Double Taxation Rellef (Ships an d Aircraft) (shipsandaircraft)

L.N. 230 of 1997

INCOME T AX Acr

(CAV. I23)

Double Taxation Rellef (Ships an d Aircraft)

(U nit ed States of America) Order, 1997

IN exercise of the powe rs confen'Cd by section 76 of the Income

Tax Act.the Minister ofFinance and Commerce has made the following

Order: -

This order may be cited as the Double Taxation Relief (S hips c ....... _

and Aircraft) (United States of America) Order. 1997.

It is hereby declared that -

(1065)

The Embassy of Malta presents its cOlLIplimcnts to thc rkpanment of State of the

United States of America and has the honour to propose that the two govemments

conclude an agrccmcnt toexempt from income ta~ .o n a ~iprocal basis . income derived

by residents of the other country frum the international upem tion of ships and aircraft.

The following proposed tenns of agreement have been drafted on the basis of similar

agreement.~ the United States has with othe r govern ments

The Government of Malta agrees 10 exempi from lax gross Income derived from

the international operations of ships or aircraft by individuals who are res idents of the

United States (other than cili7-cns of Malta) and corporations which (Ire incorporat ed in

the United States.

In case of a U.S. corpOr:ltion. the exemption shall apply only if the corpor,lIion

meets one of the following conditions

(I) the corporation's stoc k is primarily and regularly traded on an

established securities market in the U.S., another country which grants a reciprocal

exemption to Maltese corporations or Malta. or

(2) more than liffy (SO) percent of the value orlhe corpOr:ltion's stock is

owned directly or indirectly by individuals who are residents of the United States

or of another foreign country which grants an eq ui valent exemption to Maltese

corporations or by acorporation organized in a cou ntry which grants an equivalent

exemption 10 Maltese corporations and whose stock is primarily and regularly

traded on an established securities market in that country, another country which

grants an equivalent exemption to Maltese corporations. or Malta.

The Governmcnt of the United States of Ame rica. in accordance with sections

872(b) and 883(A) of the Internal Re venue Code, agrees to exempt from tax gross

income derived from thc intcrnational operati on of ships or aircmft by individuals who

are residents of Malta (other than United States citizens) and corporlltions which are

incorporated in Malta.

In case of a Moltese corporation. the exemption shall opply only if the corporntion

meets one of the following conditions

( 1) the corporation' s sto,'k is primaril y ond regulorly traded on an

established sec urities market in Multa. another country which grams a reciprocal

exemption to U.S. corporations or th~ United Stotes. or

(2 ) more than lifty (50) percent of the value of the corporation's stock is

owned directly or indirectly by individuals who are residents of ~-1alta or of

another forei gn country which grants an equivalent exemption to U.S. corporations

or by a corpormi()n org;tn ilcd in a country whi<:h grantS an equivalent exemption

to U.s. <:orporations and whose stock is primarily and regularly traded on un

estublished securities market in th;l[ country. ;lnotller coumry which gran ts an

equivalent exemption to U.s. corporations, or the United States.

For the purposes of exemption from [he U.S. tax, the Government of Malta will

be treated as an individual res ident of Malta. and sub.paragraph (2) shall be considered

to be satisfied if the corporation is a "controlled foreign corporation" uOOer the Internal

Revenue Code, so however, that U.s. shareholders of such corporations shall be treated

as residents of Malta.

In this agreement

(a) the tenns "comracting state" and "other contracting state" mean Malta

or the United States of Amcrica, the governments of which have concluded this

agreement.

(b) gross inco me includes all income derived from the international

operation of ships or aircraft, including

( I) income from the rental on full (time or voyage) basis of ships or

aircraft used in inte rnational transport;

(2) income from the rental on a bareboat basis of ships or aircraft

used in international transport;

(3) income from the rental of containers and related «[uipment used

in international transport that is incidental to income from the international

operation of ships and aircraft; and

(4) gains from the sale or ot her alienation of ships or aircraft used in

international transpon derived by a pe rso n primarily engaged in the

internati onal operation of ships or ai rcraft.

In the application of th is agreement by a contracting state, any tenn not defined in

this agreement shall , unless the context otherwise requires, have the meaning which it

has under the laws of that state relating to the taxes to which the agreemem applies.

The Government of Malta proposes that, if the foregoing is acceptable to the

Government of the Uni ted States. this note and the Depanment 's note in reply shall

constitute an agreement. The agreeme l1l shaJl el1ler into force on the date of the

Department's note in reply and shall have effect in respect of income derived on or

after l1anuary, 1997 .

Th i ~ agree ment shall con tinue in force untillhe Governmen t of either Contractin g

.~I:.Jle gives wrillcn not icc of h.:nn in:.Jt ion \If til<! agrecmcnt In the oth.:r COlllracting state

through the f.iiplomatic ch'lIInd .

The Embassy of Malia takes th is oPlXlrtunilY 10 re ncw to Ihe Department of Statc

of the United States of America the assurance of its highest consideration.

26 December. 1996

Embassy o f Malia

Wash ington . D.C.

The Department of State refeB the Embassy of Malta to the Embassy's note 1065

of December 26 . 1996. regarding the reciprocal exemption from income tax of income

derived from the international operation of ship s aoo aircraft .

The De partment of State confirms that the proposals contained in the Embassy's

note are acceptable to the Government of the United States of America. There fore, thi s

note and the Embassy's note of December 26. 1996. constit ute an agreeme nt which

shall enter in to force on the date of this note in repl y and shall be e ffect ive in respect of

income derived on or afte r Janu3ry 1. 1997 . Thi s agreement shall continue in force

unt illhe Government of either con tracting state gives wrinen notice of termi natio n of

the agreement to the other contracting state through the diplomatic channel.

Depanment of Stale.

Washi ngton.

March II. 1997.

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(a) the Agreement specified in the Exc hange o f NOles

Verbales re produced in the Schedule to this order has been made

with the United States of America with a view to afford ing relief

from double tallation in relation to the taxation of income derived

from the international operation of ships and aircraft; and

(b) the Agreement has entered into force 011 the 11 th March.

1997 and is effective in respect of income derived on or after the

1st January . 1997.