Double Taxation Relief (Taxes on Income)

L.N. 1M fI IJM

INCOME TAX ACf

(CAP. 123)

Double Taxation Relief (Taxes on Income)

(The Kingdom or Sweden) Order. 1996

IN exercise of the powers conferred by section 76 of the Income

Tax Act, the Minister of Finance has made the following order:-

This order may be cited as the Double Taxation Relief(Taxes Cit.ion_

on Income) (The Kingdom of Sweden) Order. 1996.

CONVENTION

BETWEEN MALTA

AND SWEDEN

FOR THE A VOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FlSCAL EVASION

WITH RESPECT TO l' AXES ON INCOME

The Government of Malta and the Government of Sweden, desiring to conclude a

Convention for the avoidance of double taxation and the prevention of fiscaJ evasion

with respect to taxes on income, have agreed as follows

ARTlCLl! 1

Personal St::ope

This Convention shall apply to pernons who are residents of one or both of the

Contracting States.

ARTlCU;2

Taxes Coyered

I . The taxes to which this Convention shall apply are

(a)

in Malta

the income tax

(hereinafter referred to as "Malta tax");

(b)

in Sweden

(i) the national income tax (den statliga inkomstskatten), including

the tax on employees at sea (sjomansskatten) and the withholding tax on

dividends (kupongs katten);

(ii) the income tax on non-residents (den sarskilda inkomstskatten

for utomlands bosatta);

(iii) the income tax on non-resident artistes and athletes (den sarskilda

inkomstskatten for utomlands bosatta artister m.fl.); and

(iv) the municipal income tax (den kommunala inkomstskatten)

(hereinafter referred to as "Swedish tall").

2. The Convention shall apply also to any identical or substantially similar taxes

which are imposed after the date of signature of tbe Convention in addition to, or in

place of, the taxes referred to in paragraph I. The competent authorities of the

Contracting States shall notify each other of any substantial changes which have been

made in their respective taxation laws.

It is hereby declared:-

(a) that the arrangements specified in the Convention set

out in the Schedule to this Order have been made with the

Government of the The Kingdom of Sweden with a view to

affording relief from double taxation in relation to the foUowing

taxes imposed by the laws of the 1be Kingdom of Sweden

(i) the national income tax . including the tax on

employees at sea and the withholding tax on dividends;

the income tax on non-residents;

(ii)

(iii) the income tax on non- resident anistes and

athletes; and

(iv)

the municipal income tax;

that it is expedient that those arrangements should have

(b)

effect;

(c) that the Convention has entered into force on the 3rd

February, 1996.

Notwithstanding the otber provisions of this Article, the Convention shall

not apply to tax paid or payable in Malta in accordance with the provisions of subsection

(13)of section 56 of the Income Tax Act (Cap. 123),CQnceming thechargeable income

of any person engaged in the production of petroleum produced in Malta, or any

substantially similar provision which is imposed after the date of signature of this

Convention.

ARTICLE l

GeneraJ Definitions

For the purposes of this Convention, unless the context otherwise requires

I.

(a) the tenn "Malta" means the Republic of Malta and, when used in a

geographical sense, 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 waters of Malta which has been or may hereafter

be designated. in accordance with intemationallaw and under the law of Malta

CQnceming the continental shelf, as an area within which the rights of Malta with

respect to the seabed and subsoil and their natural resources may be exercised;

(b) the tenn "Sweden" means the Kingdom of Sweden and, when used in

a geographical sense, includes the nationa1 territory, the territorial sea of Sweden

as well as othermaritime areas over which Sweden in accordance with international

law exercises sovereign rights or jurisdiction;

(c) the terms "a Contracting State" and "the other Contracting State" mean

Malta or Sweden, as the context requires;

(d) the tenn "person" includes an individua1. a company and any otber

body of persons;

(e) the tenn "company" means any body CQrporate or any entity which is

treated as a body corporate for tax purposes;

(0 the terms "enterprise of a Contracting State" and "enterprise of the other

Contracting State" mean respectively an enterprise carried on by a resident of a

Contracting State and an enterprise carried on by a resident of the other Contracting

State;

(g) thertenn "international traffic" means any transport by a ship or aircraft

operated by an enterprise of a Contracting State, except when the ship or aircraft

is operated solely between places in the other Contracting State;

(h)

the leon "natio nal" means

any individual possessing the nationality of a Conrracting State;

(i)

(ii) any legal person , partnership or assoc iation deriving its status as

such from the laws in force in a Contracting State;

the tenn "competent authority" means

(i)

(i) in Malta, the Minister responsible for finance or his authorised

representative;

(ii) in Sweden, the Minister of Finance, his a uthorised representative

or the authority which is designated as acompetent authority forthe purposes

of this Convention.

2. As regards the application of the Convention by a Contracting State, any

tenn not defined therein shall, unless the context otherwise requires, have the meaning

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

applies .

Resident

I . Forthe purposes of this Convention, the tenn "resident of a Contracting State"

means any pewn who, under the laws of that State, is liable to tax therein by reason of

his domici Ie, residence , place o f manageme nt or any other criteri on of a similar nature.

But this tenn does nOI incl ude any person who is liable 10 lax in that Slate in respect

only of income from sources in that State.

2. Where by reason of lhe provisions of paragraph 1 an individual is a resident

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

<a> he shall be deemed 10 be a residenl o f the Siale in which he has a

pennanent home available to him; if he has a pennanent home available 10 him in

both States, he shall be deemed to be a resident of the Stale with which his personal

and econo mic relations are closer (centre of vital interests);

(b) if the Siale in which he has his centre of vital interests cannOI be

detennined, or if he has not a pennanenl home available 10 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 habi tual abode in both States or in ne ither of them, he shall

be deemed to be a resident of Ihe State o f which he is a national;

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

authorities of the Contmcting Stales shall settle the question by mutual agreeme nt .

BlOSS

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

individual iJ; • resident of both Contracting States. then it shall be deemed 10 be 8

resident of the Stale in which iu place of effective management iJ; situated.

PermaDe.nt Establishment

l. For the purposes of this Convention . the lenn "pennanenl establishment"

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

or partly carried on.

2. The term "permanent establishment" includes especially

(.)

• place of management;

a branch;

(b)

an office;

(0)

(d)

• factory;

<e) • workshop; and

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

narural resources including an offshore drilling site.

3. A building site or aconstruction, assembly or installation project or supervisory

activities in connection therewith constitutes a pennanent establishment only if such

site. project or activities continue for a period of more than six months.

Notwithstanding the preceding provisions of this Article, the furnishing of

services, including consuhancy services, by an enterprise through employees or other

personnel engaged by the enteJprise for such purpose shall be considered to constitute

a pennanent establishment where activities of that nature continue (for the same or a

connected project) within a Conlr8Cting State for a period or periods aggregating more

than six months within any twelve-month period.

S. Notwithstanding the prt.eeding provisions of this Article, the tenn "pennanent

establishment" shall be deemed nol to include

(8) the use of facilities SOlely for the purpose of storage. display or delivery

of goods or merchandise belonging 10 the enterprise

(b) the mainlenance of. slock of goods or merchandise belonging 10 the

en1eTprise solely for the purpose of storage, display or delivery;

(c) the maintenance of a stock of goods or mert:handise belonging to the

enterprise solely for tile purpose of processing by another enterprise

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

purt:hasing goods or merchandise or of collecting infonnation, for the enterprise;

the maintenance of a fixed place: of business solely for the purpose of

(e)

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

character;

(0 the maintenance o f a fixed place of business solely for any combination

of activities mentioned in su!).paragraphs (a) to (e),provided that theoverall activity

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

or auxiliary character.

Minkejja d-dispoZizzjonijiel ta' qabel ta' dan I-Artiklu, il-fraii "Slahbilimenl

permanenli" ghandha titqies Ii rna tink!udix

(a) I-uw ta' faCi litajictghall-iskop hiss ta' haina, wirijew rqassim ta' oggetti

jew mcricanzija lijkun proprjela ta' I-impriza;

(b) it-tizmim la' haina ta' oggetti jew merkanzija Ii tkun proprjeta ta' 1-

impriza ghall· iskop biss ta' haina, wiri jew Iqassim

it-li:i:mim la' hazna ta' oggctti jcw mcrlcanzija Ii Ikun proprjetA ta' 1-

(c)

impriia ghall.iskop biss ta' proeessar minn impri:i:a ohm;

(d) it·lizmim la' posl fiss ta' negozju ghall. iskop biss ta' xiri ta' oggetti

jew mcrkanzija jew ta' ghir ta' taghrif ghaJl-impri:i:a;

(e) il-lizmim ta' post fiss ta ' negozju ghall-iskop biss Ii taghmel, ghall-

impriia, xi ani vitA ohra ta' xona preparalorja jew awziljarja;

(f) il-manutenzjoni ta' posl tan-negozju fiss unikamem ghal kombinazzjoni

ta' I-attivitajici imsemmija fis-subparagrafu (a) sa (c), kcm m-il darba I-attivita

kollha tal-post tan-ncgozju fiss Ii tirrizulta min n din il-komhinazzjoni Ikun waMa

ta' xorta preparatorja jew awiiljari .

Notwithstanding the provisions of paragraphs I and 2. where a person -other

than an agent of an independent status to whom paragraph 7 applies - is acting on

behalf of an enterprise and has , and habituall y exercises. in a Contracting State an

authority to conclude conttacts in the name or the enterprise. that e nterprise shall be

deemed to have a pennanent establ islunent in that State in respect of any activities

which that person undertakes for the eDlerprise. unless the activities of such person are

limited to those mentioned in paragraph 5 which , if exercised through a fixed place of

business. would not make this fixed place of business a pennanentestablishmenl under

the provisions of that paragraph.

An enterprise of a Contracting State shall not be deemed to have a permanent

establishment in the other Contracting State merely because it carries on business in

that other State through a broker, generaJ commission agen t or any other agent of an

independent status , provided that such persons are acting in the ordinary course of

their business. However, when the activities of such an agent are devoted wholly or

almost wholly on behalf of thaI enterprise, he will not be considered to be an agent of

an independent stalus within the meaning of Ihis paragraph.

The fact that a company which is a resident of a Contracting State controls or

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

carries on business in that other State (whether through a pennanent establishment or

otherwise) shall not of itself constitute either company a pennanent establisrunent of

the other.

ARTICU6

Income from Immovable Propel'ty

I. Income derived by a resident of a Contracting State from immovable property

(including income from agriculture or forestry) situated in the other Contracting State

may be taxed in that other Slate.

B IOS7

2. The tenn "immovable property" shall have the meaning which it has under

the law of the Contracting State in which the property in question is situated. The tenn

shall in any case include property accessory to immovable property, livestock and

equipment used in agriculture, rights to which the provisions of general law respecting

landed property apply, buildings, usufruct of immovable property and rights to variable

or fixed payments as consideration for the working of, or the right to work., minera1

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 fonn of immovable property.

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 performance of independent personal services.

A1!.T1C12 7

Business Profits

I. The profits of an enterprise of a Contracting State shall be taxable only in

that State urness the enterprise carries on business in the other Contracting State through

a pennanent establishment situated therein. If the enterprise carries on business as

aforesaid, the profits of the enterprise may be taxed in the other State but only so much

of them as is attributable to that pennanent 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 pennanent

establishment situated therein, there shall in each Contracting State be attributed to

that pennanent establishment the profits which it might be expected to make if it were

a distinct and separate enterprise engaged in the same or similar activities under the

same or similar conditions and dealing wholly independently with the enterprise of

which it is a pennanent establishment.

3. In the detennination of the profits of a pennanent establishment. there shall

be allowed as deductions expenses which are incurred for the purposes of the business

of the permanent establishment, including executive and general administrative expenses

so incum:d, whether in the State in which the permanem establishment is situated or

elsewhere.

4. Insofar as it has been customary in aContracting State todetennine 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 paragraph 2 shall preclude

that Contracting State from detennining the profits to be taxed by such an apportionment

as may be customary; the method of apportionment adopted shall. however, be such

that the result shall be in accordance with the principles contained in this Article.

B IOS8

S. No profits shall be attributed to a permanent establishment by reason of the

mere purchase by that permanent establ.ishment of goods or merchandise for the

e nterprise.

6 . For the purposes of the preceding paragraphs. the profiu to be attributed to

the pennanent establishment shall be determined by the same method year by year

unless there is good and sufficient reason to the contrary.

7. Where profits include ite ms of income which are dea1t with separately in

other Ankles of this Convention, then the provisiQllS o f those Articles shall not be

affected by the provisions o f this Article.

8. The provisions of this Anicle shall not affect the provisions of the law of a

Contracting State regarding the taxation of profits from the business o f insurance.

Shipping lind Air Tnutsport

I . Profits of an enterprise of a Contracting State from the operation of ships or

aircraft in international traffic shall be taxable only in that State.

2. With respect to profits derived by the air transport consonium Scandinavian

Airlines System (SAS) the provisions o f paragraph I shall apply only to such part o f

the profits as corresponds to the panic ipation he ld in that conso rtium by AB

Aerotransport (ABA), the Swedish partner of Scandinavian Airlines System (SAS).

3. The provis ions of paragraph I shall also apply to profits from the participation

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

ARTIC~9

Associated Enterprises

I.

Where

(a) an e nterprise of a Contracting State panicipates directly or indirectly in

the management. control or capital o f an enterprise of the other Contracting State,

••

(b) the same persons participate directly or indirectly in the management,

control or capital of an enterprise of a Contracting State and an enterprise of the

other Contracting State.

8 1059

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

corrunercial or financial relations which differ from those which would be made between

independent enterprises, then any profits which would , but for those conditions, have

accrued to one of the enterprises, but, by reason of those conditions, have not so accrued,

may be included in the profits of that enterprise and taxed aCCOrdingly .

2. Where a Contracting Stale includes in the profits of an enterprise of that

State - and taxes accordingly - profits on which an enterprise of the other Co ntracting

State has been charged to tax in that other State and the profits so included are profits

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

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

independent enterprises. then that other State shall make an appropriate adjustment to

the amount of the tax charged therein on those profits. In detennining such adjustment ,

due regard shall be had to the other provisions of this Convention and the competent

authorities of the Contracting States shall if necessary consult each other.

ARTICLE 10

Dividends

1. Dividends paid by a company which is a resident of a Contracting State 10 a

resident of the other Contnlcting State may be taxed in that other State.

2 . However, such dividends may also be taxed in the Contracting State o f which

the company paying the dividends is a reside nt and according to the laws of that State.

but

(a) Where the dividends are paid by a company which is a resident of

Sweden 10 a resident of Malta who is the beneficial owner thereof, the Swedish

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

However, if the beneficial owner is a company which holds at least 10 percent of

the voti ng power o f the company paying the d ividends. the dividends shall be

exempt from tax in Sweden;

(b) (i) Where the dividends are paid by a company which is a resident o f

Malta to a resident of Sweden who is the beneficial owne r thereof, Malta tax

on the gross amount of the dividends shall not exceed that chargeable on the

profits out o f whic h the dividends are paid.

(ii) Notwithstanding the provisions o f sub-paragraph (i) hereof, Malta

tax shall not exceed 15 per cent o f the dividends if such dividends are paid

out of gains o r profits earned in any year in respect of which the company is

in recei pl of any tax benefit under the provisions regulating aids to ind ustries

in Malta. and the shareholder submits returns and accounts to the taxation

authorities of Malta in respect o f his income liable to Malta tax for the relative

year of assessmen t .

81060

The provisions of sub-paragraph (b) (ii) of this paragraph shall apply for the

first ten years during which this Convention is effective. This period may be

elUended by a mUlUal agreement between the competent authorities.

This paragraph shall not affect the taxation of the company in respect of the

profits out of which the dividends are paid .

3 . The tenn "dividends" as used in Inis Anicle means income from shares or

other rights. 001 being debl-claims. participating in profits. as well as income from

other corporate rights which is subjected 10 the same taxation treatment as income

from shares by the laws of the Stale of which the company making the distribution is a

resident.

4 . The provisions of parngraphs I and 2 shall not apply ifthe beneficial owner

of the dividends, being a resident of 8 Contracting State, carries 0 0 business in the

other Conbacting Swe of which the company paying the divideads is a resident, through

a pennanen! establishment situated therein,or performs in that other 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 pennanentestabli.shment

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

shall apply .

Where a company which is a resmnt of a Contracting Slate derives profits

5. or income from the O(her Contracting State. that O(her State may not impose any tax 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 holding in respect of which the dividends

are paid isefTectivclyconnected with a pennanem establishment or a fixed base situated

in that other State, nor subject the company's undistributed profits to a tax on the

company's undistributed profits. even if the dividends paid or the undistributed profits

consist wholly or panly of profits or income arising in such other State: .

..... T1CI.£ 11

Interest

I. !merest arising in a Contracting State and paid to a resident of the other

Contracting State shall be taxable only in that O(her State, if such resident is the benefJcial

owner of the interest.

2. 'The tenn "imerest" as used in this Ankle means income from detx-claims of

every kind , whether or not secured by mortgage and whether or not carrying a right to

panicipate in thedebtor's profits, and in particular, income from government securities

and income from bonds or debentures. including premiums and prizes attaching to

such securities. bonds or debentures. Penalty charges for late paymenl shall nol be

regarded as interest for the purpose of this Ank le.

3. The provisions of paragraph I shall not apply if the beneficial owner of the

interest, being a resident of a Contracting State, carries o n 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

situated therein,and the debt-claim in respect o f which the interest is paid is effectively

connected with such pem1anem establishment or fixed base . ln such case the provisions

of Article 7 or Article 14 , as the case may be, shall apply.

4. Where, by reason of a special relationship between the payer and the beneflcial

owner or between both of them and some other person, the amount of the interest,

having regard to the debt-claim for which it is paid, exceeds the amount whic h 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 sllC~ case, the excess pan of the payments shall remain taxable accord ing to the

laws of eacb Contracting State, due regard being had to the other provis ions of this

Convention.

ARTlCLB I1

Royalties

I . Royalties arising in a Contracting State and paid to a resident of the other

Contracting State shall be taxable only in that Other Stale if such resident is the beneficial

owner of the royalties.

2. 1be term "royalties" as used in this Anicle means payments of any kind

received as a consideration for the use o f, or the right 10 use, any copyright ortiterary,

artistic or scientific work including cinematograph films and films or tapes for radio or

television broadcasting, any patent, trade mark, design o r model , plan. secret formula

or process, or for infonnation concerning industrial, commercial or scientific ellOperience.

3 . The provis ions of paragraph I shall nOl apply if the benefic ial owner of the

royalties, being a res ident of a Contracting State, carries on business in the other

Contracting State in which the royalties arise, through a pemlanent establishment

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

fix.ed base sitt:ated therein, and the right or propen y in respect of which the royalties

are paid is effectively connected with such pennanent establishment or fixed base. In

such case the provisions of Article 7 or Article l4 , as the case may be, shall apply.

4 . Where, by reason of a special relationship between the payer and the beneficial

owner or between both of them and some other person , the amount of the royalties ,

having regard to 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 Article shall apply only to the

last-mentioned amount. In such case, the ex.cess part of the payments shall remain

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

other provisions of this Convention .

AalleLE U

Alienation of Property

I. Jncome or gains derived by a resident of a Contracting State from thealienation

of immovable property referred to in Article 6 and situated in !he OIher Conlracting

State may be taxed in !hat other State.

2. Income or gains from the alienation of shares or comparable interests in a

company, !he assets of whieh consist wholly or principally of immovable property,

may be taxed in the Contracting Stale in which the assets or the principaJ asselS of the

company are situated.

3. Income or gains from the alienation of movable property fonning part of the

business property of a pennanent establishment which an enterprise of a Contracting

State has in the other Contracting State or of movable property pertaining to a fixed

base available to a resident of a Contracting State in the other Contracting State for the

purpose of performing independent personal services, including such income or gains

from the alienation of such a permanent establishment (alone or wi th the whole

e nterprise) or of such fixed base. may be taxed in the other State.

4. Income or gains derived by a resident of a Contracting State from the alienation

of ships or aircraft operated in international traffIC or movable propeny pertaining to

the operation of such ships or aircraft. shall be taxable only in that State.

With respect to income or gai ns derived by the air transport consortium

Scandinavian Airlines System (SAS). the provisions of lhis paragraph shall apply only

to such portion of the income or gains as corresponds to the participation held in that

consortium by AB Aerotransport (ABA). the Swedish pannerofScandinavian Airlines

System (SAS).

5. Income or gains from the alienation of any property other than !hat referred

to in paragraphs 1, 2,3 and 4 . shall be taxable only in the Contracting Stale of which

the alienator is a resident ,

Independent Personal Services

I. Income derived by a resident of a Contracting State in respect of professional

services or other acti vities of an independent character shall be taxable only in that

State. However, such income may be taxed in the OlherContracting State in the following

circumstances

(a) if he has a fixed base regularly available 10 him in the other Contracting

State for the purpose of performing his activities; in that case. only so much of

the income as is attributable to that fixed base may be taxed in thatOlherCootracting

State; or

(b) if his stay in the other Contracting State is for a period o r periods

amounting to or exceeding in the aggregate 183 days in an y twelve month period

commencing or ending in the fiscal year concerned; in that case. only so much of

the income as is derived from the acti vity exercised in the other Contracting State

may be taxed in that other State; or

(c) if the remuneration for hi! activities in the other Contracting State is

paid by a resident of that Contracting State or is borne by a permanent establishment

or fixed base situated in that Contracting State and exceeds in the fi scal year the

equivalent of 25.000 United States dollars.

2. The term " professional services" includes especially independent scientific.

literary. artistic, educational or teaching activities as well as the independent activities

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

AR11CLE 15

Dependent Personal Services

I. Subject: to the provisions of Articles 16, 18 and 19, salaries, wages and other

similar remuneration derived by a resident of a Contracting State in respect of an

employment shall be taxable only in that State unless the employment is exercised in

the other Contracting Swe.lfthe employment is so exercised. such remuneration as is

deri ved tberefrom may be taxed in that other State.

2. NOI:withstanding the provisions of paragraph I, remuneration derived by a

resident of a Contracting State in respect of an employment exercised in the OI:her

Contracting State shall be taxable only in the first-mentioned Stale if

(a) the recipient is present in the other State for a period or periods not

exceeding in the aggregate 183 days in any twelve-month period commencing or

ending in the fiscal year concerned; and

(b) the remuneration is paid by, or on behalf of, an employer who is not a

resident of the other State; and

(c) the remuneration is not borne by a pennanent establishment or a fixed

base whic h the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived

in respect: of an employment exercised aboard a ship or aircraft operated in imernatiooal

traffic by an enterprise of a Contracting State may be taxed in that State. Where a

resident of Sweden derives remuneration in respect of an employment exercised aboard

an aircraft operated in international traffic by the air transport consortium Scandinavian

Airlines System (SAS) , such remuneration shall be taxable only in Sweden.

.'064

Directors' "'ees

Directors' fees and other similar paymenlS derived by a resident of a Contracting

Slate in his capacity as a member of the board of directors of a company which is a

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

ARnaJ! 17

Entertainers and Sportsmen

I. Notwithstanding the provisions of Anicks 14 and 15, income derived by a

resident of a Contracting State as an entenainer. such as a theatre, m<Xion picture.

radio or television artiste ,or a musician , Of as a sportsman, from his personal activities

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

2. Where income in respect of personal activities exercised by an e.ltenainer or

a sportsman in his capacity as such accrues nOllO the entertainer or sportsman himself

but to another person. that income may. notwithstanding the provisions of Articles 7.

14 and 15, be taxed in the Contracting State in which the activities of the entertainer or

sportsman arc exercised.

ARTlCUlIS

Pensions and Social Stturity Payments

J. Subject 10 the provisions of paragraph 2 of Article 19 , pensions and other

similar remuoerntion paid to a residem of a Contracting State in consideration o f pas t

employment shall be taxable only in that State.

) . Notwithstanding the provisions o f paragraph I, pensions paid and other

paymems made under the social security legislation of a Contracting State shall be

taxable only in that State.

ARTICLE 19

Gol'e:rnme:nt Service

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

polilical subd ivision or a local authority thereof 10 an ind ividual in respect of

services rendered 10 that State or subdivision or au thority shall be taxable only in

tha! State.

8 1065

However , such remunel1ltioo shall be taxable only in the other

(b)

Conuacting Stale ifthe services are rendered in that OIher State and the individual

is a resident of that State who

is a national of that State; or

(i)

(ii) did nOl become a resident of that State solely for the purpose of

rendering the services.

2. (a) Ally pension paid by. or out of fuods created by. a Contracting State

or a political subdivision or a local authority !hereof to an individual in respect of

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

that State.

However, such pension shall be taxable only in the other Contracting

(b)

State if the individual is a resident of, and a national of, thal State.

3. The provisions of Articles 15, 16 and 18 shall apply to remuneration and

pensions in respect of services rendered in connection with a business carried on by a

Contracting Stale or a political subdivision or a local authority thereof.

ARTICU!lO

Students and Business Apprentices

Payments which a student or business apprentice who is or was immediately before

visiting a Conuacting Stale a resident ofme otherContracling State and who is present

in the flISt-mentioned State solely for the purpose of his education or training receives

for the purpose of his maintenance, education or training shall nOl be taxed in that

State. provided that such payments arise from sources outside that State

ARnCLEll

Other Income

Items of income of a resident of a Contracting State, wherever arising, not

I.

dealt with in the foregoing Articles of this Convention shall be taxable only in that

State.

2. The provisions of paragraph 1 shall nOl apply to income, other than income

from immovable property as defined in paragraph 2 of Article 6, if the recipient of

such income, being a resident of a Contracting State . carries on business in the other

Contracting Stale through a pennanent establishment situated therein, or perfonns in

that other State independent personal services from a fixed base situated therein, and

the right or property in respect of which the income is paid is effectively connected

with such pennanent establishment or fixed base. In such case the provisions of Article

7 or Article 14 , as the case may be, shall apply.

81066

Elimination of Double Taxadon

In the case of Malta, double taution shall be avoided as folloW!

1. SUbject to the provisions of the law of Malta regarding the allowance of a

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

provisions of this Convention there is included in a Maha assessment income

from sources within Sweden, the Swedish tax on such income shall be a]]owed as

a credit against the relative Malta tax payable mereon.

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

2. Where a reside nt o f Sweden derives income which under the laws of

<8>

Malta and in accordance with the provisions of this Convention may be taxed in

Malta , Sweden shal l allow - subject to the provisions of the laws of Sweden

concerning credit for fore ign tax (as it may be amended from time to time without

changing the gencnl principle hereoQ - as a deduction from the tax on such

income, an amount equal to the Malta tax paid in respect of such income.

(b) Where a resident o f Sweden derives income which. in accordance with

the provisions o f Ihis Convention , shall be taxable onl y in Malta, Sweden may,

when detennini ng the graduated rate of Swedish tax, take into account the income

whic h shall be taxable only in Malta.

(c) Notwithstanding the provisions o f sub-panlgraph (a) of lhis paragraph ,

dividends paid by a com pany which is a reswent of Malta to a company which is

a resident of Sweden shall be exempt from Swedish tax according to the provisions

of Swedish law governing the exemption of tax on d ivideDds paid to Swedish

companies by subsidiaries abroad .

(d) For the purposes of sub-paragraph (a) of this paragraph the tenn ~Malta

tax paw" shall be deemed to include the Malta tax which would have been paid

but for any time-limited exemptio n or reduction of tax granted under incentive

provisions contained in the Malta law designed to promote economic development

tothe extent that such exemption or reduction is granted for profits from industrial

or manufacturing activities or from agric ulture , fi shing o r to urism (including

restaurants and hotels) provided that the activities have been carried OUI within

Malta. For the purposes of sub-paragraph (c) of this paragraph a tax of 15 per cent

calcul ated on a Swedish tax base shall be considered to have been paid for such

activities unde r those conditions mentioned in the previous sentence.

The competent authorities may agree to extend the applicatio n o f this

proviS ion also to oth er act ivities.

(e) The provisions of sub-paragraph (d) of this paragraph shall apply for

the first ten years during which this convention is effective. This period may be

extended by a mutual agreement between the competent authorities .

3. Where the Convention provides that income (including capital gains) arising

in a Contracting State shall be relieved from tax in that State, either in full or in pan,

and, under the law in force in the other Contracting State , such income is subject to tax

by reference to the amount thereof which is remitted to or received in that other State

and not by reference to the full amount thereof, then the relief to be allowed in the first-

mentioned State shall apply only to such portion of the income as remitted to or received

in the other State.

ARTICU;:U

Non-DiscrimInation

Nationals of a Contracting State shall not be subjected in the OIherContracting

I.

State to any taxation or any requirement connected therewith, which is other or more

burdensome than the taxation and connected requirements 10 which nationals of that

other State in the same circumstances are or may be subjected. This provision shall ,

notwithstanding the provisions of Article I , also apply to persons who are not residents

of one or both of the Contracting States.

2. The taxation on a pennanent establishment which an enterprise of a

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

in that other State than the taxation levied on enterprises of that other State carrying on

the same activities. This provision shall not be construed as obliging a Contracting

State to grant to residents of the other Contracting State any personal allowances,

reliefs and reductions for taxation purposes on accoUn! of civil status or family

responsibilities which it grants 10 its own residents.

3. Except where the provisions of paragraph I of Article 9, paragraph4 of Article

11 , or paragraph 4 of Article 12 apply , interest, royalties and otherdisbur.;ements paid

by an enterprise of a Contracting State to a resident of the other Contracting State

shall.forthe purpose of determining the taxable profits of such enlerprise, be deductible

under the same conditions as ifthey had been paid to a resKlent of the fIrSt-mentioned

State.

4. Enterprises of a Contracting Stale , the capital of which is wholly or panly

owned or controlled , directly or indirectly. by one or more residents of the other

Contracting State, shall not be subjected in the fU'St-mentioned State to any taxation or

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

taxation and connected requirements 10 which other similar enterprises of the flTSt-

mentioned State are or may be subjected.

5. The provisions ohhis Article shall apply to the taxes which are the subject of

this Convention.

ARTICLE:'"

Mutual Agreement Procedure

I. Where a penon considen that the actions of one or both of the Contracting

States result or will resul t for him in taxation not in accordance with the provis ions o f

this Convention, he may, irrespective of the remedies provided by the domestic law of

those Stales, present his case to the competent authority of the Contracting State of

whic h he is a resident or, if his case comes under paragraph 1 o f Article 23 , 10 that o f

the Conuacting State of whic h he is a naliona!. The case must be presented within

three ye~ from lhe fint notification of the action resulting in taxation not in accordance

with the provisions of the Convention.

2. The competent authority shall endeavour, if the objection appears to it to be

justified and if it is not itself able to arrive at a satisfactory solution, to resolve tbe case

by mutual agreement with the competcnt authority of the other Conuacting Slate, with

a view 10 the avoidance of taxation which is not in accordance with lhe Convention .

Any agreement reached shall .be implemented notwithstanding any time Iimi.lS in the

domestic law of the Contracting Slates.

3 . 1be competentauthorities oflhe Conuacting States shall endeavour toresolve

by mutual agreemem any d ifficulties o r doubts arising as 10 the imerpretation or

application of the Convention . They may also cons ult together for the elimination of

double taxation in cases nOt provided for in lhe Conve ntion.

4. 1be competent authorities of the Contracting States may communicate with

each othcrdirectly for the purpose of reaching an agreement in the sense of the pnx:eding

paragraphs.

ARTICUl2l

Exchange or [nfo nnation

I. The competent authoriti es of the Contracting States shall exchange such

information as is necessary for carrying out the provisions of this Convention or of the

domestic laws of the Contracting States concerning taxes covered by the Convention ,

insofar as the taxation thereunder is not contrary to the Convention . The exchange of

information is not restricted by Articlc I . Any information received by a Contracting

State shall be !reated as secret in the same manner as infonnation obtained under the

domeslic laws of that Slate and shall be disclosed only 10 persons or authorities

(including couns and administtative bodies) involved in the assessment or collection

o f, the enforcement or prosecution in respect of, or the detennination of appeals in

relation to, the taxes covered by the Convention. Such persons or authori ties shall use

the information only for such purposes. They may disclose the infonnati on in public

cou n proceedings or in judicial decisions.

2. In no case shall the provisions of paragraph 1 be construed SO as to impose on

a Contracting Stale Ihe obligation

Bl069

to carry OUI administrative measures at variance with the laws and

(8)

administraJive practice of that or of the other Contracting State;

to supply infonnation which is not obIainable under the laws or in the

(b)

oorma1 course of the administration of that or of the other ContJaCting State;

(c) to supply infonnation which would disclose any trade. business.

industrial . commercial or professional seaet or trade process. or information. the

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

~RTICI..S 'Z6

Umltation or Relief

The provisions of this Convention shall not apply to persons entitled taany special

tax benefit under.

a law of either one of the Contracting States which has been identified

(8)

in an Exchange ofNOIeS between the Conttacting StaleS; or

any substantially similar law subsequently enacted .

(b)

Dlplomadc Agents and CollSwar Offkers

Nothing in this Convention shall affect the fisca1 privileges of diplomatic agents

orconsular OfficeB under the general rules orintemationallaw or underthe provisions

of special agreemenlS.

Entry into Force

I . The Contracting States shall notify each other that the constitutional

requirements for the entry into force of this Convention have been complied with .

2. This Convention shall enter into force thirty days after the date of the later of

the notifications referred to in paragraph I and its provisions shall have effect,

<a) in Sweden, on iDCOOlC derived on or after the first day of January

immediately following the date on which the Convention enters into force; and

in Malta, on inoome derived during any caJendar year or accounting

(b)

period. as the case may be. beginning on or after the first day of January

immediately following the date on which the Convention enters into force .

3. Upon the coming inlo effect of this Convention, the Agreemenl and

accompanying Protocol between Mallaand Sweden fortheavoidance of double taxation

wi!h respect to Ialtes on income, signed at Stockholm on May 30, 1975, as modified by

a Protocol signed at Valletta on JUDe 25, 1986, shall terminate. The provisions of the

1975 Agreemenl, as modified, shall cease to have effect from the date on which the

corresponding provisions of this Convenlion shaH, for !he fint time, have effect

according to the provisions of paragraph 2 of !his Anicle. Wi!h regard to the provisions

of Anicles 5 and 14 of the 1975 Agreement, where any greater relief from Ialt would

have been offered by the applicalion of !hose provisions, any such provision as aforesaid

shall continue to have effect

(a) in Sweden, on income derived on or before the last day of the second

calendar year Dext following that in which this Convention came inlo effect; and

in Malta, on income derived on or before !he last day of the second

(b)

calendar yearoraccounling period, as the case may be,next following the calendar

year in which this Convention came into effect.

ARnaJI:19

Termination

This Convenlion shall remain in force until tenninated by a Conttacting State.

Either Contracting Slate may tenninate the Convention, through diplomatic channels,

by giving notice of termination at least six months before !he end of any calendar year

beginning after the expiration of a period of five years from !he date of its entry into

force . In such event , the Convention shall cease to have effect.

(a) in Sweden, on income derived on or after the flISt day of January of the

calendar year next following the date on which the notice is given; and

in Malta, on income derived during any calendar year or accounting

(b)

period , as the case may be, beginning on or after the first day of January

immediately following the date on which the nQlice is given.

IN WITNESS WHEREOF the undersigned being duly au!horised thereto have

signed this Convenlion .

OONE at Washington D.C. this 9th day of October, 1995. in duplicate in the

English language.

JOHN DALLI

GORAN PERSSON

For the Government of Sweden

For the Govenunenl of Malta

BIO?I

PROTOCOL

At the signing of the Convention between Sweden and Malla for the avoidance of

double taxation and the pn:vention of fiscal evasion with respect to taxes on income,

the undersigned have agreed that the following shall form an integral part of the

Convention

Notwithstanding the provisions of paragraph 5 of Article 13. gains from the

alienation of shares or other corporate rights derived by an individual who has been

resident of a Contracting State and who has become a resident ortheother Contracting

State, may be taxed the flISt-mentioned State if the alienation of the shares or other

corpcnte rights occur a.I any time during the five years next following the date on

which the individual has ceased to be a resident of the flISt mentioned State.

In witness whereof the undersigned being duly authorised thereto have signed

this Protocol.

Done at Washington , this 9th day of October 1995, in duplicate in the English

language.

GORAN PBRSSON

JOHNDAW

For the Govemmc.nt of Sweden

For the Government of Malta

MINISTRY OF FlNANCE

Th~ MinistuofPill4ltU

GORAN PERSSON

His Excellency

Mr. Jo hn Da1li

9 October, 1995

MinisterofFinance

Your Exc:el1ency,

I have the honour to refer to the Convention, signed today, and to propose on

behalf of the Government of Sweden that

With reference to Anicle 26, the provisions of this Convention shall not apply

( i) to persons who are entitled to a special tax benefit under the Malta

Financial Services Centre Act (Cap. 330) except for those persons who opt under

section 41 of the saki Act 10 be subject 10 the normal provisions of the Income

Tax Act (Cap. 123) and of the Income Tax Management Act, 1994; or

10 persons who areentitled to exemption orany otherspecial tax benefit

(ii)

under the provisions of the Merchant Shipping Act, 1973. However, this does not

apply to income that is subject to the normal Malta income tax; or

(iii) to persons entitled 10 any special tax benefit under any substantially

similar law.

If the foregoing proposals are acceptable to the Governmenl of Malta, I have the

honour 10 suggesl thallhc presenl Note and Your Excellency's reply to that effect shall

be regarded as constituting an agreement between the two Governments in this matter,

which shall enter into force at the same time as the entry into forte ofthc Convention.

Pennit me, Excellency, to renew to you the assurances of my highest consideration.

Mr. OORAN PERSSON

MINISTRY OF FINANCE

MALTA

TIuMinisur

His ExceUency

GOran Persson

Minister of Finance

9th October. 1995

Swede"

Excellency.

I have the honour to acknowledge the receipt of your note of today's date which

reads as follows

"I have the honour to refer to the Convention, signed today, and to propose on

behalf of the Government of Sweden that

With reference to Article 26. the provisions of this Convention shall not apply

to persons who are entitled to a speciaJ tax benefit under the Malta

(i)

FinanciaJ Services Centre Act (Cap. 330) except for those persons who opt under

section 4\ of the said Act to be subject 10 the nonnal provisions of the Income

Tax Act (Cap. 123) and of the Income Tax Management Act. 1994; or

(ii) to persons who are entitled to exemption or any otherspedaJ tax benefit

under the provisions of the Merchant Shipping Act, 1973. However. this does nOl

apply to income that is subject to the nonnaJ Malta income tax; or

to persons entitled to any special tax benefit under any substantially

(iii)

similar law.

If the foregoing proposals are acceptable to the Government of Malta, I have the

honour to suggest that the present Note and Your Excellency's reply to that effect shall

be regarded as constituting an agreement between the two Governments in this matter.

which shall enter into force at the same time as the entry into force of the Convention."

The foregoing proposals being acceptable to the Government of Malta , I have the

honour to confmn that your Excellency's Note and this reply shall be regarded as

constituting an agreement between the two Governments in this matter, which shall

enter into force at the same time as the entry into force of the Convention.

Please accept. Excellency , the assurances of my highest consideration.

JOHN DALLI

Minister of Finance

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