Double Taxation Relief (Taxes on Income)

L.N. 234 of 2006

INCOME TAX ACT

(CAP. 123)

Double Taxation Relief (Taxes on Income)

(The Kingdom of Spain) Order, 2006

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) (The Kingdom of Spain) Order, 2006.

It is hereby declared>–

CONVENTION

BETWEEN

MALTA

AND

THE KINGDOM OF SPAIN

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

Malta and The Kingdom of Spain, 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 political subdivisions or 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, taxes on the total amounts of wages or salaries

paid by enterprises, as well as taxes on capital appreciation.

(a) that the arrangements specified in the Convention set

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

of Spain with a view to affording relief from double taxation in

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

of Spain>

(i) the income tax on individuals<

(ii) the corporation tax<

(iii) the income tax on non residents< and

iv)

local taxes on income<

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

effect<

(c) that the Convention shall be deemed to have come into

force on the 12 September, 2006.

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

a) in Spain

i)

the income tax on individuals;

ii)

the corporation tax;

iii)

the income tax on non residents; and

iv)

local taxes on income;

(hereinafter referred to as “Spanish 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

the term “Spain” means the Kingdom of Spain and, when used in a

geographical sense, means the territory of the Kingdom of Spain,

including the territorial sea and any area outside the territorial sea

upon which, in accordance with international law and on application

of its domestic legislation, the Kingdom of Spain exercises or may

exercise in the future jurisdiction or sovereign rights with respect to

the seabed, its subsoil and superjacent waters, and their natural

resources;

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 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;

the terms “a Contracting State” and “the other Contracting State”

mean Spain or Malta, as the context requires;

the term "person" includes an individual, a company and any other

body of persons;

the term "company" means any body corporate or any entity that 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;

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 Spain: the Minister of Economy and 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 or association 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 or any other

criterion of a similar nature, and also includes that State and any political

subdivision or 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

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);

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;

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;

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, then it shall be deemed to be a

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

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 place of management;

a branch;

an office;

a factory;

a workshop, and

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

of natural resources.

3. A building site, construction, installation project, or supervisory or consulting

activities connected therewith, constitutes a permanent establishment only if it lasts

more than 12 months.

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

"permanent establishment" shall be deemed not to include

the use of facilities solely for the purpose of storage, display or

delivery of goods or merchandise belonging to the enterprise;

the maintenance of a stock of goods or merchandise belonging to

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

the maintenance of a stock of goods or merchandise belonging to

the enterprise solely for the purpose of processing by another

enterprise;

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

of purchasing goods or merchandise or of collecting information, for

the enterprise;

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;

the maintenance of a fixed place of business solely for any

combination of activities mentioned in subparagraphs (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.

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

term shall in any case include 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, usufruct of

immovable property and rights to variable or fixed payments as consideration for

the working of, or the right to work, mineral deposits, sources and other natural

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

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

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

4. The provisions of paragraphs 1 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.

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.

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 Contracting 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 that other

State agrees that 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) When the dividends are paid by a company which is a resident of

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

Spanish tax so charged shall not exceed 5 per cent of the gross

amount of the dividends.

Notwithstanding the provisions of this sub-paragraph, Spain shall

exempt from tax the dividends paid by that company to a company the

capital of which is wholly or partly divided into shares and which is a

resident of Malta, as long as it holds directly at least 25 per cent of the

capital of the company paying the dividends.

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

Malta to a resident of Spain 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,

“jouissance” shares or “jouissance” rights, mining shares, founders' shares or

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

other corporate 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 shall be taxable only in that other State.

2. 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, as well

as all other income assimilated to income from money lent by the taxation laws of

the State in which the income arises. Penalty charges for late payment shall not

be regarded as interest for the purpose of this Article.

3. The provisions of paragraph 1 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.

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 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 beneficially owned by a

resident of the other Contracting State shall be taxable only in that other State.

2. 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, or films, tapes

and any other means used for image or sound reproduction, any patent, trade

mark, design or model, plan, secret formula or process, or for information

concerning industrial, commercial or scientific experience.

3. 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.

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 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

CAPITAL GAINS

1. 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 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 from the alienation

of ships or aircraft operated in international traffic, or from movable property

pertaining to the operation of such ships or aircraft, shall be taxable only in that

State.

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

shares or comparable interests deriving more than 50% of their value directly or

indirectly from immovable property situated in the other Contracting State may be

taxed in that other State.

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

paragraphs 1, 2, 3 and 4 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.

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.

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 payments derived by a resident of a

Contracting State in his capacity as a member of the board of directors 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.

Article 18

PENSIONS

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.

Article 19

GOVERNMENT SERVICE

1. a)

Salaries, wages and other similar remuneration, other than a

pension, paid by a Contracting State or a political subdivision or a

local authority thereof to an individual in respect of services

rendered to that State or subdivision or authority shall be taxable

only in that State.

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

State or a political subdivision or a local authority thereof 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 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 political

subdivision or a local authority thereof.

Article 20

STUDENTS AND BUSINESS APPRENTICES

Payments which a student or business apprentice who is or was

immediately before visiting a Contracting State a resident of the other

Contracting State and who is present in the first-mentioned State solely for the

purpose of his education or training receives for the purpose of his maintenance,

education or training shall not be taxed in that State, provided that such

payments arise from sources outside that State.

Article 21

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.

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 22

ELIMINATION OF DOUBLE TAXATION

Double taxation shall be avoided as follows

1. In Spain

Double taxation shall be avoided following either the provisions of its

internal legislation or the following provisions

a)

Where a resident of Spain derives income which, in accordance

with the provisions of this Convention, may be taxed in Malta, Spain shall

allow

i)

as a deduction from the tax on the income of that resident,

an amount equal to the income tax paid in Malta;

ii)

the deduction of the underlying corporation tax shall be given

in accordance with the internal legislation of Spain.

Such deduction shall not, however, exceed that part of the income

tax as computed before the deduction is given, which is attributable to the

income which may be taxed in Malta.

b)

Where in accordance with any provision of the Convention income

derived by a resident of Spain is exempt from tax in Spain, Spain may

nevertheless, in calculating the amount of tax on the remaining income of

such resident, take into account the exempted income.

2. In Malta

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 Spain, the Spanish tax on such income shall be allowed as a

credit against the relative Malta tax payable thereon.

Article 23

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 4 of

Article 11, or paragraph 4 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.

5. The provisions of this Article shall, notwithstanding the provisions of Article

2, apply to taxes of every kind and description.

Article 24

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 23, 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 for the purpose of reaching an agreement in the sense of

the preceding paragraphs. When it seems advisable in order to reach agreement

to have an oral exchange of opinions, such exchange may take place through a

Commission consisting of representatives of the competent authorities of the

Contracting States.

Article 25

EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such

information as is forseeably relevant for carrying out the provisions of this

Convention or to the administration or enforcement of the domestic laws

concerning taxes covered by the Convention imposed on behalf of the

Contracting States, or of their political subdivisions or local authorities, insofar as

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

information is not restricted by Article 1.

2. Any information received under paragraph 1 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) involved in the assessment or

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

appeals in relation to taxes of every kind and description or the oversight of the

said persons or authorities. 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.

3. In no case shall the provisions of paragraphs 1 and 2 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;

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).

4. If information is requested by a Contracting State in accordance with this

Article, the other Contracting State shall use its information gathering measures

to obtain the requested information, even though that other State may not need

such information for its own tax purposes. The obligation contained in the

preceding sentence is subject to the limitations of paragraph 3 but in no case

shall such limitations be construed to permit a Contracting State to decline to

supply information solely because it has no domestic interest in such information.

5. In no case shall the provisions of paragraph 3, in relation to cases of tax

fraud, be construed to permit a Contracting State to decline to supply information

solely because the information is held by a bank, other financial institution,

nominee or person acting in an agency or a fiduciary capacity or because it

relates to ownership interests in a person.

Article 26

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 27

LIMITATION OF BENEFITS

1. The provisions of Articles 6 to 21 of this Convention shall not apply to

a)

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 the Protocol to this Convention;

b)

persons enjoying a special fiscal treatment of either Contracting

State which has been identified as such by mutual agreement

between the competent authorities.

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.

2. 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

ENTRY INTO FORCE

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

through diplomatic channels that the internal procedures required by each

Contracting State for the entry into force of this Convention have been complied

with.

2. The Convention shall enter into force after the period of three months

following the date of receipt of the later of the notifications referred to in

paragraph 1 and its provisions shall have effect

a)

In Spain

i. regarding taxes periodically assessed, in respect of taxes on

income relating to any taxable year beginning on or after the date

on which the Convention enters into force;

ii. regarding all other cases, the date on which the Convention

enters into force.

b)

In Malta

in respect of taxes which are levied for any taxable year beginning

on or after the first of January in the year next following the year in

which the Convention enters into force.

Article 29

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 beginning on or after the expiration of a period of five

years from the date of its entry into force. In such event, the Convention shall

cease to have effect

a) In Spain

i. regarding taxes periodically assessed, in respect of taxes on

income relating to any taxable year beginning on or after the first

day of January in the calendar year next following that in which

the notice is given.

ii. regarding all other cases, the first day of January in the calendar

year next following that in which the notice is given.

b) In Malta

in respect of taxes which are levied for any taxable year beginning

on or after the first of January in the calendar year next following

the year in which the notice is given.

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

this Convention.

Done in duplicate in Madrid on the 8 th day of November, 2005, in the

Spanish and English languages, both texts being equally authentic. In case of

any divergence of interpretation, it shall be resolved in accordance with the English

text.

For Malta

For The Kingdom of Spain

Michael Frendo

Miguel Angel Moratinos

Minister of Foreign Affairs

Minister of Foreign Affairs

and Co-Operation

PROTOCOL

At the moment of signing the Convention between the Kingdom of Spain and

Malta for the avoidance of double taxation and the prevention of fiscal evasion with

respect to taxes on income, the undersigned have agreed upon the following

provisions which shall be an integral part of the Convention

1. Ad. Article 27

With reference to paragraph 1 (a) of Article 27 it is understood that

a) in the case of Spain, there is no legislation or administrative practice under which

persons may enjoy any special fiscal treatment;

b) in the case of Malta, any persons enjoying a special fiscal treatment are persons

which under the provisions of the Merchant Shipping Act, 1973 -and to that

extent- are not subject to tax on the profits derived from the operation of ships in

international traffic;

2. Ad Article 25.5

The term "tax fraud" would be interpreted along the lines of the common

understanding of the term stated in Part V letter A of the 2003 OECD Progress

Report: "Improving Access to Bank Information for tax Purposes"

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

Protocol.

Done in duplicate in Madrid on the 8 th day of November, 2005, in the Spanish

and English languages, both texts being equally authentic. In case of any divergence

of interpretation, it shall be resolved in accordance with the English text.

For Malta

For The Kingdom of Spain

Michael Frendo

Miguel Angel Moratinos

Minister of Foreign Affairs

Minister of Foreign Affairs

and Co-Operation

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