Double Taxation Relief (Taxes on Income)

L.N. 214 of 2016

INCOME TAX ACT

(CAP. 123)

Double Taxation Relief (Taxes on Income)

(The Republic of Azerbaijan) Order, 2016

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 Republic of Azerbaijan) Order, 2016.

Article 2

CONVENTION

BETWEEN

THE GOVERNMENT OF THE REPUBLIC OF MALTA

AND

THE GOVERNMENT OF THE REPUBLIC OF AZERBAIJAN

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

The Government of the Republic of Malta and the Government of the

Republic of Azerbaijan desiring to promote bilateral economic relations between

the two countries through conclusion of 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 administrative-territorial 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

Arrangements 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

Republic of Azerbaijan with a view to affording relief from

double taxation in relation to the following tax imposed by the

laws of the Republic of Azerbaijan

(i)

the tax on income of physical persons; and

(ii) the tax on profit of legal persons;

(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 the Convention shall apply are in particular

(a)

in the Republic of Azerbaijan

(i)

the tax on income of physical persons; and

(ii)

the tax on profit of legal persons

(hereinafter referred to as "Azerbaijani 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 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 which 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 "Azerbaijan" means the territory of the Republic of

Azerbaijan, including the Caspian Sea (Lake) sector belonging to the

Republic of Azerbaijan, the air space above the Republic of Azerbaijan,

within which the sovereign rights and jurisdiction of the Republic of

Azerbaijan is implemented in respect to subsoil, sea bed and natural

resources, and any other area which has been or may hereinafter be

determined in accordance with international law and legislation of the

Republic of Azerbaijan;

(b) the term "Malta" means the Republic of Malta and, when used in

a geographical sense, means the Island of Malta, the Island of Gozo and the

other islands of the Maltese archipelago including the territorial waters

thereof, as well as any area of the sea-bed, its sub-soil and the superjacent

water column adjacent to the territorial waters, wherein Malta exercises

sovereign rights, jurisdiction, or control in accordance with international law

and its national law, including its legislation relating to the exploration of the

continental shelf and exploitation of its natural resources;

(c)

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

mean Azerbaijan or Malta, as the context requires;

(d) the term "person" includes an individual, a collective investment

scheme, a company 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 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 Azerbaijan: the Ministry of Finance and the Ministry of

Taxes;

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

authorised representative;

(i)

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.

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 incorporation, place of management

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

administrative-territorial 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 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)

a place of management;

(b)

a branch;

(c)

an office;

(d)

a factory;

(e)

a workshop;

(f)

an installation, structure or vessel or any other place used for the

exploration of natural resources; and

(g) a mine, an oil or gas well, a quarry or any other place of

extraction of natural resources.

3. The term "permanent establishment" shall also be deemed to include

(a)

a building site, a construction or installation project, or

supervisory activities in connection therewith, but only if such site, project or

activities continue for more than 12 (twelve) months;

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

enterprise through its employees or other personnel engaged by the enterprise

for such purpose, but only if activities of that nature continue (for the same or

a connected project) for a period or periods aggregating more than 6 (six)

months within any 12 (twelve) month period.

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.

Notwithstanding the preceding provisions of this Article, an insurance

enterprise of a Contracting State shall, except in regard to re-insurance, be deemed

to have a permanent establishment in the other Contracting State if it collects

premiums in the territory of that other State or insures risks situated therein

through a person other than an agent of an independent status to whom paragraph 7

applies.

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

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

broker, general commission agent or any other agent of an independent status,

provided that such persons are acting in the ordinary course of their business.

However, when the activities of such an agent are devoted wholly or almost wholly

on behalf of that enterprise, and conditions are made or imposed between that

enterprise and the agent in their commercial and financial relations which differ

from those which would have been made between independent enterprises, he will

not be considered an agent of an independent status within the meaning of this

paragraph.

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

controls or is controlled by a company which is a resident of the other Contracting

State, or which carries on business in that other State (whether through a

permanent establishment or otherwise), shall not of itself constitute either

company a permanent establishment of the other.

Article 6

INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable

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

Contracting State may be taxed in that other State.

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

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

The 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

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 (other than expenses which would not be

deductible if that permanent establishment were a separate enterprise of a

Contracting State) which are incurred for the purposes of the permanent

establishment, including executive and general administrative expenses so

incurred, whether in the State in which the permanent establishment is situated or

elsewhere.

4. Insofar as it has been customary in a Contracting State to determine the

profits to be attributed to a permanent establishment on the basis of an

apportionment of the total profits of the enterprise to its various parts, nothing in

paragraph 2 shall preclude that Contracting State from determining the profits to

be taxed by such an apportionment as may be customary; the method of

apportionment adopted shall, however, be such that the result shall be in

accordance with the principles contained in this Article.

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

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

the enterprise.

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

to the permanent establishment shall be determined by the same method year by

year unless there is good and sufficient reason to the contrary.

7. Where profits include items of income which are dealt with separately

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

be affected by the provisions of this Article.

Article 8

SHIPPING AND AIR TRANSPORT

1. Profits of an enterprise of a Contracting State from the operation of

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

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

aircraft in international traffic shall also include

(a)

profits from the rental of ships or aircraft in international traffic;

and

(b) profits from the use, maintenance or rental of containers in

international traffic (including trailers and related equipment for the

transportation of containers)

if this kind of activities are supplementary or incidental to the operation of ships or

aircraft in international traffic.

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

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

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

so charged in Azerbaijan shall not exceed 8 per cent of the gross amount of

the dividends;

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

Malta to a resident of Azerbaijan 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 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 8 per cent of the gross amount of the interest.

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

Contracting State shall be exempt from tax in that Contracting State if

(a) the payer of the interest is the Government of that Contracting

State or an administrative-territorial subdivision or a local authority or

Central Bank thereof;

(b) the interest is paid to the Government of the other Contracting

State or an administrative-territorial subdivision or a local authority or

Central Bank thereof;

(c)

the recipient of the interest is a financial institution which is

wholly owned by the Government of 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 paragraphs 1 and 2 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

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

may be, shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is

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

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

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

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

establishment or fixed base, then such interest shall be deemed to arise in the State

in which the permanent establishment or fixed base is situated.

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

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

the interest, having regard to the debt-claim for which it is paid, exceeds the

amount which would have been agreed upon by the payer and the beneficial owner

in the absence of such relationship, the provisions of this Article shall apply only

to the last-mentioned amount. In such case, the excess part of the payments shall

remain taxable according to the laws of each Contracting State, due regard being

had to the other provisions of this Convention.

Article 12

ROYALTIES

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

other Contracting State may be taxed in that other State.

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

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

of the royalties is a resident of the other Contracting State, the tax so charged shall

not exceed 8 per cent of the gross amount of royalties.

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

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

literary, artistic or scientific work including cinematograph films, a computer

software, any patent, trade mark, design or model, plan, secret formula or process,

or for the use of, or the right to use, industrial, commercial or scientific equipment

or for information concerning industrial, commercial or scientific experience.

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

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

in the other Contracting State in which the royalties arise through a permanent

establishment situated therein, or performs in that other State independent personal

services from a fixed base situated therein, and the right or property in respect of

which the royalties are paid is effectively connected with such permanent

establishment or fixed base. In such case the provisions of Article 7 or Article 14,

as the case may be, shall apply.

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

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

whether he is a resident of a Contracting State or not, has in a Contracting State a

permanent establishment or a fixed base in connection with which the liability to

pay the royalties was incurred, and such royalties are borne by such permanent

establishment or fixed base, then such royalties shall be deemed to arise in the

State in which the permanent establishment or fixed base is situated.

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

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

the royalties, having regard to the use, right or information for which they are paid,

exceeds the amount which would have been agreed upon by the payer and the

beneficial owner in the absence of such relationship, the provisions of this Article

shall apply only to the last-mentioned amount. In such case, the excess part of the

payments shall remain taxable according to the laws of each Contracting State, due

regard being had to the other provisions of this Convention.

Article 13

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 other corporate rights 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.

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 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 except in the following circumstances, when such income

may also be taxed in the other Contracting State

(a)

if he has a fixed base regularly available to him in the other

Contracting State for the purpose of performing his activities; in that case,

only so much of the income as is attributable to that fixed base may be taxed

in that other Contracting State; or

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

amounting to or exceeding in the aggregate 183 days in any twelve-month

period commencing or ending in the calendar year concerned; in that case,

only so much of the income as is derived from his activities performed in that

other State may be taxed in that other State.

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,

accountants and auditors.

Article 15

INCOME FROM EMPLOYMENT

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 or any other

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

be taxed in that other State.

Article 17

ARTISTES AND SPORTSMEN

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

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

picture, radio or television artiste, or a musician, or as a sportsman, from his

personal activities as such exercised in the other Contracting State, may be taxed in

that other State.

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

entertainer or a sportsman in his capacity as such accrues not to the entertainer or

sportsman himself but to another person, that income may, notwithstanding the

provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the

activities of the entertainer or sportsman are exercised.

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 paid by a

Contracting State or an administrative-territorial 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 other 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 an administrative-territorial 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 other similar remuneration shall be

taxable only in the other Contracting State if the individual is a resident of, and a

national of, that other State.

3. The provisions of Articles 15, 16, 17 and 18 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 an administrative-

territorial subdivision or a local authority thereof.

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 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

1. In Azerbaijan double taxation shall be avoided as follows

Where a resident of Azerbaijan derives income which, in accordance

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

Azerbaijan shall allow as a deduction from the tax on the income of that

resident, an amount equal to the income tax paid in Malta.

Such deduction shall not, however, exceed the tax amount computed for

such income according to the legislation and taxation rules of Azerbaijan.

2. 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 Azerbaijan, the Azerbaijani 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. Stateless persons who are residents of a Contracting State shall not be

subjected in either 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 the State concerned in the same circumstances,

in particular with respect to residence, are or may be subjected.

3. 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.

4. Except where the provisions of paragraph 1 of Article 9, paragraph 6 of

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

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

Contracting State shall, for the purpose of determining the taxable profits of such

enterprise, be deductible under the same conditions as if they had been paid to a

resident of the first-mentioned State.

5. 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.

6. 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, 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

concerning taxes of every kind and description imposed on behalf of the

Contracting States, or of their administrative-territorial subdivisions or local

authorities, insofar as the taxation thereunder is not contrary to the Convention.

The exchange of information is not restricted by Articles 1 and 2.

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 the taxes referred to in paragraph 1, 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

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

AMENDMENTS

By a mutual consent of the Contracting States amendments made by separate

Protocols and considered integral parts of this Convention can be made to this

Convention. Protocols referred to in the first sentence of this Article shall enter

into force in accordance with the procedure stipulated in Article 28 of this

Convention.

Article 28

ENTRY INTO FORCE

1. The Contracting States shall notify each other by sending a written

notification through diplomatic channels, that the legal requirements required by

their national legislation for the entry into force of this Convention are completed.

The Convention shall enter into force on the date of receipt of the last notification.

2. The Convention shall be applicable in respect of taxes on income

derived during any calendar year or accounting period, as the case may be,

beginning on or after the first day of January immediately following the date on

which the Convention enters into force.

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

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

immediately following the date on which the notice is given.

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

signed this Convention.

DONE at Baku this 29th day of April 2016 in duplicate in the English and

Azerbaijani languages, both texts being equally authentic.

George W. Vella

Elmar Mammadyarov

For the Government of

For the Government of

the Republic of Malta

the Republic of Azerbaijan

PROTOCOL

At the moment of signature of the Convention between the Government of

the Republic of Malta and the Government of the Republic of Azerbaijan for the

Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect

to Taxes on Income, both parties have agreed upon the following provisions, which

form an integral part of the Convention

AD Article 10

In connection with Article 10 (Dividends) paragraph 2

a) it is understood that in the case of Malta the expression "the gross

amount of the dividends" means the dividends in the shareholders’ hands being

grossed up, for the purposes of taxation according to the law of a Contracting

State, with the tax paid by the company on the profits out of which such dividend

is paid. The amount of tax with which dividends are grossed up is in the same

proportion to the tax on the company's profits as the dividends in question, as

grossed up, bear to the whole amount of the company's profits out of which the

distribution is being made;

b) where the laws of a Contracting State provide for the availability of

underlying tax relief, the provisions of Article 22 (Elimination of Double

Taxation) shall be applicable in that Contracting State where the other Contracting

State makes use of the offset mentioned in that paragraph. Where underlying tax

relief is not so available, the provisions of Article 22 (Elimination of Double

Taxation) may not be applied.

B

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

signed this

Protocol. whereof the undersigned, being duly authorised thereto, have

In witness

signed this Protocol.

DONE at Baku this 29th day of April 2016 in duplicate in the English and

Azerbaijani

languages,

at Baku both

texts day

being

of equally

authentic.

DONE

this 29th

April 2016

in duplicate in the English and

Azerbaijani languages, both texts being equally authentic.

George W. Vella

Elmar Mammadyarov

For

the Government

W. Vella of

For

the Government

of

George

Elmar

Mammadyarov

the For

Republic

of Malta of

the For

Republic

of Azerbaijan

the Government

the Government

of

the Republic of Malta

the Republic of Azerbaijan

€1.98