in the calendar year in

which the exchange of inst ruments of ratification takes place; and

(ii) in respect of OIher Canadian lax for taxation years bocginning on

or after the firsl day of January in the calendar year in which the exchange

of instruments of ratification takes place;

(b) in Malta, in respect of taxes which are levied for any year of assessment

beginning on the first day of January in the calendar year immediately following

that in which the exchange of instruments of ratific-.;Ition takes place.

ART IC LE 30

This Agreement shall continue in effect indefinite ly but either Contracting State

may. on or before Jun e 30 in any calendar year after the year of the exchange of

iru;truments of ratification . give to the other Contracting State a notice of termination

in writing through diplomatic channels; in such event, th e Agreement shall cease to

have effect

(a)

in Canada

(i) in respect of tall withhdd at the source on amounts paid or credited

to non·residents on or after lite first day of January in the calendar year

immediately following that in which the notice is give n; and

(ii) in respe<;:t of other Canadilln twc for taxation years beginning on

or after the first day of January in the calendar year immediately following

that in which the notice is given;

(b) in Malta, in respect of taxes which are levied for the year of assessment

beginning on the first day of January in the second year following that in which

the notice is given.

IN WI1NESS WHEREO F the undersigned, duly authorised to that effect, have

signed this Agreement.

DONE in duplicate at Valletta, this 25th day of July, 1986, in the English and

French languages, each version being equally authentic.

(sgd.) ClaudeT.Charland

FOR T HE GOVERN MENT OF

(sgd.) RobertJ . Stivala

CANAD A

FO R T HE GOVERNMENT OF T HE

R EPUBLIC OF MALTA