DOUBLE TAXATION RELIEF (TAXES ON INCOME) (THE STATE OF ISRAEL) ORDER (thestateofisrael)

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

SUBSIDIARY LEGISLATION 123.152

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL) ORDER

25th October, 2013

LEGAL NOTICE 343 of 2013, as modified by S.L.123.183.

This title of this order is the Double Taxation Relief (Taxes

on Income) (The State of Israel) Order.

(Article 2)

CONVENTION

BETWEEN

THE GOVERNMENT OF MALTA AND

THE GOVERNMENT OF THE STATE OF ISRAEL

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND

THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

The Government of Malta and the Government of the State of Israel desiring to

conclude a Convention for the avoidance of double taxation and the prevention of

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

Article 1

PERSONS COVERED

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

Contracting States.

Article 2

TAXES COVERED

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

Contracting State or of its political subdivisions or local authorities, irrespective of

the manner in which they are levied.

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

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

movable or immovable property and taxes on the total amounts of wages or salaries

paid by enterprises.

It is hereby declared

(a) that the arrangements specified in the Convention set

out in the Schedule to this Order (hereinafter referred

to as "the Convention") have been made with the

Government of The State of Israel with a view to

affording relief from double taxation in relation to the

following taxes imposed by the laws of The State of

Israel

(i) the income tax and company tax (including tax

on capital gains);

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

property according to the Real Estate Taxation

Law; and;

(iii) the profit tax on financial institutions;

(b) that it is expedient that those arrangements should

have effect following the entry into force of the

Convention and in accordance with the relevant

provisions of the Convention;

(c) that the Convention shall enter into force on such date

as may be announced by notice in the Government

Gazette * .

*the Convention came into force on 8th December, 2013 - see L.N. 57 of 2014.

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

(a) in Malta

the income tax;

(hereinafter referred to as "Malta tax");

(b) in Israel

(i) the income tax and company tax (including tax on capital gains);

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

according to the Real Estate Taxation Law; and

(iii) the profit tax on financial institutions;

(hereinafter referred to as "Israeli tax").

The Convention shall apply also to any identical or substantially similar

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

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

shall notify each other of any significant changes that have been made in their

taxation laws.

Article 3

GENERAL DEFINITIONS

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

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

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

the other islands of the Maltese archipelago including the territorial

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

superjacent water column adjacent to the territorial waters, wherein

Malta exercises sovereign rights, jurisdiction, or control in accordance

with international law and its national law, including its legislation

relating to the exploration of the continental shelf and exploitation of its

natural resources;

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

geographical sense comprises the territory in which the Government of

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

well as those maritime areas adjacent to the outer limit of the territorial

sea, including seabed and subsoil thereof over which the State of Israel,

in accordance with international law and the laws of the State of Israel,

exercises its sovereign or other rights and jurisdiction;

(c) the terms "a Contracting State" and "the other Contracting State" mean

Malta or Israel, as the context requires;

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

other body of persons;

(e) the term "company" means any body corporate or any entity that is

treated as a body corporate for tax purposes;

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

(g) the terms "enterprise of a Contracting State" and "enterprise of the other

Contracting State" mean respectively an enterprise carried on by a

resident of a Contracting State and an enterprise carried on by a resident

of the other Contracting State;

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

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

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

aircraft is operated solely between places in the other Contracting State;

(i) the term "competent authority" means

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

representative;

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

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

(i) any individual possessing the nationality of that Contracting

State;

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

such from the laws in force in that Contracting State;

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

and of other activities of an independent character.

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

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

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

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

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

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

Article 4

RESIDENT

1. For the purposes of this Convention, the term "resident of a Contracting

State" means any person who, under the laws of that State, is liable to tax therein by

reason of his domicile, residence, place of management, place of incorporation or

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

subdivision or local authority thereof. This term, however, does not include any

person who is liable to tax in that State in respect only of income from sources in

that State.

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

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

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

permanent home available to him; if he has a permanent home available

to him in both States, he shall be deemed to be a resident only of the

State with which his personal and economic relations are closer (centre

of vital interests);

(b) if the State in which he has his centre of vital interests cannot be

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

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

has an habitual abode;

(c) if he has an habitual abode in both States or in neither of them, he shall

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

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

authorities of the Contracting States shall settle the question by mutual

agreement.

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

individual or a trust is a resident of both Contracting States, then it shall be deemed

to be a resident only of the State in which its place of effective management is

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

competent authorities shall endeavour to determine its residence by mutual

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

(other than Articles 23 (elimination of double taxation), 24 (non-discrimination), 25

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

that person.

Article 5

PERMANENT ESTABLISHMENT

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

means a fixed place of business through which the business of an enterprise is

wholly or partly carried on.

2. The term "permanent establishment" includes especially

(a)

a place of management;

(b)

a branch;

(c)

an office;

(d)

a factory;

(e)

a workshop; and

(f)

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

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

natural resources.

3. A building site or construction or installation project constitutes a permanent

establishment only if it lasts more than twelve months.

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

"permanent establishment" shall be deemed not to include

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

of goods or merchandise belonging to the enterprise;

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

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

(c) the maintenance of a stock of goods or merchandise belonging to the

enterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose of

purchasing goods or merchandise, or of collecting information, for the

enterprise;

(e) the maintenance of a fixed place of business solely for the purpose of

carrying on, for the enterprise, any other activity of a preparatory or

auxiliary character;

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

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

overall activity of the fixed place of business resulting from this

combination is of a preparatory or auxiliary character.

Notwithstanding the provisions of paragraphs 1 and 2, where a person -

other than an agent of an independent status to whom paragraph 6 applies - is acting

on behalf of an enterprise and has, and habitually exercises, in a Contracting State an

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

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

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

are limited to those mentioned in paragraph 4 which, if exercised through a fixed

place of business, would not make this fixed place of business a permanent

establishment under the provisions of that paragraph.

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

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

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

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

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

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

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

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

permanent establishment of the other.

Article 6

INCOME FROM IMMOVABLE PROPERTY

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

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

Contracting State may be taxed in that other State.

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

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

term shall in any case include property accessory to immovable property, livestock

and equipment used in agriculture and forestry, rights to which the provisions of

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

general law respecting landed property apply, any option or similar right to acquire

immovable property, usufruct of immovable property and rights to variable or fixed

payments as consideration for the working of, or the right to work, mineral deposits,

sources and other natural resources; ships, boats and aircraft shall not be regarded as

immovable property.

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

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

4. The provisions of paragraphs 1 and 3 shall also apply to the income from

immovable property of an enterprise.

Article 7

BUSINESS PROFITS

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

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

through a permanent establishment situated therein. If the enterprise carries on

business as aforesaid, the profits of the enterprise may be taxed in the other State but

only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a

Contracting State carries on business in the other Contracting State through a

permanent establishment situated therein, there shall in each Contracting State be

attributed to that permanent establishment the profits which it might be expected to

make if it were a distinct and separate enterprise engaged in the same or similar

activities under the same or similar conditions and dealing wholly independently

with the enterprise of which it is a permanent establishment.

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

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

permanent establishment, including executive and general administrative expenses

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

elsewhere.

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

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

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

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

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

adopted shall, however, be such that the result shall be in accordance with the

principles contained in this Article.

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

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

enterprise.

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

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

unless there is good and sufficient reason to the contrary.

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

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

affected by the provisions of this Article.

Article 8

SHIPPING AND AIR TRANSPORT

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

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

aircraft in international traffic shall be taxable only in the Contracting State in which

the place of effective management is situated.

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

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

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

profits are incidental to other profits described in paragraph 1 of this Article.

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

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

Article 9

ASSOCIATED ENTERPRISES

1. Where

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

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

Contracting State, or

(b the same persons participate directly or indirectly in the management,

control or capital of an enterprise of a Contracting State and an

enterprise of the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in

their commercial or financial relations which differ from those which would be made

between independent enterprises, then any profits which would, but for those

conditions, have accrued to one of the enterprises, but, by reason of those conditions,

have not so accrued, may be included in the profits of that enterprise and taxed

accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that

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

Contracting State has been charged to tax in that other State and the profits so

included are profits which would have accrued to the enterprise of the first-

mentioned State if the conditions made between the two enterprises had been those

which would have been made between independent enterprises, then that other State

shall make an appropriate adjustment to the amount of the tax charged therein on

those profits. In determining such adjustment, due regard shall be had to the other

provisions of this Convention and the competent authorities of the Contracting

States shall if necessary consult each other.

Article 10

DIVIDENDS AND DISTRIBUTIONS BY A REAL ESTATE

INVESTMENT COMPANY

1. Dividends paid by a company which is a resident of a Contracting State to a

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

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

which the company paying the dividends is a resident and according to the laws of

that State, but

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

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

charged in Israel shall not exceed

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

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

real estate investment company) which holds directly at least 10

per cent of the capital of the company paying the dividends;

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

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

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

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

the profits out of which the dividends are paid.

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

profits out of which the dividends are paid.

3. (a) Distributions made by a real estate investment company which is a

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

such distributions may also be taxed in Israel and according to the laws

of Israel, but if the beneficial owner of these distributions is a resident

of Malta and holds directly less than 10% of the capital of that company,

the tax so charged in Israel shall not exceed 15% of the gross amount of

the distributions.

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

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

according to the Israeli Income Tax Ordinance.

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

profits out of which the distributions are made.

4. The term "dividends" as used in this Article means income from shares,

"jouissance" shares or "jouissance" rights, mining shares, founders’ shares or other

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

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

shares by the laws of the State of which the company making the distribution is a

resident.

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

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

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

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

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

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

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

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

or income from the other Contracting State, that other State may not impose any tax

on the dividends paid by the company, except insofar as such dividends are paid to a

resident of that other State or insofar as the holding in respect of which the dividends

are paid is effectively connected with a permanent establishment situated in that

other State, nor subject the company’s undistributed profits to a tax on the

company’s undistributed profits, even if the dividends paid or the undistributed

profits consist wholly or partly of profits or income arising in such other State.

Article 11

INTEREST

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

Contracting State may be taxed in that other State.

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

it arises and according to the laws of that State, but if the beneficial owner of the

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

exceed 5 per cent of the gross amount of the interest.

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

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

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

subdivision, a local authority or the Central Bank thereof;

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

local authority or the Central Bank thereof;

(c) to a resident of the other Contracting State on corporate bonds traded on

a Stock Exchange in the first-mentioned State and which were issued by

a company which is a resident of that State;

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

institution for insurance or financing of international trade transactions

which is wholly owned by the other Contracting State.

4. The term "interest" as used in this Article means income from debt-claims of

every kind, whether or not secured by mortgage and whether or not carrying a right

to participate in the debtor’s profits, and in particular, income from government

securities and income from bonds or debentures, including premiums and prizes

attaching to such securities, bonds or debentures. Penalty charges for late payment

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

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

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

the other Contracting State in which the interest arises, through a permanent

establishment situated therein and the debt-claim in respect of which the interest is

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

provisions of Article 7 shall apply.

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

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

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

establishment in connection with which the indebtedness on which the interest is

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

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

establishment is situated.

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

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

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

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

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

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

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

other provisions of this Convention.

Article 12

ROYALTIES

1. Royalties arising in a Contracting State and beneficially owned by a resident

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

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

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

literary, artistic or scientific work including cinematograph films, any patent, trade

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

concerning industrial, commercial or scientific experience.

3. The provisions of paragraph 1 shall not apply if the beneficial owner of the

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

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

situated therein and the right or property in respect of which the royalties are paid is

effectively connected with such permanent establishment. In such case the

provisions of Article 7 shall apply.

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

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

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

establishment in connection with which the liability to pay the royalties was

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

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

is situated.

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

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

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

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

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

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

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

regard being had to the other provisions of this Convention.

Article 13

CAPITAL GAINS

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

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

State may be taxed in that other State.

2. (a) Gains derived by a resident of a Contracting State from the alienation of

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

value directly or indirectly from immovable property situated in the

other Contracting State may be taxed in that other State;

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

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

Income Tax Ordinance shall be taxed in Israel;

(c) in the case of gains derived by a resident of a Contracting State from the

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

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

acquired before the day of registration on the Stock Exchange may be

taxed in the other Contracting State according to the law of that State.

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

property of a permanent establishment which an enterprise of a Contracting State has

in the other Contracting State including such gains from the alienation of such a

permanent establishment (alone or with the whole enterprise) may be taxed in that

other State.

4. Gains from the alienation of ships or aircraft operated in international traffic

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

taxable only in the Contracting State in which the place of effective management of

the enterprise is situated.

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

paragraphs 1, 2, 3 and 4, shall be taxable only in the Contracting State of which the

alienator is a resident.

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

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

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

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

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

shall not be taxed in the other State.

Article 14

INCOME FROM EMPLOYMENT

1. Subject to the provisions of Articles 15, 17 18 and 19, salaries, wages and

other similar remuneration derived by a resident of a Contracting State in respect of

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

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

as is derived therefrom may be taxed in that other State.

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

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

Contracting State shall be taxable only in the first-mentioned State if

(a) the recipient is present in the other State for a period or periods not

exceeding in the aggregate 183 days in any twelve-month period

commencing or ending in the fiscal year concerned, and

(b) the remuneration is paid by, or on behalf of, an employer who is not a

resident of the other State, and

(c) the remuneration is not borne by a permanent establishment which the

employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration

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

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

effective management of the enterprise is situated.

Article 15

DIRECTORS’ FEES

Directors’ fees and other similar payments derived by a resident of a Contracting

State in his capacity as a member of the board of directors of a company which is a

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

Article 16

ARTISTES AND SPORTSMEN

1. Notwithstanding the provisions of Articles 7 and 14, income derived by a

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

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

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

State.

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

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

himself but to another person, that income may, notwithstanding the provisions of

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

entertainer or sportsman are exercised.

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

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

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

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

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

States as a not-for-profit institution. In such a case, the income shall be taxable in

accordance with the provisions of Article 7 or 14, as the case may be.

Article 17

PENSIONS

Subject to the provisions of paragraph 2 of Article 18, pensions and other similar

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

employment shall be taxable only in that State.

Article 18

GOVERNMENT SERVICE

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

State or a political subdivision or a local authority thereof to an

individual in respect of services rendered to that State or subdivision or

authority shall be taxable only in that State.

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

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

that State and the individual is a resident of that State who

(i) is a national of that State; or

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

rendering the services.

2. (a) Notwithstanding the provisions of paragraph 1, pensions and other

similar remuneration paid by, or out of funds created by, a Contracting

State or a political subdivision or a local authority thereof to an

individual in respect of services rendered to that State or subdivision or

authority shall be taxable only in that State.

(b) However, such pensions and similar remuneration shall be taxable only

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

national of, that State.

3. The provisions of Articles 14, 15, 16 and 17 shall apply to salaries, wages,

pensions and other similar remuneration in respect of services rendered in

connection with a business carried on by a Contracting State or a political

subdivision or a local authority thereof.

Article 19

Professors, teachers and researchers

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

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

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

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

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

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

Contracting State on the remuneration for such teaching or research.

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

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

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

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

Article 20

STUDENTS

Payments which a student or business apprentice who is or was immediately

before visiting a Contracting State a resident of the other Contracting State and who

is present in the first-mentioned State solely for the purpose of his education or

training receives for the purpose of his maintenance, education or training shall not

be taxed in that State, provided that such payments arise from sources outside that

State.

Article 21

OTHER INCOME

1. Items of income beneficially owned by a resident of a Contracting State,

wherever arising, not dealt with in the foregoing Articles of this Convention shall be

taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income, other than income

from immovable property as defined in paragraph 2 of Article 6, if the beneficial

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

the other Contracting State through a permanent establishment situated therein and

the right or property in respect of which the income is paid is effectively connected

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

apply.

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

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

the amount of the income referred to in that paragraph exceeds the amount (if any)

which would have been agreed upon between them in the absence of such a

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

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

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

provisions of this Convention.

Article 22

ELIMINATION OF DOUBLE TAXATION

1. In the case of Malta, double taxation shall be eliminated as follows

Subject to the provisions of the law of Malta regarding the allowance of a

credit against Malta tax in respect of foreign tax, where, in accordance with the

provisions of this Convention, there is included in a Malta assessment income from

sources within Israel, the Israeli tax on such income shall be allowed as a credit

against the relative Malta tax payable thereon.

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

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

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

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

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

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

resident, an amount equal to the tax paid in Malta;

(b) such deductions shall not, however, exceed that part of the income tax

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

income which may be taxed in Malta.

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

Article 23

NON-DISCRIMINATION

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

Contracting State to any taxation or any requirement connected therewith which is

other or more burdensome than the taxation and connected requirements to which

nationals of that other State in the same circumstances, in particular with respect to

residence, are or may be subjected.

2. The taxation on a permanent establishment which an enterprise of a

Contracting State has in the other Contracting State shall not be less favourably

levied in that other State than the taxation levied on enterprises of that other State

carrying on the same activities.

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

Article 11, paragraph 5 of Article 12 or paragraph 3 of Article 21 apply, interest,

royalties and other disbursements paid by an enterprise of a Contracting State to a

resident of the other Contracting State shall, for the purpose of determining the

taxable profits of such enterprise, be deductible under the same conditions as if they

had been paid to a resident of the first-mentioned State.

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

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

Contracting State, shall not be subjected in the first-mentioned State to any taxation

or any requirement connected therewith which is other or more burdensome than the

taxation and connected requirements to which other similar enterprises of the first-

mentioned State are or may be subjected.

5. Nothing contained in this Article shall be construed as obliging either

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

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

so resident or to its nationals.

6. The provisions of this Article shall apply to the taxes referred to in Article 2

of this Convention.

Article 24

MUTUAL AGREEMENT PROCEDURE

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

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

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

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

State of which he is a resident or, if his case comes under paragraph 1 of Article 23,

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

within three years from the first notification of the action resulting in taxation not in

accordance with the provisions of the Convention.

2. The competent authority shall endeavour, if the objection appears to it to be

justified and if it is not itself able to arrive at a satisfactory solution, to resolve the

case by mutual agreement with the competent authority of the other Contracting

State, with a view to the avoidance of taxation which is not in accordance with the

Convention. Any agreement reached shall be implemented notwithstanding any time

limits in the domestic law of the Contracting States.

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

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 may also consult together for

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

the elimination of double taxation in cases not provided for in the Convention.

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

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

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

preceding paragraphs.

Article 25

EXCHANGE OF INFORMATION

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

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

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

Contracting States concerning taxes covered by this Convention imposed on behalf

of the Contracting States, or of their political subdivisions or local authorities,

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

information is not restricted by Article 1.

2. Any information received under paragraph 1 by a Contracting State shall be

treated as secret in the same manner as information obtained under the domestic laws

of that State and shall be disclosed only to persons or authorities (including courts

and administrative bodies) concerned with the assessment or collection of, the

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

taxes of every kind and description, or the oversight of the above. Such persons or

authorities shall use the information only for such purposes. They may disclose the

information in public court proceedings or in judicial decisions.

3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to

impose on a Contracting State the obligation

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

administrative practice of that or of the other Contracting State;

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

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

State;

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

industrial, commercial or professional secret or trade process, or

information, the disclosure of which would be contrary to public policy

(ordre public).

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

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

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

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

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

limitations be construed to permit a Contracting State to decline to supply

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

5. In no case shall the provisions of paragraph 3 be construed to permit a

Contracting State to decline to supply information solely because the information is

held by a bank, other financial institution, nominee or person acting in an agency or

a fiduciary capacity or because it relates to ownership interests in a person.

Article 26

Limitation of Benefits

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

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

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

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

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

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

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

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

to income that is connected with such operations.

Article 27

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

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

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

under the provisions of special agreements.

Article 28

ENTRY INTO FORCE

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

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

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

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

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

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

Convention entered into force;

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

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

which the Convention entered into force.

Article 29

TERMINATION

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

States. Either Contracting State may terminate this Convention, through diplomatic

channels, by giving a written notice of termination at least six months before the end

of any calendar year beginning after the expiry of five years from the date of entry

into force of this Convention. In such event, this Convention shall cease to have

effect

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

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

notice is given;

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

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

which the notice is given.

IN WITNESS WHEREOF the undersigned, being duly authorised thereto by their

respective Governments, have signed this Convention.

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

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

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

provisions of this Convention, the English text shall prevail.

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

Tonio Borg

Avigdor Lieberman

For the Government of Malta

For the Government of the State

of Israel

PROTOCOL

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

Government of the State of Israel for the Avoidance of Double Taxation and the

Prevention of Fiscal Evasion with respect to Taxes on Income, the Government of

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

provisions shall form an integral part of the Convention.

1. In general

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

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

avoidance where those provisions are used to challenge arrangements which

constitute an abuse of the Convention.

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

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

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

including

(a) the State in which the trustees are resident at the time the trust was

settled and in the period in question;

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

trust;

(c) the location of the trust’s assets;

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

period in question; and

(e) the State in which the beneficiaries of the trust are resident for the

period in question.

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

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

exploration of natural resources shall be treated as constituting a permanent

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

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

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

investment company)

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

means a real estate investment fund which meets the conditions in the Israeli Income

Tax Ordinance.

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

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

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

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

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

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

DOUBLE TAXATION RELIEF (TAXES ON INCOME)

(THE STATE OF ISRAEL)

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

income.

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

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

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

scientific equipment and penalty charges for late payment.

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

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

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

which the capital gains are calculated.

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

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

agreement procedure the question of the amount of capital gain

attributed to one of the Contracting States in relation to exit tax levied,

they shall regard such factors as the fair market value of the assets on

the day the exit tax event occurred, or the duration of time the asset was

held in the relevant Contracting State.

With reference to paragraph 1 of Article 14 (Income from Employment)

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

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

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

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

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

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

provisions of this Protocol, the English text shall prevail.

Tonio Borg

Avigdor Lieberman

For the Government of Malta

For the Government of the State

of Israel