Double Taxation Relief (Taxes on Income)

L.N. 343 of 2013

INCOME TAX ACT

(CAP. 123)

Double Taxation Relief (Taxes on Income)

(The State of Israel) Order, 2013

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

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

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

on Income) (The State of Israel) Order, 2013.

(Article 2)

CONVENTION

BETWEEN

THE GOVERNMENT OF MALTA AND

THE GOVERNMENT OF THE STATE OF ISRAEL

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 State of Israel 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 and taxes on the total amounts of wages or

salaries paid by enterprises.

It is hereby declared

Arragements to

have effect.

(a)

that the arrangements specified in the Convention

set out in the Schedule to this Order (hereinafter referred to as

"the Convention") have been made with the Government of The

State of Israel with a view to affording relief from double

taxation in relation to the following taxes imposed by the laws

of The State of Israel

(i) the income tax and company tax (including

tax on capital gains);

(ii) the tax imposed on gains from the alienation

of property according to the Real Estate Taxation Law;

and;

(iii) the profit tax on financial institutions;

(b) that it is expedient that those arrangements should

have effect following the entry into force of the Convention and

in accordance with the relevant provisions of the Convention;

(c)

that the Convention shall enter into force on such

date as may be announced by notice in the Government Gazette.

The existing taxes to which this Convention shall apply are in

particular

(a)

in Malta

the income tax;

(hereinafter referred to as "Malta tax");

(b)

in Israel

(i)

the income tax and company tax (including tax on capital

gains);

(ii) the tax imposed on gains from the alienation of property

according to the Real Estate Taxation Law; and

(iii) the profit tax on financial institutions;

(hereinafter referred to as "Israeli tax").

The Convention shall apply also to any identical or substantially similar

taxes that 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 that have been made in

their taxation laws.

Article 3

GENERAL DEFINITIONS

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

requires

(a)

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;

(b) the term "Israel" means the State of Israel and when used in a

geographical sense comprises the territory in which the Government of the

State of Israel has taxation rights, including its territorial sea, as well as those

maritime areas adjacent to the outer limit of the territorial sea, including

seabed and subsoil thereof over which the State of Israel, in accordance with

international law and the laws of the State of Israel, exercises its sovereign or

other rights and jurisdiction;

(c)

the terms "a Contracting State" and "the other Contracting State"

mean Malta or Israel, as the context requires;

(d) the term "person" includes an individual, a company, a trust and

any other body of persons;

(e)

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

is treated as a body corporate for tax purposes;

(f)

the term "enterprise" applies to the carrying on of any business;

(g) 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;

(h) the term "international traffic" means any transport by a ship or

aircraft operated by an enterprise of a Contracting State that has its place of

effective management in a Contracting State, except when the ship or aircraft

is operated solely between places in the other Contracting State;

(i)

the term "competent authority" means

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

authorised representative;

(ii) in Israel, the Minister of Finance or his authorised

representative;

(j)

the term "national", in relation to a Contracting State, means

(i) any individual

possessing

the

nationality

of

that

Contracting State;

(ii) any legal person, partnership or association deriving its

status as such from the laws in force in that Contracting State;

(k) the term "business" includes the performance of professional

services and of other activities of an independent character.

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

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 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 or a trust 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. In the case of a trust which is a resident of both Contracting States, the

competent authorities shall endeavour to determine its residence by mutual

agreement. In the absence of such agreement, the provisions of this Convention

(other than Articles 23 (elimination of double taxation), 24 (non-discrimination),

25 (mutual agreement procedure) and 26 (exchange of information)) shall not

apply to that person.

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. A building site or construction or installation project constitutes a

permanent establishment only if it lasts more than twelve months.

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.

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, 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, 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.

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 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 the Contracting

State in which the place of effective management is situated.

2. For the purposes of this Article, profits derived from the operation of

ships or aircraft in international traffic include profits derived from the rental of

ships or aircraft if such ships or aircraft are operated in international traffic or if

such rental profits are incidental to other profits described in paragraph 1 of this

Article.

3. 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 AND DISTRIBUTIONS BY A REAL ESTATE

INVESTMENT COMPANY

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

Israel to a resident of Malta who is the beneficial owner thereof, the tax so

charged in Israel shall not exceed

(i) 0 per cent of the gross amount of the dividends if the

beneficial owner of the dividends is a company (other than a partnership

or a real estate investment company) which holds directly at least 10 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 Israel 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. (a)

Distributions made by a real estate investment company which is

a resident of Israel to a resident of Malta may be taxed in Malta. However, such

distributions may also be taxed in Israel and according to the laws of Israel, but if

the beneficial owner of these distributions is a resident of Malta and holds directly

less than 10% of the capital of that company, the tax so charged in Israel shall not

exceed 15% of the gross amount of the distributions.

(b) The term "distributions by a real estate investment company"

means, in the case of Israel, distributions by a real estate investment company

according to the Israeli Income Tax Ordinance.

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

profits out of which the distributions are made.

4. 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.

5. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial

owner of the dividends or of the distributions by a real estate investment company,

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

State of which the company paying the dividends or making a distribution is a

resident, through a permanent establishment situated therein and the holding in

respect of which the dividends or distributions are paid is effectively connected

with such permanent establishment. In such case the provisions of Article 7 shall

apply.

6. 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

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 5 per cent of the gross amount of the interest.

3. Notwithstanding the provisions of paragraphs 1 and 2, interest arising in

a Contracting State shall be exempt from tax in that State if it is paid

(a) to the Government of the other Contracting State, a political

subdivision, a local authority or the Central Bank thereof;

(b) by the Government of that Contracting State, a political

subdivision, a local authority or the Central Bank thereof;

(c)

to a resident of the other Contracting State on corporate bonds

traded on a Stock Exchange in the first-mentioned State and which were

issued by a company which is a resident of that State;

(d) in respect of a loan, debt-claim or credit guaranteed or insured by

an institution for insurance or financing of international trade transactions

which is wholly owned by the other Contracting 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. Penalty charges for

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

5. The provisions of paragraph 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 and the debt-claim in respect of which the interest is

paid is effectively connected with such permanent establishment. In such case the

provisions of Article 7 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 in connection with which the indebtedness on which the interest is

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

then such interest shall be deemed to arise in the State in which the permanent

establishment 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 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, 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 paragraph 1 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 and the right or property in respect of which the

royalties are paid is effectively connected with such permanent establishment. In

such case the provisions of Article 7 shall apply.

4. 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 in connection with which the liability to pay the royalties

was incurred, and such royalties are borne by such permanent establishment, then

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

establishment is situated.

5. 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. (a)

Gains derived by a resident of a Contracting State from the

alienation of shares or comparable interests, deriving more than 50 per cent of their

value directly or indirectly from immovable property situated in the other

Contracting State may be taxed in that other State;

(b) gains derived by a resident of a Contracting State from the

alienation of shares in a real estate investment company as defined in the Israeli

Income Tax Ordinance shall be taxed in Israel;

(c)

in the case of gains derived by a resident of a Contracting State

from the alienation of shares of a company which is a resident of the other

Contracting State that are listed on a Stock Exchange and that were acquired

before the day of registration on the Stock Exchange may be taxed in the other

Contracting State according to the law of that State.

3. 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 including such gains from the

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

may be taxed in that other State.

4. Gains 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 the Contracting State in which the place of effective

management of the enterprise is situated.

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.

6. Where a person, who was a resident of a Contracting State, has become

a resident of the other Contracting State, paragraph 5 shall not prevent the first-

mentioned State from taxing under its domestic law the capital gains on property

of that person at the time of change of residence. In the case of subsequent

alienation of such property capital gains on such property up to the time of change

of residence shall not be taxed in the other State.

Article 14

INCOME FROM EMPLOYMENT

1. Subject to the provisions of Articles 15, 17 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

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 may be taxed in the Contracting State in which the place of

effective management of the enterprise is situated.

Article 15

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 16

ARTISTES AND SPORTSMEN

1. Notwithstanding the provisions of Articles 7 and 14, 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 and 14, 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 sportsman if

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

Contracting States or local authorities thereof or by public funds of one or both of

the Contracting States or by an institution which is recognised by one or both of

the Contracting States as a not-for-profit institution. In such a case, the income

shall be taxable in accordance with the provisions of Article 7 or 14, as the case

may be.

Article 17

PENSIONS

Subject to the provisions of paragraph 2 of Article 18, 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 18

GOVERNMENT SERVICE

1. (a) Salaries, wages and other similar remuneration 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.

(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)

Notwithstanding the provisions of paragraph 1, pensions and

other similar remuneration 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.

(b) However, such pensions and similar remuneration 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 14, 15, 16 and 17 shall apply to salaries,

wages, pensions and other similar remuneration 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 19

Professors, teachers and researchers

1. An individual who visits one of the Contracting States, for a period not

exceeding two years, for the purpose of teaching or engaging in research at a

university, college, school or other recognised educational institution in that

Contracting State, and who immediately before that visit was a resident of the

other Contracting State, shall, for a period not exceeding two years from the date

of his first arrival in that first-mentioned State for that purpose, be exempt from tax

in that Contracting State on the remuneration for such teaching or research.

2. No exemption shall be granted under paragraph 1 with respect to any

remuneration for research if such research is undertaken not in the public interest

but primarily for the private benefit of a specific person or persons.

Article 20

STUDENTS

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 beneficially owned by 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

beneficial owner of such income, being a resident of a Contracting State, carries on

business in the other Contracting State through a permanent establishment situated

therein and the right or property in respect of which the income is paid is

effectively connected with such permanent establishment. In such case, the

provisions of Article 7 shall apply.

3. Where, by reason of a special relationship between the resident referred

to in paragraph 1 and some other person, or between both of them and some third

person the amount of the income referred to in that paragraph exceeds the amount

(if any) which would have been agreed upon between them in the absence of such

a relationship, the provisions of this Article shall apply only to the last-mentioned

amount. In such a case, the excess part of the income shall remain taxable

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

applicable provisions of this Convention.

Article 22

ELIMINATION OF DOUBLE TAXATION

1. In the case 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 Israel, the Israeli tax on such income shall be allowed as a

credit against the relative Malta tax payable thereon.

2. In the case of Israel double taxation shall be eliminated as follows

(a) where a resident of Israel derives income which, in accordance

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

(subject to the laws of Israel regarding the allowance of a credit of foreign

taxes, which shall not affect the general principle contained in this

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

an amount equal to the tax paid in Malta;

(b) such deductions 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.

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.

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.

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

Article 11, paragraph 5 of Article 12 or paragraph 3 of Article 21 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. Nothing contained in this Article shall be construed as obliging either

Contracting State to grant to individuals not resident in that State any of the

personal allowances, reliefs and reductions for tax purposes which are granted to

individuals so resident or to its nationals.

6. The provisions of this Article shall apply to the taxes referred to in

Article 2 of this Convention.

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, 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 25

EXCHANGE OF INFORMATION

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

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

Convention or to the administration or enforcement of the domestic laws of the

Contracting States concerning taxes covered by this 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) concerned with 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

above. 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 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

Limitation of Benefits

1. Notwithstanding the provisions of any other Article of this Convention,

a resident of a Contracting State shall not receive the benefit of any reduction in or

exemption from tax provided for in the Convention by the other Contracting State

if the main purpose or one of the main purposes of such resident or a person

connected with such resident was to obtain the benefits of the Convention.

2. The foregoing provision shall not apply where a company is engaged in

substantive business operations in the Contracting State of which it is a resident

and the relief from the taxation claimed from the other Contracting State is with

respect to income that is connected with such operations.

Article 27

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 28

ENTRY INTO FORCE

1. Each of the Contracting States shall notify the other in writing, through

diplomatic channels, of the completion of the procedures required by its law for

the bringing into force of this Convention. This Convention shall enter into force

on the date of the later of these notifications and shall thereupon have effect

(a) in respect of taxes withheld at source, on amounts paid on or after

the first day of January of the calendar year following the year in which the

Convention entered into force;

(b) in respect of other taxes, on taxes levied for periods beginning on

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

which the Convention entered into force.

Article 29

TERMINATION

This Convention shall remain in force until terminated by one of the

Contracting States. Either Contracting State may terminate this Convention,

through diplomatic channels, by giving a written notice of termination at least six

months before the end of any calendar year beginning after the expiry of five years

from the date of entry into force of this Convention. In such event, this Convention

shall cease to have effect

(a) in respect of taxes withheld at source, on amounts paid on or after

the first day of January of the calendar year following the year in which the

notice is given;

(b) in respect of other taxes, on taxes levied for periods beginning on

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

which the notice is given.

IN WITNESS WHEREOF the undersigned, being duly authorised thereto by

their respective Governments, have signed this Convention.

Done in duplicate at Jerusalem this 28 day of July 2011, which corresponds

to the 26 day of Tammuz, 5771, of the Hebrew Calendar, in the English and

Hebrew languages, both texts being equally authoritative. In case of any

divergence of the provisions of this Convention, the English text shall prevail.

Tonio Borg

Avigdor Lieberman

For the Government of Malta

For the Government of the State

of Israel

PROTOCOL

At the signing of the Convention between the Government of Malta and the

Government of the State of Israel 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 State of Israel have agreed that the following

provisions shall form an integral part of the Convention.

1. In general

It is understood that the Convention shall not prevent a Contracting State

from applying provisions in its domestic law on the prevention of tax evasion or

tax avoidance where those provisions are used to challenge arrangements which

constitute an abuse of the Convention.

2. With reference to paragraph 3 of Article 4 (resident)

It is understood that in endeavouring to determine the residence of a trust for

a certain period, the competent authorities will take into account all relevant

factors, including

(a)

the State in which the trustees are resident at the time the trust

was settled and in the period in question;

(b) the law of the State that governs the establishment and operation

of the trust;

(c)

the location of the trust’s assets;

(d) the residence of the settlor at the time the trust was settled and in

the period in question; and

(e)

the State in which the beneficiaries of the trust are resident for the

period in question.

3. With reference to paragraph 1 of Article 5 (Permanent Establishment)

An installation, drilling rig or ship used for activities connected with the

exploration of natural resources shall be treated as constituting a permanent

establishment in a Contracting State if those activities last in aggregate more than

365 days in that State in any two-year period.

4. With reference to Article 10 (Dividends and Distributions by a real

estate investment company)

It is understood that in the case of Israel, a Real Estate Investment Trust

(REIT) means a real estate investment fund which meets the conditions in the

Israeli Income Tax Ordinance.

5. With reference to paragraph 2 of Article 11 (Interest)

A resident of a Contracting State may elect, in lieu of the tax that would be

imposed under sub-paragraph 11(2) to be taxed on the net amount of interest. The

competent authorities of each Contracting State may adopt reasonable rules for the

determination and reporting of taxable income. Each competent authority may also

adopt procedures to ensure that a person deriving interest income provides such

books and records as are necessary to determine the proper amount of the taxable

income.

6. With reference to paragraph 4 of Article 11 (Interest)

It is understood that the term "interest" shall not include additional payments

arising from the sale on credit of any merchandise or industrial, commercial or

scientific equipment and penalty charges for late payment.

7. (a)

With reference to paragraph 5 of Article 13 (Capital Gains)

It is understood that the paragraph will apply only if the alienator was the

beneficial owner of the alienated property for the whole period for which the

capital gains are calculated.

(b)

With reference to paragraph 6 of Article 13 (Capital gains)

It is understood that if the competent authorities try to settle by mutual

agreement procedure the question of the amount of capital gain attributed to one of

the Contracting States in relation to exit tax levied, they shall regard such factors

as the fair market value of the assets on the day the exit tax event occurred, or the

duration of time the asset was held in the relevant Contracting State.

With reference to paragraph 1 of Article 14 (Income from

Employment)

Income from severance pay paid to a resident of a Contracting State in

consideration of past employment in both Contracting States, shall be taxed in

each Contracting State according to the period of employment in that State.

Done in duplicate at Jerusalem this 28 day of July 2011, which corresponds

to the 26 day of Tammuz, 5771, of the Hebrew Calendar, in the English and

Hebrew languages, both texts being equally authoritative. In case of any

divergence of the provisions of this Protocol, the English text shall prevail.

Tonio Borg

Avigdor Lieberman

For the Government of Malta

For the Government of the State

of Israel

€2.16