Double Taxation Relief (Taxes on Income) (repubblikatal-litwanja)

L.N. 337 of 2004

INCOME TAX ACT

(CAP. 123)

Double Taxation Relief (Taxes on Income)

(Republic of Lithuania) Order, 2004

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

Tax Act, the Prime Minister and Minister of Finance has made the

following order>-

The title of this order is the Double Taxation Relief (Taxes on

Income) (Republic of Lithuania) Order, 2004.

It is hereby declared>–

CONVENTION

BETWEEN THE GOVERNMENT OF MALTA AND

THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

The Government of Malta and the Government of the Republic of Lithuania,

Desiring to conclude a Convention for the avoidance of double taxation and the

prevention of fiscal evasion with respect to taxes on income, have agreed as follows>

Article 1

PERSONS COVERED

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

Contracting States.

Article 2

TAXES COVERED

1. This Convention shall apply to taxes on income imposed on behalf of a

Contracting State or of its local authorities, irrespective of the manner in which they

are levied.

2. There shall be regarded as taxes on income all taxes imposed on total income

or on elements of income, including taxes on gains from the alienation of movable or

immovable property.

(a) that the arrangements specified in the Convention set

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

of Lithuania with a view to affording relief from double taxation

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

Republic of Lithuania>

(i) the tax on profits of legal persons (juridiniu asmenu

pelno mokestis)<

(ii) the tax on income of natural persons (fiziniu asmenu

pajamu mokestis)<

(b) that it is expedient that those arrangements should have

effect<

(c) that the Convention has entered into force on the 2nd

February, 2004.

B

The existing taxes to which the Convention shall apply are in particular>

a) in Lithuania>

(i) the tax on profits of legal persons (juridiniu asmenu pelno mokestis)<

(ii) the tax on income of natural persons (fiziniu asmenu pajamu

mokestis)<

(hereinafter referred to as “Lithuanian tax”)<

b)

in Malta>

the income tax<

(hereinafter referred to as “Malta tax”).

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

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

place of, the existing taxes. The competent authorities of the Contracting States shall

notify each other of any significant changes which have been made in their respective

taxation laws.

Article 3

GENERAL DEFINITIONS

1. For the purposes of this Convention, unless the context otherwise requires>

a) the term “Lithuania” means the Republic of Lithuania and, when used

in the geographical sense, means the territory of the Republic of Lithuania and

any other area adjacent to the territorial sea of the Republic of Lithuania within

which under the laws of the Republic of Lithuania and in accordance with

international law, the rights of Lithuania may be exercised with respect to the sea

bed and its sub-soil and their natural resources<

b) the term “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, as well

as any area of the sea bed, its sub-soil and the superjacent water column adjacent

to the territorial waters, wherein the Republic of Malta exercises sovereign rights,

jurisdiction, or control in accordance with international law and its national law,

including its legislation relating to the exploration of the continental shelf and

exploitation of its natural resources<

c) the terms “a Contracting State” and “the other Contracting State” mean

Lithuania or Malta, as the context requires<

d) the term “person” includes an individual, a company and any other body

of persons<

e) the term “company” means any body corporate or any entity which is

treated as a body corporate for tax purposes<

f) 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<

B

g) the term “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 term “competent authority” means>

(i) in Lithuania, the Minister of Finance or his authorised

representative<

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

representative<

i)

the term “national” means>

(i) any individual possessing the nationality of a Contracting State<

(ii) any legal person, partnership, association or other entity deriving

its status as such from the laws in force in a Contracting State.

2. As regards the application of the Convention at any time by a Contracting

State, any term not defined therein shall, unless the context otherwise requires, have

the meaning that it has at that time under the law of that State for the purposes of the

taxes to which the Convention applies, any meaning under the applicable tax laws of

that State prevailing over a meaning given to the term under other laws of that State.

Article 4

RESIDENT

1. For the purposes of this Convention, the term “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, place of incorporation or any other

criterion of a similar nature, and also includes that State and any local authority thereof.

This term, however, does not include any person who is liable to tax in that State in

respect only of income from sources in that State.

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

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

a) he shall be deemed to be a resident only of the State in which he has a

permanent home available to him< if he has a permanent home available to him in

both States, he shall be deemed to be a resident only 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 centre of vital interests cannot be

determined, or if he has not a permanent home available to him in either State, he

shall be deemed to be a resident only 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 only of the State of which he is a national<

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

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

3. Where by reason of the provisions of paragraph 1 a person other than an

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

Contracting States shall endeavour to settle the question by mutual agreement. In the

absence of such agreement, for the purposes of the Convention, the person shall not be

entitled to claim any benefits provided by this Convention.

Article 5

PERMANENT ESTABLISHMENT

1. For the purposes of this Convention, the term “permanent establishment”

means a fixed place of business 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. The term “permanent establishment” likewise encompasses>

a) a building site, a construction, assembly or installation project or

supervisory activities in connection therewith, but only where such site, project

or activities continue for a period of more than six months<

b) the furnishing of services, including consultancy services, by an

enterprise of a Contracting State through employees or other personnel engaged

by the enterprise for such purpose, but only where activities of that nature continue

for a period or periods aggregating more than six months within any twelve month

period.

B

4. Notwithstanding the preceding provisions of this Article, the term “permanent

establishment” shall be deemed not to include>

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

of goods or merchandise belonging to the enterprise<

b) the maintenance of a stock of goods or merchandise belonging to the

enterprise solely for the purpose of 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 of 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<

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

of activities mentioned in sub-paragraphs a) to e), provided that the overall activity

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

or auxiliary character.

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 State an

authority to conclude contracts in the name of the enterprise, that enterprise shall be

deemed to have a permanent establishment in that State in respect of any activities

which that person undertakes for the enterprise, unless the activities of such person are

limited to those mentioned in paragraph 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.

An enterprise shall not be deemed to have a permanent establishment in a

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

general commission agent 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 that

enterprise, he will not be considered an agent of an independent status within the

meaning of this 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 which

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

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

the other.

Article 6

INCOME FROM IMMOVABLE PROPERTY

1. 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 State.

2. 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. The

provisions of this Convention relating to immovable property shall apply also to property

accessory to immovable property, livestock and equipment used in agriculture and

forestry, rights to which the provisions of general law respecting landed property apply,

any option or similar right to acquire immovable property, usufruct of immovable

property and rights to variable or fixed payments as consideration for the working of,

or the right to work, or to explore for, mineral deposits, sources and other natural

resources. Ships, boats and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct

use, letting, or use in any other form of immovable property.

4. Where the ownership of shares or other corporate rights in a company entitles

the owner of such shares or corporate rights to the enjoyment of immovable property

held by the company, the income from the direct use, letting, or use in any other form

of such right to enjoyment may be taxed in the Contracting State in which the immovable

property is situated.

5. The provisions of paragraphs 1, 3 and 4 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.

Article 7

BUSINESS PROFITS

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

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

a permanent 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 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 attributed to

that permanent 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 permanent establishment.

B

3. In determining the profits of a permanent establishment, there shall be allowed

as deductions expenses which are incurred for the purposes of the permanent

establishment, including executive and general administrative expenses so incurred,

whether 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 paragraph 2 shall preclude

that Contracting State from determining 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.

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

mere purchase by that permanent establishment of goods or merchandise for the

enterprise.

6. For the purposes of the preceding paragraphs, the profits to be attributed to

the permanent 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 items of income which are dealt with separately in

other Articles of this Convention, then the provisions of those Articles shall not be

affected by the provisions of this Article.

Article 8

SHIPPING AND AIR TRANSPORT

1. 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. The provisions of paragraph 1 shall also apply to profits from the participation

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

Article 9

ASSOCIATED ENTERPRISES

1. Where

a) an enterprise of a Contracting State participates directly or indirectly in

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

or

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,

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 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 State includes in the profits of an enterprise of that

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

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 determining 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 to a

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

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

the company paying the dividends is a resident and according to the laws of that State,

but>

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

Lithuania to a resident of Malta who is the beneficial owner thereof, the Lithuanian

tax so charged shall not exceed>

(i) 5 per cent of the gross amount of the dividends if the beneficial

owner is a company (other than a partnership) which holds directly at least

25 per cent of the capital of the company paying the dividends<

(ii) 15 per cent of the gross amount of the dividends in all other cases<

b) where the dividends are paid by a company which is a resident of Malta

to a resident of Lithuania who is the beneficial owner thereof, Malta tax on the

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

of which the dividends are paid.

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

out of which the dividends are paid.

3. The term “dividends” as used in this Article means income from shares or

other rights, not being debt-claims, participating in profits, as well as income from

B

other rights which is subjected to the same taxation treatment as income from shares

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

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner

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

other Contracting State of which the company paying the dividends is a resident, through

a permanent 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 permanent establishment

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

shall apply.

5. Where a company which is a resident of a Contracting State derives profits

or income from the other Contracting State, that other 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 is effectively connected with a permanent 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 partly of profits or income arising in such other State.

Article 11

INTEREST

1. Interest arising in a Contracting State and paid to a resident of the other

Contracting 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 beneficial owner of the interest

is a resident of the other Contracting State, the tax so charged shall not exceed 10 per

cent of the gross amount of the interest.

3. Notwithstanding the provisions of paragraph 2 interest arising in a Contracting

State, derived and beneficially owned by the Government of the other Contracting

State, including its local authorities, the Central Bank or any financial institution wholly

owned by that Government, or interest derived on loans guaranteed by that Government

shall be exempt from tax in the first-mentioned State.

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 debentures, including premiums and prizes attaching to

such securities, bonds or debentures. The term “interest” shall not include any income

which is treated as a dividend under the provisions of Article 10. Penalty charges for

late payment shall not be regarded as interest for the purpose of this Article.

5. The provisions of paragraphs 1, 2 and 3 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

situated therein, and the debt-claim in respect of which the interest is 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. Interest shall be deemed to arise in a Contracting State when the payer is a

resident of that State. Where, however, the person paying the interest, whether he is a

resident of a Contracting State or not, has in a Contracting State a permanent

establishment or a fixed base in connection with which the indebtedness on which the

interest is paid was incurred, and such interest is borne by such permanent establishment

or fixed base, then such interest 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 other person, the amount of the interest,

having regard to the debt-claim for which it is 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 excess 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.

Article 12

ROYALTIES

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

Contracting State may be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which

they arise and according to the laws of that State, but if the beneficial owner of the

royalties is a resident of the other Contracting State, the tax so charged shall not exceed

10 per cent of the gross amount of the royalties.

3. The term “royalties” as used in this Article means payments of any kind

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

artistic or scientific work including cinematograph films and films or tapes and other

means of image or sound reproduction for radio or television broadcasting, any patent,

trade mark, design or model, plan, secret formula or process, or for the use of, or the

right to use, industrial, commercial or scientific equipment, or for information

concerning industrial, commercial or scientific experience.

B

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner

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

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

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

fixed base situated therein, and the right or property in respect of which the royalties

are 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.

5. Royalties shall be deemed to arise in a Contracting State when the payer is a

resident of that State. Where, however, the person paying the royalties, whether he is a

resident of a Contracting State or not, has in a Contracting State a permanent

establishment or a fixed base in connection with which the liability 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.

6. 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 excess 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.

Article 13

ALIENATION OF PROPERTY

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

of immovable property referred to in Article 6 and situated in the other Contracting

State or shares or comparable interests in a company the assets of which consist directly

or indirectly mainly of such property may be taxed in that other State.

2. Gains from the alienation of movable property forming part of the business

property of a permanent 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 gains from the alienation of

such a permanent establishment (alone or with the whole enterprise) or of such fixed

base, may be taxed in that other State.

3. Gains derived by an enterprise of a Contracting State operating ships or aircraft

in international traffic from the alienation of ships or aircraft operated in international

traffic or movable property pertaining to the operation of such ships or aircraft, shall

be taxable only in that State.

4. Gains from the alienation of any property other than that referred to in

paragraphs 1, 2 and 3 shall be taxable only in the Contracting State of which the alienator

is a resident.

Article 14

INDEPENDENT PERSONAL SERVICES

1. Income derived by an individual who is a resident of a Contracting State in

respect of professional services or other activities of an independent character shall be

taxable only in that State unless he has a fixed base regularly available to him in the

other Contracting State for the purpose of performing his activities. If he has such a

fixed base, the income may be taxed in the other State but only so much of it as is

attributable to that fixed base. If an individual who is a resident of a Contracting State

has no such a fixed base but he stays in the other Contracting State for a period or

periods exceeding in the aggregate 183 days in any twelve month period commencing

or ending in the fiscal year concerned, he shall be deemed to have a fixed base regularly

available to him in that other State and the income that is derived from his activities

referred to above that are performed in that other State shall be attributable to that

fixed base.

2. The term “professional services” includes especially independent scientific,

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

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

Article 15

DEPENDENT 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 Contracting State in respect of an

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

the other Contracting State. If the employment is so exercised, such remuneration as is

derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a

resident of a Contracting State in respect of an employment exercised in the other

Contracting State shall be taxable only in the first-mentioned State 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 permanent establishment or a fixed

base which the employer has in the other State.

B

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

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

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

Article 16

DIRECTORS’ FEES

Directors’ fees and other similar remuneration derived by a resident of a

Contracting State in his capacity as a member of the board of directors or any other

similar organ of a company which is a resident of the other Contracting State may be

taxed in that other State.

Article 17

ARTISTES AND SPORTSMEN

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a

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

radio or television artiste, or a musician, or as a sportsman, 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

a sportsman in his capacity as such accrues not to 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 are exercised.

3. The provisions of paragraphs 1 and 2 shall not apply to income derived from

activities exercised in a Contracting State by an entertainer or a sportsman if the visit

to that State is wholly or mainly supported by public funds of one or both of the

Contracting States or local authorities thereof. In such case, the income shall be taxable

only in the Contracting State of which the entertainer or sportsman is a resident.

Article 18

PENSIONS AND SOCIAL SECURITY PAYMENTS

1. Subject to the provisions of paragraph 2 of Article 19, pensions and other

similar remuneration paid to a resident of a Contracting State in consideration of past

employment shall be taxable only in that State.

2. Notwithstanding the provisions of paragraph 1, pensions paid and other

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

taxable only in that State.

Article 19

GOVERNMENT SERVICE

1. a) Salaries, wages and other similar remuneration, other than a pension,

paid by a Contracting State or a local authority thereof to an individual in respect of

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

b) However, such salaries, wages and other similar remuneration shall be

taxable only in the other Contracting State if the services are rendered in that State and

the individual is a resident of that State who>

(i) is a national of that State< or

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

the services.

2. a) Any pension paid by, or out of funds created by, a Contracting State or a

local authority thereof to an individual in respect of services rendered to that State or

authority shall be taxable only in that State.

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

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

3. The provisions of Articles 15, 16, 17 and 18 shall apply to salaries, wages

and other similar remuneration, and to pensions, in respect of services rendered in

connection with a business carried on by a Contracting State or a local authority thereof.

Article 20

STUDENTS

A student, an apprentice or a trainee who is present in a Contracting State solely

for the purpose of his education or training and who is, or immediately before being so

present was, a resident of the other Contracting State shall be exempt from tax in the

first-mentioned State on payments received from outside that first-mentioned State for

the purpose of his maintenance, education or training.

Article 21

OFFSHORE ACTIVITIES

1. The provisions of this Article shall apply notwithstanding the provisions of

Articles 4 to 20 of this Convention.

2. For the purposes of this Article, the term “offshore activities” means activities

carried on offshore in a Contracting State in connection with the exploration or

B

exploitation of the sea bed and sub-soil and their natural resources situated in that

State.

3. A person who is a resident of a Contracting State and carries on offshore

activities in the other Contracting State shall, subject to paragraph 4, be deemed to be

carrying on business in that other State through a permanent establishment or a fixed

base situated therein.

4. The provisions of paragraph 3 shall not apply where the offshore activities

are carried on for a period or periods not exceeding in the aggregate 30 days in any

twelve month period. For the purposes of this paragraph>

a) offshore activities carried on by a person who is associated with another

person shall be deemed to be carried on by the other person if the activities in

question are substantially the same as those carried on by the first-mentioned

person, except when those activities are carried on at the same time as its own

activities<

b) a person shall be deemed to be associated with another person if one is

controlled directly or indirectly by the other, or both are controlled directly or

indirectly by a third person or third persons.

5. Salaries, wages and other similar remuneration derived by a resident of a

Contracting State in respect of an employment connected with offshore activities in

the other Contracting State may, to the extent that the duties are performed offshore in

that other State, be taxed in that other State. However, such remuneration shall be

taxable only in the first-mentioned State if the employment is carried on for an employer

who is not a resident of the other State and for a period or periods not exceeding in the

aggregate 30 days in any twelve month period.

6. Gains derived by a resident of a Contracting State from the alienation of>

a) exploration or exploitation rights< or

b) property situated in the other Contracting State which is used in

connection with the offshore activities carried on in that other State< or

c) shares deriving their value or the greater part of their value directly or

indirectly from such rights or such property or from such rights and such property

taken together<

may be taxed in that other State.

In this paragraph the term “exploration or exploitation rights” means rights to

assets to be produced by offshore activities carried on in the other Contracting State, or

to interests in or to the benefit of such assets.

Article 22

OTHER INCOME

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

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

State. However, such items of income, arising in the other Contracting State, may also

be taxed in that other State.

2. The provisions of paragraph 1 shall not 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 State through a permanent establishment situated therein, or performs 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 permanent establishment or fixed base. In such case the provisions of Article

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

Article 23

ELIMINATION OF DOUBLE TAXATION

1. In the case of a resident of Lithuania, double taxation shall be eliminated as

follows>

Where a resident of Lithuania derives income which, in accordance with this

Convention, may be taxed in Malta, unless a more favourable treatment is provided in

its domestic law, Lithuania shall allow as a deduction from the tax on the income of

that resident an amount equal to the income tax paid thereon in Malta. Such deduction

shall not, however, exceed that part of the income tax in Lithuania, as computed before

the deduction is given, which is attributable to the income which may be taxed in

Malta.

2. In the case of a resident of Malta, double taxation shall be eliminated as

follows>

Subject to the provisions 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 Convention, there is included in a Malta assessment income from sources within

Lithuania, the Lithuanian tax on such income shall be allowed as a credit against the

relative Malta tax payable thereon.

3. For the purpose of paragraphs 1 and 2 the terms “income tax paid thereon in

Malta” and “the Lithuanian tax on such income” shall for the first five years during

which this Convention is applicable, be deemed to include the Malta tax or the

Lithuanian tax which would have been paid but which has been reduced or waived

under incentive provisions of the Malta law or the Lithuanian law designed to promote

economic development to the extent that reduction or exemption is granted for profits

B

from industrial or manufacturing activities or from agriculture, fishing or tourism

provided that in the case of application of paragraph 1 the activities are carried out

within Malta and in the case of application of paragraph 2 the activities are carried out

within Lithuania.

Article 24

NON-DISCRIMINATION

1. Nationals of a Contracting State shall not be subjected in the other Contracting

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

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

other State in the same circumstances, in particular with respect to residence, are or

may be subjected. This provision shall, notwithstanding the provisions of Article 1,

also apply to persons who are not residents of one or both of the Contracting States.

2. The taxation on a permanent 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 account of civil status or family

responsibilities which it grants to its own residents.

3. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article

11, or paragraph 6 of Article 12, apply, interest, royalties and other disbursements paid

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

shall, for the purpose of determining the taxable profits of such enterprise, be deductible

under the same conditions as if they had been paid to a resident of the first-mentioned

State.

4. Enterprises of a Contracting State, the capital of which is wholly or partly

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

Contracting State, 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 connected requirements to which other similar enterprises of the first-

mentioned State are or may be subjected.

Article 25

MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting

States result or will result for him in taxation not in accordance with the provisions of

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

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

which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of

the Contracting State of which he is a national. The case must be presented within

three years from the first 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 the case

by mutual agreement with the competent authority of the other Contracting State, with

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

Any agreement reached shall be implemented notwithstanding any time limits in the

domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve

by mutual agreement any difficulties or doubts arising as to the interpretation or

application of the Convention. They may also consult together for the elimination of

double taxation in cases not provided for in the Convention.

4. The competent authorities of the Contracting States may communicate with

each other directly, including through a joint commission consisting of themselves or

their representatives, for the purpose of reaching an agreement in the sense of the

preceding paragraphs.

Article 26

EXCHANGE OF INFORMATION

1. The competent authorities 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 Article 1. Any information received by a Contracting

State shall be treated as secret in the same manner as information obtained under the

domestic laws of that State and shall be disclosed only to persons or authorities

(including courts and administrative bodies) concerned with the assessment or collection

of, the enforcement or prosecution in respect of, or the determination of appeals in

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

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

court proceedings or in judicial decisions.

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

a Contracting State the obligation>

a) to carry out administrative measures at variance with the laws and

administrative practice of that or of the other Contracting State<

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

normal course of the administration of that or of the other Contracting State<

B

c) to supply information which would disclose any trade, business,

industrial, commercial or professional secret or trade process, or information, the

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

Article 27

LIMITATION OF BENEFITS

1. Where under any provision of this Convention any income is relieved from

tax in a Contracting State and, under the law in force in the other Contracting State, a

person, in respect of that income, is subject to tax by reference to the amount thereof

which is remitted to or received in that other Contracting State and not by reference to

the full amount thereof, then the relief to be allowed under this Convention in the first-

mentioned Contracting State shall apply only to so much of the income as is taxed in

the other Contracting State.

2. The provisions of this Convention shall not apply to persons enjoying a special

fiscal treatment by virtue of the laws or the administrative practice of either one of the

Contracting States which are identified in a Protocol to this Convention. Neither shall

they apply to income derived from such persons by a resident of the other Contracting

State, nor to shares or other rights in such persons owned by such a resident.

3. Notwithstanding any other provision of this Convention, a resident of a

Contracting State shall not receive the benefit of any reduction in or exemption from

taxes provided for in this Convention by the other Contracting State if the main purpose

or one of the main purposes of the creation or existence of such resident or any person

connected with such resident was to obtain the benefits under this Convention that

would not otherwise be available.

Article 28

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Convention shall affect the fiscal privileges of members of

diplomatic missions or consular posts under the general rules of international law or

under the provisions of special agreements.

Article 29

ENTRY INTO FORCE

1. The Governments of the Contracting States shall notify each other, through

diplomatic channels, that the legal requirements for the entry into force of this

Convention have been complied with.

2. The Convention shall enter into force on the date of the later of the notifications

referred to in paragraph 1 and its provisions shall have effect>

a) in Lithuania>

(i) in respect of taxes withheld at source, on income derived on or

after the first day of January in the calendar year next following the year in

which the Convention enters into force<

(ii) in respect of other taxes on income, for taxes chargeable for any

fiscal year beginning on or after the first day of January in the calendar year

next following the year in which the Convention enters into force<

b)

in Malta>

in respect of taxes on income derived during any calendar year or accounting 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.

Article 30

TERMINATION

This Convention shall remain in force until terminated by a Contracting State.

Either Contracting State may terminate the Convention, through diplomatic channels,

by giving written notice of termination at least six months before the end of any calendar

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

a) in Lithuania>

(i) in respect of taxes withheld at source, on income derived on or

after the first day of January in the calendar year next following the year in

which the notice has been given<

(ii) in respect of other taxes on income, for taxes chargeable for any

fiscal year beginning on or after the first day of January in the calendar year

next following the year in which the notice has been given<

b)

in Malta>

in respect of taxes on income derived during any calendar year or

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

January immediately following the date on which the notice is given.

In witness whereof, the undersigned, duly authorised thereto, have signed this

Convention.

B

Done in duplicate at Vilnius this 17th day of May 2001, in the English and

Lithuanian languages, both texts being equally authentic.

JOE BORG

ANTANAS VALIONIS

For the Government of Malta

For the Government of the

Republic of Lithuania

PROTOCOL

At the signing of the Convention between the Government of the Republic of

Lithuania and the Government of Malta for the avoidance of double taxation and the

prevention of fiscal evasion with respect to taxes on income (hereinafter referred to as

“the Convention”) the undersigned have agreed upon the following provisions which

form an integral part of the Convention.

1. With reference to paragraph 3 of Article 4

It is understood that under the domestic legislation in Lithuania, a company may

only be considered resident for tax purposes if it is incorporated in Lithuania. Should

such legislation be changed to provide for tax residence to be established also on the

basis of the place of effective management of a company, then where a company is

considered to be a resident of both Contracting States, it shall be deemed to be a resident

only of the Contracting State in which its place of effective management is situated.

This provision shall be applicable from the date from which the said change in legislation

shall have effect.

2. With reference to paragraph 1 of Article 7

It is understood that profits of an enterprise of a Contracting State derived from

the sale of goods or merchandise in the other Contracting State of the same or similar

kind as those sold, or from other business activities carried on in the other Contracting

State of the same or similar kind as those effected, through a permanent establishment

situated in that other State may be considered attributable to that permanent

establishment if it is established that such sales or activities were structured in a manner

intended to avoid taxation in that other State.

3. With reference to paragraph 3 of Article 7

It is understood that the expenses to be allowed as deductions by a Contracting

State shall include only expenses that are deductible under the domestic laws of that

State.

4. With reference to paragraph 2 of Article 27 it is understood that>

a) in the case of Lithuania, there is no legislation or administrative practice

under which persons may enjoy special fiscal treatment<

b) in the case of Malta, the persons who enjoy a special fiscal treatment

are the following>

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

Services Centre Act, 1994, except for those persons who opt to be subject to

the normal provisions of the Income Tax Act (Cap. 123) and of the Income

Tax Management Act, 1994< or

(ii) persons who and to the extent to which under the provisions of

the Merchant Shipping Act, 1973 are not subject to tax on the profits derived

from the operation of ships in international traffic< or

(iii) persons entitled to any special tax benefit in respect of distributions

by a trust subject to the provisions of the Trusts Act given that a trust as laid

down in that Act is not vested with legal personality and therefore cannot

benefit under this Convention in its own right<

c) if any law substantially similar to those indicated in sub-paragraph b)

of this paragraph is enacted by either Contracting State and it is agreed by the

competent authorities of the Contracting States that it be included within the terms

of paragraph 2 of Article 27, persons entitled to any special tax benefit thereunder

shall likewise be excluded from the provisions of this Convention.

In witness whereof, the undersigned, duly authorised thereto, have signed this

Protocol.

Done in duplicate at Vilnius this 17th day of May 2001, in the English and

Lithuanian languages, both texts being equally authentic.

JOE BORG

ANTANAS VALIONIS

For the Government of Malta

For the Government of the

Republic of Lithuania

Mitbug[ fl-Istamperija tal-Gvern — Printed at the Government Printing Press