MT
DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE UNITD STATES OF AMERICA ORDER
Table of Provisions (10)
Statutory Text (10 Articles)
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
SUBSIDIARY LEGISLATION 123.123
DOUBLE TAXATION RELIEF ON TAXES ON
INCOME WITH THE UNITD STATES OF AMERICA
ORDER
23rd November, 2010
LEGAL NOTICE 560 of 2010.
The title of this order is the Double Taxation Relief (Taxes on
Income) (United States of America) Order.
(Article 2)
CONVENTION BETWEEN
THE GOVERNMENT OF MALTA
AND THE GOVERNMENT OF THE UNITED STATES OF AMERICA
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 United States of America,
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
GENERAL SCOPE
1. This Convention shall apply only to persons who are residents of one or both
of the Contracting States, except as otherwise provided in the Convention.
2. This Convention shall not restrict in any manner any benefit now or
hereafter accorded
by the laws of either Contracting State; or
by any other agreement to which the Contracting States are parties.
It is hereby declared
(a) that the arrangements specified in the Convention set out
in the Schedule have been made with the United States of
America with a view to affording relief from double
taxation in relation to the following taxes imposed by the
laws of the United States of America
-
the Federal income taxes imposed by the Internal
Revenue Code (but excluding social security and
unemployment taxes), and the Federal excise taxes
imposed with respect to private foundations;
(b) that it is expedient that those arrangements should have
effect;
(c) that the Convention has entered into force on the 23rd
November, 2010.
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
Notwithstanding the provisions of subparagraph (b) of paragraph 2 of
this Article
for purposes of paragraph 3 of Article XXII (Consultation) or the
General Agreement on Trade in Services, the Contracting States
agree that any question arising as to the interpretation or
application of this Convention and, in particular, whether a
taxation measure is within the scope of this Convention, shall be
determined exclusively in accordance with the provisions of
Article 25 (Mutual Agreement Procedure) of this Convention; and
the provisions of Article XVII of the General Agreement on Trade
in Services shall not apply to a taxation measure unless the
competent authorities agree that the measure is not within the
scope of Article 24 (Non-Discrimination) of this Convention.
For the purposes of this paragraph, a "measure" is a law, regulation,
rule, procedure, decision, administrative action, or any similar provision
or action.
Except to the extent provided in paragraph 5, this Convention shall not
affect the taxation by a Contracting State of its residents (as determined under
Article 4 (Resident)) and its citizens. Notwithstanding the other provisions of this
Convention, a former citizen or former long-term resident of a Contracting State
may, for the period of ten years following the loss of such status, be taxed in
accordance with the laws of that Contracting State.
The provisions of paragraph 4 shall not affect
the benefits conferred by a Contracting State under paragraph 2 of
Article 9 (Associated Enterprises), paragraphs 1 b), 2, and 5 of Article
17 (Pensions, Social Security, Annuities, Alimony, and Child Support),
and Articles 18 (Pension Funds), 23 (Relief from Double Taxation), 24
(Non-Discrimination), and 25 (Mutual Agreement Procedure); and
the benefits conferred by a Contracting State under Articles 19
(Government Service), 20 (Students and Trainees), and 27 (Members of
Diplomatic Missions and Consular Posts), upon individuals who are
neither citizens of, nor have been admitted for permanent residence in,
that State.
An item of income, profit or gain derived through an entity that is fiscally
transparent under the Laws of either Contracting State shall be considered to be
derived by a resident of a State to the extent that the item is treated for purposes of
the taxation law of such Contracting State as the income, profit or gain of a resident.
Article 2
TAXES COVERED
1. This Convention shall apply to taxes on income imposed on behalf of a
Contracting State 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
3. The existing taxes to which this Convention shall apply are
in the case of Malta: the income tax;
in the case of the United States: the Federal income taxes imposed by
the Internal Revenue Code (but excluding social security and
unemployment taxes), and the Federal excise taxes imposed with
respect to private foundations.
4. This 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 changes that have been made in their respective
taxation or other laws that significantly affect their obligations under this
Convention.
Article 3
GENERAL DEFINITIONS
1. For the purposes of this Convention, unless the context otherwise requires
the term "person" includes an individual, an estate, a trust, a
partnership, a company, and any other body of persons;
the term "company" means any body corporate or any entity that is
treated as a body corporate for tax purposes according to the laws of the
state in which it is organized;
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; the terms also include an
enterprise carried on by a resident of a Contracting State through an
entity that is treated as fiscally transparent in that Contracting State;
the term "enterprise" applies to the carrying on of any business;
the term "business" includes the performance of professional services
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
and of other activities of an independent character;
the term "international traffic" means any transport by a ship or aircraft,
except when such transport is solely between places in a Contracting
State;
the term "competent authority" means
i)
in Malta: the Minister responsible for finance or his authorized
representative; and
ii)
in the United States: the Secretary of the Treasury or his delegate.
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 sea
thereof as well as any area of the sea-bed, its subsoil and the superjacent
water column adjacent to the territorial sea, where the Republic of
Malta exercises sovereign rights, jurisdiction or control in accordance
with international law and its national law, including its legislation
relating to the exploration of the Continental Shelf and exploitation of
its natural resources;
the term "United States" means the United States of America, and
includes the states thereof and the District of Columbia; such term also
includes the territorial sea thereof and the sea bed and subsoil of the
submarine areas adjacent to that territorial sea, over which the United
States exercises sovereign rights in accordance with international law;
the term, however, dots not include Puerto Rico, the Virgin Islands,
Guam or any other United States possession or territory;
the term "national" of a Contracting State means
i)
any individual possessing the nationality or citizenship of that
State; and
ii)
any legal person, partnership or association deriving its status as
such from the laws in force in that State;
the term "pension fund" means any person established in a Contracting
State that is
i)
in the case of pension funds established in the United States,
generally exempt from income taxation, and in the case of
pension funds established in Malta, a licensed fund or scheme
subject to tax only on income derived from immovable property
Situated in Malta; and
ii)
operated principally either
A) to administer or provide pension or retirement benefits; or
B) to cam income for the benefit of one or more persons
meeting the requirements of subparagraph i) and clause A)
of this subparagraph.
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, or the
competent authorities agree to a common meaning pursuant to the provisions of
Article 25 (Mutual Agreement Procedure), have the meaning which it has at that
time under the law of that State for the purposes of the taxes of 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, citizenship, 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 or of profits attributable to a permanent establishment in that
2. The term "resident of a Contracting State" includes
a pension fund established in that State; and
an organization that is established and maintained in that State
exclusively for religious, charitable, scientific, artistic, cultural, or
educational purposes,
notwithstanding that all or part of its income or gains may be exempt from tax under
the domestic law of that State.
3. 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
he shall be deemed to be a resident only of the State in which he has a
permanent home available to him; if he has a permanent home available
to him in both States, he shall be deemed to be a resident only of the
State with which his personal and economic relations are closer (centre
of vital interests);
if the State in which he has his centre of vital interests cannot be
determined, or if he does not have a permanent home available to him in
either State, he shall be deemed to be a resident only of the State in
which be has an habitual abode;
if he has an habitual abode in both States or in neither of them, he Shall
be deemed to be a resident only of the State of which he is a national;
if he is a national of both States or of neither of them, the competent
authorities of the Contracting States shall endeavour to settle the
question by mutual agreement.
4. Where by reason of the provisions of paragraph 1 a company is a resident of
both Contracting States, then if it is incorporated under the laws of one of the
Contracting States or a political subdivision thereof, but not under the laws of the
other Contracting State or a political subdivision thereof, such company shall be
deemed to be a resident of the first-mentioned Contracting State. In all other cases
involving dual resident companies, the competent authorities of the Contracting
States shall endeavour to determine the mode of application of the Convention to
such company. If the competent authorities do not reach such an agreement, that
company will not be treated as a resident of either Contracting State for purposes of
its claiming any benefits provided by the Convention.
5. Where by reason of the provisions of paragraphs 1 and 2 of this Article a
person other than an individual or a company is a resident of both Contracting
States, the competent Authorities of the Contracting States shall by mutual
agreement endeavour to determine the mode of application of this Convention to that
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
Article 5
PERMANENT ESTABLISHMENT
1. For the purposes of this Convention, the term "permanent establishment"'
means a fixed place of business through which the business of an enterprise is
wholly or partly carried on.
2. The term "permanent establishment"' includes especially
a place of management;
a branch;
an office;
a factory;
a workshop; and
a mine, an oil or gas well, a quarry, or any other place of extraction of
natural resources.
3. A building site or construction or installation project, or an installation or
drilling rig or ship used for the exploration of natural resources, constitutes a
permanent establishment only if it lasts, or the exploration activity continues for
more than twelve months.
4. Notwithstanding the preceding provisions of this Article, the term
"permanent establishment" shall be deemed not to include
the use of facilities solely for the purpose of storage, display or delivery
of goods or merchandise belonging to the enterprise;
the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display or delivery;
the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;
the maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise, or of collecting information, for the
enterprise;
the maintenance of a fixed place of business solely for the purpose of
carrying on, for the enterprise, any other activity of a preparatory or
auxiliary character;
(f)
the maintenance of a fixed place of business solely for any combination
of the activities mentioned in subparagraphs a) through e), provided that
the overall activity of the fixed place of business resulting from this
combination is of a preparatory or auxiliary character.
5. 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 that are binding on the enterprise, that enterprise
shall be deemed to have a permanent establishment in that State in respect of any
activities that the person undertakes for the enterprise, unless the activities of such
person are limited to those mentioned in paragraph 4 that, if exercised through a
fixed plan of business, would not make this fixed place of business a permanent
establishment under the provisions of that paragraph.
6. 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 as
independent agents.
The fact that a company that is a resident of a Contracting State controls or
is controlled by a company that is a resident of the other Contracting State, or that
carries on business in that other State (whether through a permanent establishment or
otherwise), shall not be taken into account in determining whether either company
has a permanent establishment in that other State.
Article 6
INCOME FROM REAL (IMMOVABLE) PROPERTY
1. Income derived by a resident of a Contracting State from real (immovable)
property, including income from agriculture or forestry, situated in the other
Contracting State may be taxed in that other State.
2. The term "real (immovable) properly" 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 real (immovable) property
(including livestock and equipment used in agriculture and forestry), rights to which
the provisions of general law respecting landed properly apply, usufruct of real
(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 real (immovable) properly.
3. The provisions of paragraph 1 shall apply to income derived from the direct
use, letting, or use in any other form of real (immovable) property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from
real (immovable) property of an enterprise.
5. A resident of a Contracting State who is liable to tax in the other Contracting
State on income from real (immovable) property situated in the other Contracting
State may elect for any taxable year to compute the tax on such income on a net basis
as if such income were business profits attributable to a permanent establishment in
such other State. In the ease of income from real (immovable) property situated in
the United States, any such election shall be binding for the taxable year of the
election and all subsequent taxable years unless the competent authority of the
United States agrees to terminate the election.
Article 7
BUSINESS PROFITS
1. The profits of all 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 there in. 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 are 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 that it might be expected to
make if it were a distinct and independent enterprise engaged in the same or similar
activities under the same or similar conditions. For this purpose, the profits to be
attributed to the permanent establishment shall include only the profits derived from
the assets u sed, r isk s assum ed and acti vi ties per fo rm ed by th e p erm anen t
establishment.
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
3. In determining the profits of a permanent establishment, there shall be
allowed as deductions expenses that 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. 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.
5. For the purposes of the preceding paragraphs, the profits to he 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.
6. Where profits include items of income that are dealt with separately in other
Articles of the Convention, then the provisions of those Articles shall not be affected
by the provisions of this Article.
7. In applying this Article, paragraph 6 of Article 10 (Dividends), paragraph 5
of Article 11 (Interest), paragraph 4 of Article 12 (Royalties), paragraph 3 of Article
13 (Gains), and paragraph 2 of Article 21 (other Income), any income or gain
attributable to a permanent establishment during its existence is taxable in the
Contracting State where such permanent establishment is situated even if the
payments are deferred until such permanent establishment has ceased to exist.
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 purposes of this Article, profits from the operation of ships or aircraft
include, but are not limited to
a)
profits from the rental of ships or aircraft on a full (time or voyage)
basis;
b)
profits from the rental on a bareboat basis of ships or aircraft if the
rental income is incidental to profits from the operation of ships or
aircraft in international traffic; and
c)
profits from the rental on a bareboat basis of ships or aircraft if such
ships or aircraft are operated in international traffic by the lessee.
Profits derived by an enterprise from the inland transport of property or
passengers within either Contracting State shall be treated as profits from the
operation of ships or aircraft in international traffic if such transport is undertaken as
part of international traffic.
3. Profits of an enterprise of a Contracting State from the use, maintenance, or
rental of containers (including trailers, barges, and related equipment for the
transport of containers) shall be taxable only in that Contracting State, except to the
extent that those containers are used for transport solely between places within the
other Contracting State.
4. The provisions of paragraphs 1 and 3 shall also apply to profits from
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 direcl1y 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 Contrac1ing 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 that differ from those that would be made
between independent enterprises, then any profits that, but for those conditions,
would 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 other Contracting State
agrees that the profits so included are profits that would have accrued to the
enterprise of the first-mentioned State if the conditions made between the two
enterprises had been those that 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 that 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)
if the dividends are paid by a company that is a resident of the United
States to a resident of Malta who is the beneficial owner thereof, except
as otherwise provided in This Convention, the tax charged by the United
States shall not exceed
i)
5 percent of the gross amount of the dividends if the beneficial
owner is a company that owns directly at least 10 percent of the
voting stock of the company paying the dividends;
ii)
15 percent of the gross amount of the dividends in all other cases.
b)
if the dividends are paid by a company that is a resident of Malta to a
resident of the United States who is the beneficial owner thereof, the tax
charged by Malta on the gross amount of the dividends shall not exceed
that Malta tax 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. Notwithstanding paragraph 2, dividends shall not be taxed in the
Contracting State of which the company paying the dividends is a resident if
a)
the beneficial owner of the dividends is a pension fund that is a resident
of the other Contracting State; and
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
such dividends are not derived from the carrying on of a trade or
business by the pension fund or through an associated enterprise.
4. Clause i) of subparagraph a) of paragraph 2 shall not apply in the case of
dividends paid by a U.S. Regulated Investment Company (RIC) or a
U.S. Real Estate Investment Trust (REIT). In the case of dividends paid
by a RIC, clause ii) of subparagraph a) of paragraph 2 and paragraph 3
shall apply. In the case of dividends paid by a REIT, clause ii) of
subparagraph a) of paragraph 2 and paragraph 3 shall apply only if
i)
the beneficial owner of the dividends is an individual or pension
fund, in either case holding an interest of not more than 10
percent in the REIT;
ii)
the dividends are paid with respect to a class of stock that is
publicly traded and the beneficial owner of the dividends is a
person holding an interest of not more than 5 percent of any class
of the REIT's stock; or
iii)
the beneficial owner of the dividends is a person holding an
interest of not more than 10 percent in the REIT and the REIT is
diversified.
For purposes of this paragraph, a REIT shall be "diversified" if the
value of no single interest in real property exceeds 10 percent of its total
interests in real properly. For the purposes of this rule, foreclosure
property shall not be considered an interest in real property. Where a
REIT holds an interest in a partnership, it shall be treated as owning
directly a proportion of the partnership's interests in real property
corresponding to its interest in the partnership.
5. For purposes of this Article, the term "dividends" means income from shares
or other rights, not being debt-claims, participating in profits, as well as income that
is subjected to the same taxation treatment as income from shares under the laws of
the State of which the payer is a resident.
6. The provisions of paragraphs 2 through 4 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 payer is a resident, through a permanent
establishment situated therein, and the holding in respect of which the dividends are
paid is effectively connected with such permanent establishment. In such case the
provisions of Article 7 (Business Profits) shall apply.
7. A Contracting State may not impose any tax on dividends paid by a resident
of the other State, except insofar as the dividends are paid to a resident of the first-
mentioned State or the dividends are attributable to a permanent establishment, nor
may it impose tax on a corporation’s undistributed profits, except as provided in
paragraph 8, even if the dividends paid or the undistributed profits consist wholly or
partly of profits or income arising in that State.
A company that is a resident of one of the States and that has a
permanent establishment in the other State or that is subject to tax in the
other State on a net basis on its income that may be taxed in the other
State under Article 6 (Income from Real (Immovable) Property) or
under paragraph 1 of Article 13 (Gains) may be subject in that other
State to a tax in addition to the tax allowable under the other provisions
of this Convention.
Such tax, however, may be imposed
i)
on only the portion of the business profits of the company
attributable to the permanent establishment and the portion of the
income referred to in subparagraph a) that is subject to tax under
Article 6 or under paragraph 1 of Article 13 that, in the case of the
United States, represents the dividend equivalent amount of such
profits or income and, in the case of Malta, is an amount that is
analogous to the dividend equivalent amount; and
ii)
at a rate not in excess of the rate specified in clause i) of
subparagraph a) of paragraph 2.
Article 11
INTEREST
1. Interest arising in a Contracting State and beneficially owned by a resident
of the other Contracting State may be taxed in that other State.
2. Such interest may also be taxed in the Contracting State in which it arises,
and according to the laws of that State, hut the tax so charged shall not exceed 10
percent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraphs 1 and 2
a)
interest arising in the United States that is contingent interest of a type
that does not qualify as portfolio interest under United States law may
be taxed by the United States but, if the beneficial owner of the interest
is a resident of Malta, the interest may be taxed at a rate not exceeding
15 percent of the gross amount of the interest; and
b)
interest that is an excess inclusion with respect to a residual interest in a
real estate mortgage investment conduit may be taxed by each State in
accordance with its domestic law.
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 or prizes
attaching to such securities, bonds or debentures, and all other income that is
subjected to the same taxation treatment as income from money lent by the taxation
law of the Contracting State in which the income arises. Income dealt with in Article
10 (Dividends) and penalty charges for late payment shall not be regarded as interest
for the purposes of this Convention.
5. The provisions of paragraphs 1, 2, and 3 shall not apply if the beneficial
owner of the interest, being a resident of a Contracting State, carries on business in
the other Contracting State, in which the interest arises, through a permanent
establishment situated therein, 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 (Business Profits) shall apply.
6. Interest shall be deemed to arise in a Contracting State where the payer is a
resident of that State. Where, however, the person paying the interest, whether the
person 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
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
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 pan of the payments shall remain
taxable according to the laws of each State, due regard being had to the other
provisions of this Convention.
8. In the case of the United States, the excess, if any, of the amount of interest
allocable to the profits of a company resident in the other Contracting State that are
either attributable to a permanent establishment in the United States or subject to tax
in the United States under Article 6 ( Income from Real (Immovable) Property) or
paragraph 1 of Article 13 (Gains) over the interest paid by that permanent
establishment or trade or business in the United States s hall be deemed to arise in
the United States and be beneficially owned by a resident of the other Contracting
State. The tax imposed under this Article on such interest shall not exceed the rate
specified in paragraph 2.
Article 12
ROYALTIES
1. Royalties arising in a Contracting State and beneficially owned by a resident
of the other Contracting State may be taxed in that other State.
2. Such royalties may also be taxed in the Contracting State in which they
arise, and according to the laws of that State, but the tax so charged shall not exceed
10 percent of the gross amount of the royalties.
3. For purposes of this Article, the term "royalties" means
a)
payments of any kind received as a consideration for the use of, or the
right to use, any copyright of literary, artistic, scientific or other work
(including cinematographic films), any patent, trademark, design or
model, plan, secret formula or process, or for information concerning
industrial, commercial or scientific experience; and
b)
gain derived from the alienation of any property described in
subparagraph a), to the extent that such gain is contingent on the
productivity, use, or disposition of the property.
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 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
(Business Profits) shall apply.
5. Royalties shall be deemed to arise in a Contracting State when they are in
consideration for the use of, or the right to use, property, information or experience
in that State.
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 the Convention.
Article 13
GAINS
1. Gains derived by a resident of a Contracting State that are attributable to the
alienation of real (immovable) property situated in the other Contracting State may
be taxed in that other State.
2. For the-purposes of this Article the term "real (immovable) property situated
in the other Contracting State" shall include
a)
real (immovable) property referred to in Article 6 (Income from Real
(Immovable) Property);
b)
where that other State is the United States, a United States real property
interest; and
c)
where that other State is Malta,
i)
shares, including rights to acquire shares, in a company resident
in Malta whose assets consist wholly or principally of real
(immovable) property referred to in subparagraph a) of this
paragraph situated in Malta; and
ii)
an interest in a partnership or trust to the extent that the assets of
the partnership or trust consist of real (immovable) property
situated in Malta, or of shares referred to in clause i) of this sub-
paragraph.
3. Gains from the alienation of movable property forming part of the business
property of a permanent establishment that 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 derived by an enterprise of a Contracting State from the alienation of
ships or aircraft operated or used in international traffic or personal property
pertaining to the operation or use of such ships or aircraft shall be taxable only in
that State.
5. Gains derived by an enterprise of a Contracting State from the alienation of
containers (including trailers, barges and related equipment for the transport of
containers) used for the transport of goods or merchandise shall be taxable only in
that State, unless those containers are used for transport solely between places within
the other Contracting State.
6. Gains from the alienation of any property other than property referred to in
paragraphs 1 through 5 and other than gain described in subparagraph b) of
paragraph 3 of Article 12 (Royalties) shall be taxable only in the Contracting State
of which the alienator is a resident.
Article 14
INCOME FROM EMPLOYMENT
1. Subject to the provisions of Articles 15 (Directors’ Fees), 17 (Pensions,
Social Security, Annuities, Alimony, and Child Support) and 19 (Government
Service), 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.
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
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 taxable year concerned;
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
described in paragraph 1 that is derived by a resident of a Contracting State in
respect of an employment as a member of the regular complement of a ship or
aircraft operated in international traffic shall be taxable only in that State.
Article 15
DIRECTORS’ FEES
Directors’ fees and other compensation derived by a resident of a Contracting
State for services rendered in the other Contracting State in his capacity as a member
of the board of directors of a company that is a resident of the other Contracting
State may be taxed in that other Contracting State.
Article 16
ENTERTAINERS AND SPORTSMEN
1. 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, which income would be exempt from tax in that other Contracting State under
the provisions of Articles 7 (Business Profits) and 14 (Income from Employment)
may be taxed in that other State, except where the amount of the gross receipts
derived by such entertainer or sportsman, including expenses reimbursed to him or
borne on his behalf, from such activities does not exceed twenty thousand United
States dollars ($20,000) or its equivalent in Euros for the taxable year of the
payment.
2. Where income in respect of 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, notwithstanding the provisions of Article 7
(B usiness P ro fit s) o r 14 (I ncom e f rom E m plo ym ent) , may be taxed in the
Contracting State in which the activities of the entertainer or sportsman are
exercised unless the contract pursuant to which the personal activities are performed
allows that other person to designate the individual who is to perform the personal
activities.
Article 17
PENSIONS, SOCIAL SECURITY, ANNUITIES, ALIMONY,
AND CHILD SUPPORT
1. a)
Pensions and other similar remuneration beneficially owned by a
resident of a Contracting State shall be taxable only in that State.
b)
Notwithstanding subparagraph a), the amount of any such pension or
remuneration arising in a Contracting State that, when received, would
be exempt from taxation in that State if the beneficial owner were a
resident thereof shall be exempt from taxation in the Contracting State
of which the beneficial owner is a resident.
2. Notwithstanding the provisions of paragraph 1, payments made by a
Contracting State under provisions of the social security or similar legislation of that
State to a resident of the other Contracting State or to a citizen of the United States
shall be taxable only in the first-mentioned State.
3. Annuities derived and beneficially owned by an individual resident of a
Contracting State shall be taxable only in that State. The term "annuities" as used in
this paragraph means a stated sum paid periodically at stated times during a specified
number of years, or for life, under an obligation to make the payments in return for
adequate and full consideration (other than services rendered).
4. Alimony paid by a resident of a Contracting State to a resident of the other
Contracting State shall be taxable only in that other State. The term "alimony" as
used in this paragraph means periodic payments made pursuant to a written
separation agreement or a decree of divorce, separate maintenance, or compulsory
support, which payments are taxable to the recipient under the laws of the State of
which he is a resident.
5. Periodic payments, not dealt with in paragraph 4, for the support of a child
made pursuant to a written separation agreement or a decree of divorce, separate
maintenance, or compulsory support, paid by a resident of a Contracting State to a
resident of the other Contracting State, shall be exempt from tax in both Contracting
States.
Article 18
PENSION FUNDS
Where an individual who is a resident of one of the States is a member or
beneficiary of, or participant in, a pension fund that is a resident of the other State,
income earned by the pension fund may be taxed as income of that individual only
when, and, subject to the provisions of paragraph 1 of Article 17 (Pensions, Social
Security, Annuities, Alimony, and Child Support), to the extent that, it is paid to, or
for the benefit of, that individual from the pension fund (and not transferred to
another pension fund in that other State).
Article 19
GOVERNMENT SERVICE
1. Notwithstanding the provisions of Articles 14 (Income from Employment),
15 (Directors’ Fees), 16 (Entertainers and Sportsmen) and 20 (Students and
Trainees)
a)
Salaries, wages and other remuneration, other than a pension, paid to an
individual in respect of services rendered to a Contracting State or a
political subdivision or local authority thereof shall, subject to the
provisions of subparagraph b), be taxable only in that State;
b)
such remuneration, however, 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. Notwithstanding the provisions of paragraph 1 of Article 17 (Pensions,
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
Social Security, Annuities, Alimony, and Child Support)
a)
any pension 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 (other than a payment to which
paragraph 2 of Article 17 applies) shall, subject to the provisions of
subparagraph b), be taxable only in that State;
b)
such pension, however, 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 (Income from Employment), 15 (Directors'
Fees), 16 (Entertainers and Sportsmen) and 17 (Pensions, Social Security, Annuities,
Alimony, and Child Support) shall apply to salaries, wages and other remuneration,
and to pensions, in respect of services rendered in connection with a business carried
on by a Contracting State or a political subdivision or a local authority thereof.
Article 20
STUDENTS AND TRAINEES
1. Payments, other than compensation for personal services, received by a
student or business trainee 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 for the purpose of his full-time education or for his full-time
training, shall not be taxed in that State, provided that such payments arise outside
that State, and are for the purpose of his maintenance, education or training. The
exemption from tax provided by this paragraph shall apply to a business trainee only
for a period of time not exceeding one year from the date the business trainee first
arrives in the first-mentioned Contracting State for the purpose of training.
2. A student or business trainee within the meaning of paragraph 1 shall be
exempt from tax by the Contracting State in which the individual is temporarily
present with respect to income from personal services in an aggregate amount equal
to $9,000 or its equivalent in Euros annually. The competent authorities shall, every
five years, adjust the amount provided in this subparagraph to the extent necessary to
take into account changes in the U.S. personal exemption and the standard deduction
and in the Maltese personal tax rates.
3. For purposes of this Article, a business trainee is an individual
a)
who is temporarily in a Contracting State for the purpose of securing
training required to qualify the individual to practice a profession or
professional speciality; or
b)
who is temporarily in a Contracting State as an employee of, or under
contract with, a resident of the other Contracting State, for the primary
purpose of acquiring technical, professional, or business experience
from a person other than that resident of the other Contracting State (or
a person related to such resident of the other Contracting 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 in that State.
2. The provisions of paragraph 1 shall not apply to income, other than income
from real (immovable) property as defined in paragraph 2 of Article 6 (Income from
Real (Immovable) Property), if the beneficial owner of the income, being a resident
of a Contracting State, carries on business in the other Contracting State through a
permanent establishment situated therein and the income is attributable to such
permanent establishment. In such case the provisions of Article 7 (Business Profits)
shall apply.
3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a
resident of one of the Contracting States not dealt with in the foregoing Articles of
this Convention from sources in the other Contracting State may also be taxed in the
other Contracting State, but the tax so charged shall not exceed 10 percent of the
amount of such items.
Article 22
LIMITATION ON BENEFITS
1. Except as otherwise provided in this Article, a resident of one of the
Contracting States that derives income from the other Contracting State shall be
entitled, in that other Contracting State, to all the benefits of this Convention
otherwise accorded to residents of a Contracting State only if such resident is a
"qualified person" as defined in paragraph 2 of this Article and satisfies any other
conditions specified in the Convention for the obtaining of such benefits.
2. A resident of one of the Contracting States is a qualified person for a taxable
year only if such resident is either
a)
an individual;
b)
a Contracting State, political subdivision or local authority thereof;
c)
a company, if
i)
A) its principal class of shares (and any disproportionate class of
shares) is listed on a recognized stock exchange located in the
Contracting State of which the company is a resident;
B) its principal class of shares (and any disproportionate class of
shares) is regularly traded on one or more recognized stock
exchanges located in the Contracting State of which the company
is a resident;
C) its principal class of shares is primarily traded on one or more
recognized stock exchanges located in the Contracting State of
which the company is a resident; and
D) the company satisfies the requirements of clause ii) of
subparagraph f) of this paragraph; or
ii)
A) at least 75 percent of each such class of shares in the company is
owned directly or indirectly by companies entitled to benefits
under clause i), provided that in the case of indirect ownership,
each intermediate owner is a resident of the same Contracting
State entitled to benefits of the Convention under this clause ii);
and
B) the company satisfies the requirements of clause ii) of
subparagraph f) of this paragraph;
d)
an entity described in subparagraph b) of paragraph 2 of Article 4
(Resident) that is generally exempt from income taxation in its
Contracting State of residence;
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
a pension fund, provided that more than 75 percent of the beneficiaries,
members or participants of the pension fund are individuals who are
residents of either Contracting State; or
a person other than an individual, if
on at least half the days of the taxable year at least 75 percent of
each class of shares or other beneficial interests in the person is
owned, directly or indirectly, by residents of that Contracting
State that are entitled to the benefits of this Convention under
subparagraph a), subparagraph b), clause i) of subparagraph c),
subparagraph d), or subparagraph e) of this paragraph, provided
that, in the case of indirect ownership, each intermediate owner is
a qualified person that is a resident of that Contracting State; and
less than 25 percent of the person's gross income for the taxable
year, as determined in the person's State of residence, is paid or
accrued, directly or indirectly, to persons who are not residents of
either Contracting State entitled to the benefits of this Convention
under subparagraph a), subparagraph b), clause i) of subparagraph
c), subparagraph d), or subparagraph e) of this paragraph (other
than in the form of arm's length payments in the ordinary course
of business for services or tangible property).
3. Notwithstanding that a company that is a resident of a Contracting State may
not be a qualified person, it shall be entitled to all the benefits of this Convention
otherwise accorded to residents of a Contracting State with respect to an item of
income if it satisfies any other specified conditions for the obtaining of such benefits
at least 95 percent of each class of shares of the company are owned,
directly or indirectly, by seven or fewer persons who are equivalent
beneficiaries; and
less than 25 percent of the company's gross income for the taxable year
in which the item of income arises is paid or accrued, directly or
indirectly, to persons who are not equivalent beneficiaries (other than in
the form of arm's length payments in the ordinary course of business for
services or tangible property).
4. a) A resident of a Contracting State will be entitled to benefits of the
Convention with respect to an item of income derived from the other
State, regardless of whether the resident is a qualified person, if
the resident is engaged in the active conduct of a trade or business
in the first-mentioned State (other than the business of making or
managing investments for the resident's own account, unless these
activities are banking or insurance activities carried on by a bank
or insurance company), and the income derived from the other
Contracting State is derived in connection with, or is incidental
to, that trade or business; and
the resident satisfies the requirements of clause ii) of
subparagraph f) of paragraph 2.
If a resident of a Contracting State derives an item of income from a
trade or business activity conducted by that resident in the other
Contracting State, or derives an item of income arising in the other
Contracting State from a related person, the conditions described in
clause i) of subparagraph a) shall be considered to be satisfied with
respect to such item only if the trade or business activity carried on by
the resident in the first-mentioned Contracting State is substantial in
relation to the trade or business activity carried on by the resident or
such person in the other Contracting State. A trade or business will be
deemed substantial if, for each of the three preceding taxable years, the
asset value, the gross income, and the payroll expense that are related to
the trade or business in the first-mentioned Contracting State each
equals at least 10 percent of the resident's (and any related parties')
proportionate share of the asset value, gross income and payroll
expense, respectively, related to the activity that generated the income
in the other Contracting State, and the average of the three ratios in each
such year exceeds 15 percent.
For purposes of applying this paragraph, activities conducted by
persons connected to a person shall be deemed to be conducted by such
person. A person shall be connected to another if one possesses at least
50 percent of the beneficial interest in the other (or, in the case of a
company, at least 50 percent of the aggregate vote and value of the
company's shares or of the beneficial equity interest in the company) or
another person possesses at least 50 percent of the beneficial interest
(or, in the case of a company, at least 50 percent of the aggregate vote
and value of the company's shares or of the beneficial equity interest in
the company) in each person. In any case, a person shall be considered
to be connected to another if, based on all the relevant facts and
circumstances, one has control of the other or both are under the control
of the same person or persons.
5. Notwithstanding the preceding provisions of this Article, where an
enterprise of a Contracting State derives income from the other Contracting State,
and that income is attributable to a permanent establishment which that enterprise
has in a third jurisdiction, the tax benefits that would otherwise apply under the other
provisions of the Convention will not apply to that income if the combined tax that is
actually paid with respect to such income in the first-mentioned Contracting State
and in the third jurisdiction is less than 60 percent of the tax that would have been
payable in the first-mentioned State if the income were earned in that Contracting
State by the enterprise and were not attributable to the permanent establishment in
the third jurisdiction. Any dividends, interest or royalties to which the provisions of
this paragraph apply shall be subject to tax at a rate that shall not exceed 15 percent
of the gross amount thereof. Any other income to which the provisions of this
paragraph apply will be subject to tax under the provisions of the domestic law of the
other Contracting State, notwithstanding any other provision of the Convention.
6. A person that is a resident of one of the Contracting States, who is not
entitled to some or all of the benefits of this Convention because of the foregoing
paragraphs, may, nevertheless, be granted benefits of this Convention if the
competent authority of the Contracting State in which the income in question arises
so determines.
7. Where under any provision of this Convention income or gains arising in
one of the Contracting States are relieved from tax in that Contracting State and,
under the law in force in the other Contracting State, a person, in respect of the said
income or gains, is subject to tax by reference to the amount thereof which is
remitted to or received in that other Contracting State and not by reference to the full
amount thereof, Then the relief to be allowed under this Convention in the first-
mentioned Contracting State shall apply only to so much of the income or gains as is
taxed in the other Contracting State.
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
8. For the purposes of this Article
the term '"recognized stock exchange" means
the NASDAQ System and any stock exchange registered with the
U.S. Securities and Exchange Commission as a national securities
exchange under the U.S. Securities Exchange Act of 1934;
the Malta Stock Exchange; and
any other stock exchange agreed upon by the competent
authorities of the Contracting States;
the term "principal class of shares" means the ordinary or common
shores of the company, provided that such class of shares represents the
majority of the voting power and value of the company. If no single
class of ordinary or common shares represents the majority of the
aggregate voting power and value of the company, the "principal class
of shares" are those classes that in the aggregate represent a majority of
the aggregate voting power and value of the company;
the term "disproportionate class of shares" means any class of shares of
a company resident in one of the Contracting States that entitles the
shareholder to disproportionately higher participation, through
dividends., redemption payments or otherwise, in the earnings
generated in the other State by particular assets or activities of the
company;
For purposes of this paragraph an equivalent beneficiary is a resident of
a member state of the European Union or of a European Economic Area
State or of Australia or of a party to the North American Free Trade
Agreement but only if that resident
A) would be entitled to all the benefits of a comprehensive
convention for the avoidance of double taxation between any
member state of the European Union or a European Economic
Area State or any party to the North American Free Trade
Agreement or Australia and the State from which the benefits of
this Convention are claimed under provisions analogous to
subparagraph a), subparagraph b), clause i) of subparagraph c),
subparagraph d), or subparagraph e) of paragraph 2 of this
Article, provided that if such convention does not contain a
comprehensive limitation on benefits article, the person would be
a qualified person under subparagraph a), subparagraph b), clause
i) of subparagraph c), subparagraph d), or subparagraph e) of
paragraph 2 of this Article if such person were a resident of one
of the States under Article 4 (Resident) of this Convention; and
B) with respect to income referred to in Articles 10 (Dividends), 11
(Interest) or 12 (Royalties) of this Convention, would be entitled
under such convention to a rate of tax with respect to the
particular class of income for which benefits are being claimed
under This Convention that is at least as low as the rate applicable
under this Convention; or
ii) is a resident of a Contracting State that is a qualified person by
reason of subparagraph a), subparagraph b), clause i) of
subparagraph c), subparagraph d), or subparagraph e) of
paragraph 2 of this Article;
With respect to dividends, interest or royalties arising in Malta and
beneficially owned by a company that is a resident of the United States,
a company that is a resident of a member state of the European Union
will be treated as satisfying the requirements of clause i) B) of
subparagraph d) for purposes of determining whether such United States
resident is entitled to benefits under this paragraph if a payment of
dividends, interest or royalties arising in Malta and paid directly to such
resident of a member state of the European Union would have been
exempt from tax pursuant to any directive of the European Union,
notwithstanding that the income tax convention between Malta and that
other member state of the European Union would provide for a higher
rate of tax with respect to such payment than the rate of tax applicable
to such United States company under Article 10 (Dividends), 11
(Interest), or 12 (Royalties) of this Convention.
Article 23
RELIEF FROM DOUBLE TAXATION
1. In accordance with the provisions and subject to the limitations of the law of
the United States (as it may be amended from time to time without changing the
general principle hereof), the United States shall allow to a resident or citizen of the
United States as a credit against the United States tax on income applicable to
residents and citizens
the income tax paid or accrued to Malta by or on behalf of such resident
or citizen; and
in the case of a United States company owning at least 10 percent of the
voting stock of a company that is a resident of Malta and from which the
United States company receives dividends, the income tax paid or
accrued to Malta by or on behalf of the payer with respect to the profits
out of which the dividends are paid.
For the purposes of this paragraph, the taxes referred to in paragraphs 3 a) and 4 of
Article 2 (Taxes Covered) shall be considered income taxes.
2. In accordance with and 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 the United
States, the United States tax on such income shall be allowed as a credit
against the relative Malta tax payable thereon; and
where a Maltese company owns at least 10 percent of the voting stock of
a company that is a resident of the United States and from which the
Maltese company receives dividends that are included in a Malta
assessment in accordance with the provisions of This Convention, the
income tax paid or accrued to the United States by or on behalf of the
payer with respect to the profits out of which the dividends are paid
shall, if those profits are included in a Malta assessment, be allowed as
a credit against the relative Malta tax payable thereon.
3. For the purposes of applying paragraph 1 of this Article, an item of gross
income, as determined under the laws of the United States, derived by a resident of
the United States that, under this Convention, may be taxed in Malta shall be deemed
to be income from sources in Malta.
4. Where a United States citizen is a resident of Malta
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
a)
with respect to items of income that under the provisions of this
Convention are exempt from United States tax or that are subject to a
reduced rate of United States tax when derived by a resident of Malta
who is not a United States citizen, Malta shall allow as a credit against
Malta tax, only the tax paid, if any, that the United States may impose
under the provisions of this Convention, other than taxes that may be
imposed solely by reason of citizenship under the saving clause of
paragraph 4 of Article 1 (General Scope);
b)
for purposes of applying paragraph 1 to compute United States tax on
those items of income referred to in subparagraph a), the United States
shall allow as a credit against United States tax the income tax paid to
Malta after the credit referred to in subparagraph a); the credit so
allowed shall not reduce the portion of the United States tax that is
creditable against the Malta tax in accordance with subparagraph a);
and
c)
for the exclusive purpose of relieving double taxation in the United
States under subparagraph b), items of income referred to in
subparagraph a) shall be deemed to arise in Malta to the extent
necessary to avoid double taxation of such income under subparagraph
b).
Article 24
NON-DISCRIMINATION
1. Nationals of a Contracting State shall not be subjected in the other
Contracting State to any taxation or any requirement connected therewith that is
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 also apply to persons who are not
residents of one or both of the Contracting States. However, for the purposes of
United States taxation, United States nationals who are subject to tax on a worldwide
basis are not in the same circumstances as nationals of Malta who are not residents
of the United States.
2. The taxation on a permanent establishment that 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. The provisions of paragraphs 1 and 2 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 that it grants to its own residents.
4. Except where the provisions of paragraph 1 of Article 9 (Associated
Enterprises), paragraph 7 of Article 11 (Interest), or paragraph 6 of Article 12
(Royalties) apply, interest, royalties, and other disbursements paid by a resident of a
Contracting State to a resident of the other Contracting State shall, for the purpose of
determining the taxable profits of the first-mentioned resident, be deductible under
the same conditions as if they had been paid to a resident of the first-mentioned
State. Similarly, any debts of a resident of a Contracting State to a resident of the
other Contracting State shall, for the purpose of determining the taxable capital of
the first-mentioned resident, be deductible under the same conditions as if they had
been contracted 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 that is more burdensome than the taxation
and connected requirements to which other similar enterprises of the first-mentioned
State are or may be subjected.
6. Nothing in this Article shall be construed as preventing either Contracting
State from imposing a tax as described in paragraph 8 of Article 10 (Dividends).
7. The provisions of this Article shall, notwithstanding the provisions of
Article 2 (Taxes Covered), apply to taxes of every kind and description imposed by a
Contracting State or a political subdivision or local authority thereof.
Article 25
MUTUAL AGREEMENT PROCEDURE
1. Where a person considers that the actions of one or both of the Contracting
States result or will result for such person in taxation not in accordance with the
provisions of This Convention, it may, irrespective of the remedies provided by the
domestic law of those States, and the time limits prescribed in such laws for
presenting claims for refund, present its case to the competent authority of either
Contracting State.
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 or other procedural limitations in the domestic law of the Contracting States.
Assessment and collection procedures shall be suspended during the period that any
mutual agreement proceeding is pending.
3. The competent authorities of the Contracting States shall endeavour to
r e s o l v e b y m u t u a l a g r e e m e n t a n y d i ff i c u l t i e s o r d o u b t s a r i s i n g a s t o t h e
interpretation or application of the Convention. They also may consult together for
the elimination of double taxation in cases not provided for in the Convention. In
particular the competent authorities of the Contracting States may agree
a)
to the same attribution of income, deductions, credits, or allowances of
an enterprise of a Contracting State to its permanent establishment
situated in the other Contracting State;
b)
to the same allocation of income, deductions, credits, or allowances
between persons;
c)
to the settlement of conflicting application of the Convention, including
conflicts regarding
i)
the characterization of particular items of income;
ii)
the characterization of persons;
iii)
the application of source rules with respect to particular items of
income;
iv)
the meaning of any term used in the Convention;
v)
the timing of particular items of income;
d)
to advance pricing arrangements; and
e)
to the application of the provisions of domestic law regarding penalties,
fines, and interest in a manner consistent with the purposes of the
Convention.
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
4. The competent authorities also may agree to increases in any specific dollar
amounts referred to in the Convention to reflect economic or monetary
developments.
5. The competent authorities of the Contracting States may communicate with
each other directly, including through a joint commission, for the purpose of
reaching an agreement in the sense of the preceding paragraphs.
Article 26
EXCHANGE OF INFORMATION AND ADMINISTRATIVE ASSISTANCE
1. The competent authorities of the Contracting States shall exchange such
information as may be relevant for carrying out the provisions of this Convention or
of the domestic laws of the Contracting States concerning taxes of every kind
imposed by a Contracting State to the extent that the taxation thereunder is not
contrary to the Convention, including information relating to the assessment or
collection of, the enforcement or prosecution in respect of, or the determination of
appeals in relation to, such taxes. The exchange of information is not restricted by
paragraph 1 of Article 1 (General Scope) or Article 2 (Taxes Covered).
2. Any information received under this Article by a Contracting State shall be
treated as secret in the same manner as information obtained under the domestic laws
of that State and shall be disclosed only to persons or authorities (including courts
and administrative bodies) involved in the assessment, collection, or administration
of, the enforcement or prosecution in respect of, or the determination of appeals in
relation to, the taxes referred to above, or the oversight of such functions. 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. The
competent authority of the Contracting State that receives information under the
provisions of this Article may, with the written consent of the Contracting State that
provided the information, also make available that information to be used for other
purposes allowed under the provisions of an existing mutual legal assistance treaty
between the Contracting States that allows for the exchange of tax information.
3. In no case shall the provisions of the preceding paragraphs 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 that is not obtainable under the laws or in the
normal course of the administration of that or of the other Contracting
State; and
c)
to supply information that 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 purposes. The obligation contained in the preceding sentence
is subject to the limitations of paragraph 3 but in no case shall such limitation be
construed to permit a Contracting State to decline to supply information because it
has no domestic interest in such information.
5. In no case shall the provisions of paragraph 3 be construed to permit a
Contr actin g St ate t o decline to suppl y inf ormati on requested by t he other
Contracting State 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.
6. If specifically requested by the competent authority of a Contracting State,
the competent authority of the other Contracting State shall provide information
under this Article in the form of depositions of witnesses and authenticated copies of
unedited original documents (including books, papers, statements, records, accounts,
and writings).
7. The requested State shall allow representatives of the requesting State to
enter the requested State to interview individuals and examine books and records
with the consent of the persons subject to examination.
8. The competent authorities of the Contracting States may develop an
agreement upon the mode of application of this Article, including agreement to
ensure comparable levels of assistance to each of the Contracting States, but in no
case will the lack of such agreement relieve a Contracting State of its obligations
under this Article.
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. This Convention shall be subject to ratification in accordance with the
applicable procedures of each Contracting State, and instruments of ratification will
be exchanged as soon thereafter as possible.
2. This Convention shall enter into force on the date of the exchange of
instruments of ratification, and its provisions shall have effect
a)
in respect of taxes withheld at source, for amounts paid or credited on or
after the first day of the second month next following the date on which
the Convention enters into force;
b)
in respect of other taxes, for taxable periods beginning on or after the
first day of January next following the date on which the Convention
enters into force.
3. Notwithstanding paragraph 2, the provisions of Article 26 (Exchange of
Information and Administrative Assistance) shall have effect from the date of entry
into force of this Convention, without regard to the taxable period to which the
matter relates.
Article 29
TERMINATION
This Convention shall remain in force until terminated by a Contracting State.
Either Contracting State may terminate the Convention by giving notice of
termination to the other Contracting State through diplomatic channels. In such
event, the Convention shall cease to have effect
1)
in respect of taxes withheld at source, for amounts paid or credited after
the expiration of the 6 month period beginning on the date on which
notice of termination was given; and
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
2)
in respect of other taxes, for taxable periods beginning on or after the
expiration of the 6 month period beginning on the date on which notice
of termination was given.
IN WITNESS WHEREOF, the undersigned, being duly authorized thereto by their
respective Governments, have signed this Convention.
DONE at Valletta, in duplicate, this 8th day of August, 2008.
Tonio Fenech
Molly Bordonaro
For the Government of
For the Government of
Malta
the United States of America
EMBASSY OF THE UNITED STATES OF AMERICA
Valletta, 8 of August, 2008
Excellency
I have the honor to refer to the Convention signed today between the Government
of the United States of America and the Government of Malta for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on
Income (Convention). The following understandings were reached between our two
Governments
1. The two Governments will meet within three (3) years of the date of this
note and thereafter at regular intervals to discuss the terms, operation, application,
and proper functioning of the Convention, including especially the functioning of the
information exchange provisions of the Convention, to ensure that the Convention
continues to serve the purposes of avoiding double taxation and fiscal evasion and
shall, where they consider appropriate, conclude protocols to amend the Convention.
2. Neither the provisions of Article 8 (Shipping and Air Transport) of the
Convention nor any other provision of the Convention shall affect the continued
validity and application of the provisions of the Agreement between the United
States and Malta regarding the Taxation of Shipping and Aircraft effected by
exchange of notes dated at Washington December 26, 1996, and March 11, 1997.
3. Subparagraph a) of paragraph 2 of Article 4 (Resident) of the Convention
encompasses organizations exempt from tax under Maltese law as philanthropic
institutions, philharmonic societies, or sports clubs.
4. A company resident in Malta that is an "international trading company," as
defined in article 2 of the Income Tax Act of Malta, shall be entitled to receive only
the benefits of the Convention (subject to all applicable conditions or limitations)
other than the benefits of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and
21 (Other Income) of the Convention.
5. The United States agrees to renew discussions with Malta regarding the
application of the Convention to Maltese mutual funds after the conclusion of the
Organisation for Economic Co-operation and Development project concerning
collective investment vehicles.
6. The United States agrees to renew discussions with Malta within one year of
the date of this note regarding waiver of the excise tax imposed on insurance
premiums paid to foreign persons.
If these understandings meet with the approval of the Government of Malta, this
note and your reply thereto shall constitute an agreement between our Governments,
which shall enter into force on the date of entry into force of the Convention.
Accept, Excellency, the renewed assurances of my highest consideration.
Molly Bordonaro
Ambassador of the United States of America
His Excellency Tonio Fenech
Minister of Finance, the Economy and Investment
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE UNITED STATES OF AMERICA
The Republic of Malta
8 August, 2008
Excellency
I have the honor to acknowledge receipt of Your Excellency’s Note of today which
reads as follows
"I have the honor to refer to the Convention signed today between the Government of
the United States of America and the Government of Malta for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income
( Co n ve nt i o n) . T he fo l l ow i ng un d er s ta n di n gs w er e r e ac he d b e tw e en ou r t w o
Governments
1. The two Governments will meet within three (3) years of the date of this note
and thereafter at regular intervals to discuss the terms, operation, application, and
proper functioning of the Convention, including especially the functioning of the
information exchange provisions of the Convention, to ensure that the Convention
continues to serve the purposes of avoiding double taxation and fiscal evasion and
shall, where they consider appropriate, conclude protocols to amend the Convention.
2. Neither the provisions of Article 8 (Shipping and Air Transport) of the
Convention nor any other provision of the Convention shall affect the continued
validity and application of the provisions of the Agreement between the United States
and Malta regarding the Taxation of Shipping and Aircraft effected by exchange of
notes dated at Washington December 26, 1996, and March 11, 1997.
3. Subparagraph a) of paragraph 2 of Article 4 (Resident) of the Convention
encompasses organizations exempt from tax under Maltese law as philanthropic
institutions, philharmonic societies, or sports clubs.
4. A company resident in Malta that is an "international trading company," as
defined in article 2 of the Income Tax Act of Malta, shall be entitled to receive only the
benefits of the Convention (subject to all applicable conditions or limitations) other
than the benefits of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 21 (Other
Income) of the Convention.
5. The United States agrees to renew discussions with Malta regarding the
application of the Convention to Maltese mutual funds after the conclusion of the
Organisation for Economic Co-operation and Development project concerning
collective investment vehicles.
6. The United States agrees to renew discussions with Malta within one year of
the date of this note regarding waiver of the excise tax imposed on insurance premiums
paid to foreign persons.
If these understandings meet with the approval of the Government of Malta, this note
and your reply thereto shall constitute an agreement between our Governments, which
shall enter into force on the date of entry into force of the Convention."
As the foregoing understandings meet with the approval of the Government of Malta,
I have the honor to confirm that Your Excellency's Note and this Reply shall constitute
an agreement between our Governments, which shall enter into force on the date of
entry into force of the Convention.
Accept, Excellency, the renewed assurances of my highest consideration.
Tonio Fenech
Minister of Finance, the Economy and Investment
H.E. Molly Bordonaro
Ambassador of the United States of America
Malta
BARACK OBAMA
President of the United States of America
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING
CONSIDERING THAT
The Convention Between the Government of the United States of America and the
Government of Malta for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes on Income, was signed August 8, 2008, at
Valletta (the "Convention"); and
The Senate of the United States of America by its resolution of July 15, 2010, two-
thirds of the Senators present concurring therein, gave its advice and consent to
ratification of the Convention
NOW THEREFORE, I, Barack Obama, president of the United States of America,
ratify and confirm the said Convention.
IN TESTIMONY WHEREOF, I have signed this instrument of ratification and
caused the Seal of the United States of America to be affixed.
DONE at the city of Washington, this first day of November in the year of our
Lord two thousand ten and of the Independence of the United States of America the
two hundred thirty-fifth.
By the President
(sgd) Barack Obama
(Sgd) Hillary Rodham Clinton
RATIFICATION INSTRUMENT
I, Tonio Borg, Deputy Prime Minister and Minister of Foreign Affairs of the
Republic of Malta, declare that the Convention between the Government of Malta
and the Government of the United States of America for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income signed
at Valletta on 8 August 2008 is ratified by the Government of the Republic of Malta.
Signed and sealed with the Seal of the Ministry of Foreign Affairs in Valletta,
Malta this 10th day of November Two Thousand and Ten.
(Sgd) T. Borg,
Deputy Prime Minister and Minister of Foreign Affairs