DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF ITALY ORDER

DOUBLE TAXATION RELIEF ON TAXES ON INCOME

WITH THE REPUBLIC OF ITALY

SUBSIDIARY LEGISLATION 123.16

DOUBLE TAXATION RELIEF ON TAXES ON

INCOME WITH THE REPUBLIC OF ITALY ORDER

10th June, 1986

LEGAL NOTICE 31 of 1986, as amended by Legal Notice 14 of 2011.

The title of this Order is Double Taxation Relief on Taxes

on Income with the Republic of Italy Order.

AGREEMENT BETWEEN

THE GOVERNMENT OF THE REPUBLIC OF MALTA

AND

THE GOVERNMENT OF THE REPUBLIC OF ITALY

FOR THE AVOIDANCE OF DOUBLE TAXATION

WITH RESPECT TO TAXES ON INCOME

AND THE PREVENTION OF FISCAL EVASION

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

Italy, desiring to conclude an Agreement for the Avoidance of Double Taxation with

respect to Taxes on Income and the Prevention of Fiscal Evasion, have agreed as

follows

CHAPTER I

Scope of the Agreement

ARTICLE 1

Personal Scope

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

Contracting States.

ARTICLE 2 *

Taxes Covered

(1) This Agreement shall apply to taxes on income imposed on behalf of each

Contracting State or its political or administrative subdivisions or local authorities,

irrespective of the manner in which they are levied.

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

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

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

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

(3)

The existing taxes to which this Agreement shall apply are

(a) in the case of Italy

(i) the personal income tax;

(ii) the corporate income tax;

(iii) the regional tax on productive activities;

even if they are collected by withholding taxes at the source (hereinafter

referred to as "Italian tax");

(b) in the case of Malta

the income tax,

(hereinafter referred to as "Malta tax").

(4) This Agreement shall apply also to any identical or substantially similar

taxes which are imposed after the date of signature of this Agreement in addition to,

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

*as amended by the Protocol reproduced in Legal Notice 14 of 2011.

shall notify to each other any significant changes which have been made in their

respective taxation laws.

(5) Where the Agreement provides that income arising in a Contracting State

shall be relieved from tax in that State, either in full or in part, and, under the law in

force in the other Contracting State, such income is subject to tax by reference to the

amount thereof which is remitted to or received in that other State and not by

reference to the full amount thereof, then the relief to be allowed in the first

mentioned State shall apply only to so much of the income as is remitted to or

received in the other State.

CHAPTER II

Definitions

ARTICLE 3 *

General Definitions

(1)

In this Agreement, unless the context otherwise requires

(a)

the term "Italy" means the Republic of Italy;

(b)

the term "Malta" means the Republic of Malta;

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

and Malta as the context requires;

(d) the term "person" comprises an individual, a company and any other body of

persons;

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

as a body corporate for tax purposes;

(f)

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

Contracting State" mean, respectively, an enterprise carried on by a resident of a

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

State;

(g)

the term "national" means

(i)

in respect of Italy, any individual possessing the nationality of Italy, and

any legal person, partnership and association deriving its status as such

from the law in force in Italy;

(ii) in respect of Malta, any citizen of Malta as provided for in Chapter III

of the Constitution of Malta and in the Maltese Citizenship Act, and any

legal person, partnership or association deriving its status as such from

the law in force in Malta;

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

operated by an enterprise which 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 the case of Italy, the Ministry of Economy and Finance;

(ii) in the case of Malta, the Minister responsible for finance or his

authorised representative.

*as amended by the Protocol reproduced in Legal Notice 14 of 2011

(2) In the application of this Agreement by a Contracting State, any term not

otherwise defined shall, unless the context otherwise requires, have the meaning

which it has under the laws of that Contracting State relating to the taxes which are

the subject of this Agreement.

ARTICLE 4

Fiscal Domicile

(1) For the purpose of this Agreement, the term "resident of a Contracting State"

means any person who, under the law of that State, is liable to taxation therein by

reason of his domicile, residence, place of management or any other criterion of a

similar nature. The term does not include any person who is liable to tax in that

Contracting State in respect only of income from sources situated 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 of the Contracting State in which he

has a permanent home available to him. If he has a permanent home

available to him in both Contracting States, he shall be deemed to be a

resident of the Contracting State with which his personal and economic

relations are closest (centre of vital interests).

(b) If the Contracting State in which he has his centre of vital interests

cannot be determined, or if he has no permanent home available to him

in either Contracting State, he shall be deemed to be a resident of the

Contracting State in which he has an habitual abode.

(c) If he has an habitual abode in both Contracting States or in neither of

them, he shall be deemed to be a resident of the Contracting State of

which he is a national.

(d) If he is a national of both Contracting States or of neither of them, the

competent authorities of the Contracting States shall settle the question

by mutual agreement.

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

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

resident of the Contracting State in which its place of effective management is

situated.

ARTICLE 5

Permanent Establishment

(1) For the purposes of this Agreement the term "permanent establishment"

means a fixed place of business in which the business of the enterprise is wholly or

partly carried on.

(2)

The term "permanent establishment" shall include especially

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

(f)

a mine, quarry or other place of extraction of natural resources;

(g) a building site or construction or assembly project which exists for more

than twelve months;

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

enterprise through employees or other personnel, where activities of this

nature continue (for the same or a connected project) within the country

for a period or periods aggregating more than twelve months within any

two-year period.

(3)

The term "permanent establishment" shall not be deemed 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 for collecting information for the

enterprise;

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

advertising, for the supply of information, for scientific research or for

similar activities which have a preparatory or auxiliary character for the

enterprise.

(4) A person acting in a Contracting State on behalf of an enterprise of the other

Contracting State - other than an agent of an independent status to whom paragraph

(5) applies - shall be deemed to be a permanent establishment in the first-mentioned

State if he has, and habitually exercises in that State, an authority to conclude

contracts in the name of the enterprise, unless his activities are limited to the

purchase of goods or merchandise for the enterprise.

(5) An enterprise of a Contracting State shall not be deemed to have a

permanent establishment in the other Contracting State merely because it carries on

business in that other State through a broker, general commission agent or any other

agent of an independent status, where such persons are acting in the ordinary course

of their business.

(6) 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 make either company a permanent

establishment of the other.

CHAPTER III

Taxation of Income

ARTICLE 6

Income from Immovable Property

(1) Income from immovable property may be taxed in the Contracting State in

which such property is situated.

(2) The term "immovable property" shall be defined in accordance with 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, rights to which the

provisions of general law respecting immovable property apply. The term shall also

include usufruct of immovable property and rights to variable or fixed payments as

consideration for the working of, or the right to work, mineral deposits, sources and

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

property.

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

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

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

immovable property of an enterprise and to income from immovable property used

for the performance of professional services.

ARTICLE 7

Business Profits

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

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

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

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

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

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

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

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

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

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

activities under the same or similar conditions and dealing wholly independently

with the enterprise of which it is a permanent establishment.

(3) In the determination of 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) In so far 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 embodied 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 purpose 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 Agreement, then the provisions of those Articles shall not be

affected by the provisions of this Article.

ARTICLE 8

Shipping and Air Transport

(1) Profits from the operation of ships or aircraft in international traffic shall be

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

the enterprise is situated.

(2) If the place of effective management of a shipping enterprise is aboard a

ship or boat, then it shall be deemed to be situated in the Contracting State in which

the home harbour of the ship or boat is situated, or, if there is no such home harbour,

in the Contracting State of which the operator of the ship or boat is a resident.

(3) The provisions of paragraph (1) shall also apply to profits derived from the

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

ARTICLE 9

Associated Enterprises

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.

ARTICLE 10

Dividends

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

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

(2) However, such dividends may be taxed in the Contracting State of which the

company paying the dividends is a resident, and according to the law of that State,

but -

(a) where the dividends are paid by a company resident of Italy to a

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

charged shall not exceed 15 per cent of the gross amount of the

dividends;

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

resident of Italy who is the beneficial owner thereof -

(i)

Malta tax shall not exceed that chargeable on the company paying

the dividends in respect of the profits so distributed;

(ii) notwithstanding the provisions of sub-paragraph (i), Malta tax

shall not exceed 15 per cent of the gross amount of the dividends

if such dividends are paid out of gains or profits earned in any

year in respect of which the company is in receipt of tax benefits

under the provisions regulating aids to industries in Malta, and the

shareholder submits returns and accounts to the taxation

authorities of Malta in respect of his income liable to Malta tax

for the relative year of assessment.

The competent authorities of the Contracting States shall by mutual

agreement settle the mode of application of this limitation.

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

the profits out of which the dividends are paid.

(3) The term "dividends" as used in this Article means income from shares,

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

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

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

shares by the taxation law of the State of which the company making the distribution

is a resident.

(4) The provisions of paragraphs (1) and (2) shall not apply if the recipient of

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

Contracting State of which the company paying the dividends is a resident, through a

p er m a n en t es t ab l i sh m e nt si t u a te d th e r ei n , o r p er f o r m s in t h at o t h er St a te

professional services from a fixed base situated therein and the holding in respect of

which the dividends are paid is effectively connected with such permanent

establishment or fixed base. In such a case the dividends are taxable in that other

Contracting State according to its own law.

(5) Where a company which is a resident of a Contracting State derives profits

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

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

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

are paid is effectively connected with a permanent establishment or a fixed base

situated in that other State, or subject the company’s undistributed profits to a tax on

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 be taxed in the Contracting State in which it

arises, and according to the law of that State, but if the recipient is the beneficial

owner of the interest, the tax so charged shall not exceed 10 per cent of the gross

amount of the interest. The competent authorities of the Contracting States shall by

mutual agreement settle the mode of application of this limitation.

(3) Notwithstanding the provisions of paragraph (2) interest arising in a

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

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

local authority thereof; or

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

local authority thereof or any agency or instrumentality (including a

financial institution) wholly owned by that other Contracting State or

local authority thereof; or

(c)

the interest is paid to any other agency or instrumentality (including a

financial institution) in relation to loans made under an agreement

concluded between the Governments of the Contracting States.

(4) The term "interest" as used in this Article means income from Government

securities, bonds or debentures, whether or not secured by mortgage and whether or

not carrying a right to participate in profits, and debt-claims of every kind as well as

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

State in which the income arises.

(5) The provisions of paragraphs (1) and (2) shall not apply if the recipient of

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

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

situated therein, or performs in that other State professional services from a fixed

base situated therein and the debt-claims in respect of which the interest is paid is

effectively connected with such permanent establishment or fixed base. In such a

case, the interest is taxable in that other Contracting State according to its own law.

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

that State itself, a political or administrative subdivision, a local authority or 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 Contracting State in which the

permanent establishment is situated.

(7) Where, owing to a special relationship between the payer and the recipient

or between both of them and some other person, the amount of the interest paid,

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 recipient in the absence of such

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

amount. In that case, the excess part of the payments shall remain taxable according

to the law of each Contracting State, due regard being had to the other provisions of

this Agreement.

ARTICLE 12

Royalties

(1) Royalties arising in a Contracting State and paid to a resident of the other

Contracting State shall be taxable only in that other State if such resident is the

beneficial owner of the royalties and the royalties consist of payments of any kind

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

artistic or scientific work, cinematographic films or tapes for television or

broadcasting.

(2) Royalties arising in a Contracting State and paid to a resident of the other

Contracting State may be taxed in that other Contracting State if the royalties consist

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

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

commercial or scientific equipment, or information concerning industrial,

commercial or scientific experience. However, such royalties may also be taxed in

the Contracting State in which they arise, and according to the law of that State, but

if the recipient is the beneficial owner of the royalties, the tax so charged shall not

exceed 10 per cent of the gross amount of such royalties.

(3)

The provisions of paragraphs (1) and (2) shall not apply if the recipient of

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

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

situated therein, or performs in that other State professional services from a fixed

base situated therein, and the right or property in respect of which the royalties are

paid is effectively connected with such permanent establishment or fixed base. In

such a case the royalties are taxable in that other Contracting State according to its

own law.

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

that State itself, a political or administrative subdivision, a local authority or 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 Contracting State in which the permanent

establishment is situated.

(5) Where, owing to a special relationship between the payer and the recipient

or between both of them and some other person, the amount of the royalties paid,

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 recipient in the

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

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

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

other provisions of this Agreement.

ARTICLE 13

Capital Gains

(1) Gains from the alienation of immovable property, as defined in paragraph

(2) of Article 6, may be taxed in the Contracting State in which such property is

situated.

(2) Gains from the alienation of movable property forming part of the business

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

in the other Contracting State or of movable property pertaining to a fixed base

available to a resident of a Contracting State in the other Contracting State for the

purpose of performing professional services, including such gains from the

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

enterprise) or of such a fixed base, may be taxed in the other State. However, gains

from the alienation of ships or aircraft operated in international traffic, as well as

gains from the alienation of 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.

(3) Gains from the alienation of any property other than those mentioned in

paragraphs (1) and (2) shall be taxable only in the Contracting State of which the

alienator is a resident.

ARTICLE 14

Independent Personal Services

(1) Income derived by a resident of a Contracting State in respect of

professional services or other independent activities of a similar character shall be

taxable only in that State. However, such income may be taxed in the other

Contracting State in the following circumstances

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

State for the purpose of performing his activities (in which case only so

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

that other Contracting State); or

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

amounting to or exceeding in the aggregate 183 days during any

calendar year.

(2) The term "professional services" includes, especially, independent

scientific, literary, artistic, educational or teaching activities as well as the

independent activities of physicians, lawyers, engineers, architects, dentists and

accountants.

ARTICLE 15

Dependent Personal Services

(1) Subject to the provisions of Articles 16, 18, 19 and 20, 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 the calendar year concerned; and

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

resident of the other State; and

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

base which the employer has in the other State.

(3) Notwithstanding the preceding provisions of this Article, remuneration in

respect of an employment exercised aboard a ship or aircraft in international traffic

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

the enterprise is situated.

ARTICLE 16

Directors’ Fees

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

in his capacity as a member of the board of directors or other similar organ of a

company which is a resident of the other Contracting State may be taxed in that other

State.

ARTICLE 17

Artists and Athletes

(1) Notwithstanding the provisions of Articles 14 and 15, income derived by

entertainers, such as theatre, motion picture, radio or television artists, and

musicians, and by athletes, from their personal activities as such may be taxed in the

Contracting State in which these activities are exercised.

(2) Where income in respect of personal activities as such of an entertainer or

athlete accrues not to that entertainer or athlete himself but to another person, that

income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the

Contracting State in which the activities of the entertainer or athlete are exercised.

ARTICLE 18

Pensions and Annuities

(1) Subject to the provisions of paragraph (2) of Article 19, pensions and other

similar remuneration, and annuities, paid to a resident of a Contracting State shall be

taxable only in that State.

(2)

As used in this Article -

(a) the term "pensions and other similar remuneration" means periodic

payments made after retirement in consideration of past employment, or

by way of compensation for injuries received in connection with past

employment;

(b) the term "annuity" means a stated sum paid periodically during life, or

during a specified or ascertainable period of time, under an obligation to

make the payments in return for adequate and full consideration in

money or money’s worth.

ARTICLE 19

Government Service

(1) (a) Remuneration, other than a pension, paid by a Contracting State or a

political or an administrative subdivision or a local authority thereof to any

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

authority thereof shall be taxable only in that State.

(b) However, such remuneration shall be taxable only in the other Contracting

State if the services are rendered in that State and the recipient is a resident of that

other Contracting State who -

(i)

is a national of that State; or

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

performing the services.

(2) (a) Any pension paid by, or out of funds created by, a Contracting State or

a political or an administrative subdivision or a local authority thereof to any

individual in respect of services rendered to the State or subdivision or local

authority thereof shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if

the recipient is a national of and a resident of that State.

The provisions of Articles 15, 16 and 18 shall apply to remuneration or pensions

in respect of services rendered in connection with any trade or business carried on by

one of the Contracting States or a political or an administrative subdivision or a local

authority thereof.

(4) The provisions of paragraph (1)(a) shall likewise apply in respect of

remuneration paid, under a development assistance programme of a Contracting

State, a political or administrative subdivision or a local authority thereof, out of

funds exclusively supplied by that State, those subdivisions or local authorities

thereof, to a specialist or volunteer seconded to the other Contracting State with the

consent of that other State.

ARTICLE 20

Teachers, Students and Trainees

(1) A professor or teacher who makes a temporary visit to a Contracting State

for a period not exceeding two years for the purpose of teaching or conducting

research at a university, college, school or other educational institution, and who is,

or immediately before such visit was, a resident of the other Contracting State shall

be exem pt f rom tax in t he first- mention ed Contracting State in resp ect o f

remuneration for such teaching or research.

(2) Payments which a student or trainee who is or was formerly a resident of a

Contracting State and who is present in the other Contracting State solely for the

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

education or training shall be exempt from tax in that other Contracting State,

provided that such payments are made to him from outside that other Contracting

State.

(3) Remuneration which a trainee who is or was formerly a resident of a

Contracting State derives from an employment which he exercises in the other

Contracting State for the purpose of practical training for a period of time which is

reasonably required to conclude his training shall not be taxed in that other State.

(4) Remuneration which a student who is or was formerly a resident of a

Contracting State derives from a part time employment which he exercises in the

other Contracting State for a period of time which is reasonably required to conclude

his studies shall not be taxed in that other State.

ARTICLE 21

Other Income

(1) Items of income of a resident of a Contracting State, wherever arising, not

dealt with in the foregoing Articles of this Agreement shall be taxable only in that

State.

(2) The provisions of paragraph (1) shall not apply if the recipient of the

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

Contracting State through a permanent establishment situated therein, or performs in

that other State professional services from a fixed base situated therein, and the right

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

permanent establishment or fixed base. In such a case the items of income are

taxable in that other Contracting State according to its own law.

CHAPTER IV

Method for Elimination of Double Taxation

ARTICLE 22 *

Elimination of Double Taxation

(1) Double taxation shall be eliminated in accordance with the following

paragraphs of this Article.

*as amended by the Protocol reproduced in Legal Notice 14 of 2011.

(2) If a resident of Italy owns items of income which are taxable in Malta, Italy,

in determining its income taxes specified in Article 2 of this Agreement, may include

in the basis upon which such taxes are imposed the said items of income, unless

specific provisions of this Agreement otherwise provide.

In such a case, Italy shall deduct from the taxes so calculated the income tax paid

in Malta but in an amount not exceeding that proportion of the aforesaid Italian tax

which such items of income bear to the entire income.

The tax paid in Malta for which deduction is granted is only the pro rata amount

corresponding to the foreign income which is included in the aggregate income.

However, no deduction shall be granted if the item of income is subjected in Italy

to a substitute tax or to a final withholding tax, or to substitute taxation at the same

rate as the final withholding tax, also by request of the recipient, in accordance with

Italian law..

(3) 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 Agreement, there is included in a Malta assessment income from

sources within Italy, the Italian tax on such income shall be allowed as a credit

against the relative Malta tax payable thereon.

(4)

(Deleted by the Protocol reproduced in Legal Notice 14 of 2011).

CHAPTER V

Special Provisions

ARTICLE 23

Non-discrimination

(1) The nationals of a Contracting State, whether or not they are residents of one

of the Contracting States, shall not be subjected in the other Contracting State to any

taxatio n, or any requi rement connected therewit h, which i s other or m ore

burdensome than the taxation and connected requirements to which nationals of that

other State in the same circumstances 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.

This provision shall not be construed as obliging a Contracting State to grant to

residents of the other Contracting State any personal allowances, reliefs and

reductions for taxation purposes on account of civil status or family responsibilities

or any other personal circumstances which it grants to its own residents.

(3) Except where the provisions of Article 9, paragraph (7) of Article 11, or

paragraph (5) of Article 12 apply, interest, royalties and other disbursements paid by

an enterprise of a Contracting State to a resident of the other Contracting State shall,

for the purpose of determining the taxable profits of such enterprise, be deductible

under the same conditions as if they had been paid to a resident of the first

mentioned State.

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

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

Contracting State, shall not be subjected in the first-mentioned Contracting 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 that first-mentioned State are or may be subjected.

(5)

In this Article the term "taxation" means taxes of every kind and description.

ARTICLE 24

Mutual Agreement Procedure

(1) Where a resident of a Contracting State considers that the actions of one or

both of the Contracting States result or will result for him in taxation not in

accordance with this Agreement, he may, notwithstanding the remedies provided by

the national laws 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. This case

must be presented within three years from the first notification of the action giving

rise to taxation not in accordance with the Agreement.

(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 an appropriate 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 not in accordance with the

Agreement. Any agreement reached shall be implemented notwithstanding any time

limits in the national laws 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 Agreement. They may also consult together for

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

(4) The competent authorities of the Contracting States may communicate with

each other directly for the purpose of reaching an agreement in the sense of the

preceding paragraphs.

ARTICLE 25 *

Exchange of Information

(1) The competent authorities of the Contracting States shall exchange such

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

Agreement or to the administration or enforcement of the domestic laws concerning

taxes of every kind and description imposed on behalf of the Contracting States, or

of their political or administrative subdivisions or local authorities, insofar as the

taxation thereunder is not contrary to the Agreement as well as to prevent fiscal

evasion and tax avoidance. The exchange of information is not restricted by Articles

1 and 2.

(2) Any information received under paragraph (1) by a Contracting State shall

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

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

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

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

the taxes referred to in paragraph 1, or the oversight of the above. Such persons or

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

information in public court proceedings or in judicial decisions.

*as substiotuted by the Protocol reproduced in Legal Notice 14 of 2011.

(3) In no case shall the provisions of paragraph (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

Diplomatic and Consular Officials

Nothing in this Agreement shall affect the fiscal privileges of diplomatic or

consular officials under the general rules of international law or under the provisions

of special agreements.

ARTICLE 27

Refunds

(1) Taxes withheld at source in a Contracting State will be refunded at the

request of the taxpayer or of the Contracting State of which he is a resident, if the

right to collect the said taxes is regulated by the provisions of this Agreement.

(2) Claims for refund are to be filed within the time limits prescribed by the law

of the Contracting State obliged to make repayment and are to be accompanied by an

official certificate from the competent authorities of the other State of which the

claimant is a resident. This shall certify that the conditions which give rise to

entitlement to refund have been fulfilled.

(3) The competent authorities of the Contracting States shall by mutual

agreement settle the mode of application of this Article, in accordance with the

provisions of Article 24 of this Agreement.

CHAPTER VI

Final Provisions

ARTICLE 28

Entry into Force

(1) This Agreement shall be ratified and the instruments of ratification shall be

exchanged at Rome as soon as possible.

(2) The Agreement shall enter into force after the exchange of instruments of

ratification, and its provisions shall have effect

(a) in Italy, as respects income assessable for any taxable period

commencing on or after the first day of January, 1976;

(b) in Malta, in respect of taxes which are levied for any year of assessment

beginning with the year of assessment which brings to charge the

income of 1976.

(3) Any claim for refund or credit arising in accordance with this Agreement in

respect of any tax payable by a resident of a Contracting State referring to the

taxable periods commencing on or after the 1st January 1976 and until the entry into

force of this Agreement shall be lodged within three years from the date of entry into

force of this Agreement or from the date when the tax is charged, whichever is the

later. Nothing herein contained shall reduce any longer time limit available to such

resident for this purpose under the law of the Contracting State of which he is a

resident.

ARTICLE 29

Termination

This Agreement shall remain in force indefinitely but either of the Contracting

States may, on or before the thirtieth day of June in any calendar year beginning

after the expiration of a period of five years from the date of its entry into force, give

to the other Contracting State, through diplomatic channels, written notice of

termination and, in such event, the Agreement shall cease to be effective

(a) in Italy, as respects income assessable for any taxable period

commencing on or after the first day of January in the calendar year

next following that in which notice of termination is given;

(b) in Malta, in respect of taxes which are levied for any year of assessment

on income derived during any period commencing on the first day of

January in the year next following that in which notice of termination is

given, or in subsequent years.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed

this Agreement.

DONE at Valletta this 16th day of July, 1981 in duplicate, in the Italian and

English languages, both texts being equally authentic.

DOUBLE TAXATION RELIEF ON TAXES ON INCOME

WITH THE REPUBLIC OF ITALY

For the Government of

For the Government of

the Republic of Malta

the Republic of Italy

Robert Stivala,

Maurizio Battaglini

Secretary, Ministry of Finance,

Ambassador of Italy

Customs and People’s

Financial Investments.

PROTOCOL

At the signing of the Agreement concluded today between the Republic of Malta

and the Republic of Italy for the avoidance of double taxation and the prevention of

fiscal evasion with respect to taxes on income, the undersigned have agreed upon the

following additional provisions which shall form an integral part of the Agreement.

With reference to Article 3, in the event of agreement being reached between

Malta and Italy regulating their respective rights over the continental shelf

and allied matters, the Contracting States will enter into negotiations in order

to amend the definitions of Italy and Malta taking account of the agreement

so reached.

With reference to Article 5, an offshore drilling site is included in the

expression "a mine, quarry or other place of extraction of natural resources"

in paragraph (2)(f). thereof.

With reference to paragraph (3) of Article 7, the expression "expenses which

are incurred for the purposes of the permanent establishment" means

expenses directly connected with the activity of the permanent

establishment.

(a) With reference to Article 8, where profits derived from the operation of a

ship in international traffic by an enterprise whose place of effective

management is situated in Malta are exempt from tax under the

provisions of article 86 of the Merchant Shipping Act, or under any

identical or similar provisions, such profits may be taxed in Italy unless

it is proved to the satisfaction of the competent authorities of Italy that

not more than twenty per cent of the capital of the company owning the

relative ship is owned, directly or indirectly, by persons not residents of

Malta.

(b) With further reference to Article 8, an enterprise of a Contracting State

deriving profits from the operation of ships or aircraft in international

traffic shall not be subject to any local income tax imposed in the other

Contracting State.

With reference to paragraph (1) of Article 24, the expression

"notwithstanding the remedies provided by the national laws" means that the

mutual agreement procedure is not alternative to the national contestation

proceedings which should, in any case, be initiated within the time limits of

the national law.

The provisions of paragraph (3) of Article 27 shall not prevent the competent

authorities of the Contracting States from adopting, by mutual agreement,

other procedures for the reduction of taxation in accordance with this

Agreement.

VII Notwithstanding the provisions of paragraph (2) of Article 28, the provisions

of Article 8 shall be applicable as respects income derived during any

taxable period commencing on or after the 1st January, 1969.

DONE at Valletta this 16th day of July, 1981 in duplicate, in the Italian and

English languages, both texts being equally authentic.

For the Government of

For the Government of

the Republic of Malta

the Republic of Italy

Robert Stivala,

Maurizio Battaglini

Secretary, Ministry of Finance,

Ambassador of Italy

Customs and People’s

Financial Investments.

Legal Notice 14 of 2011

PROTOCOL

TO THE AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF

MALTA AND THE GOVERNMENT OF THE REPUBLIC OF ITALY FOR THE

AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON

INCOME AND THE PREVENTION OF FISCAL EVASION

The Government of Malta and the Government of the Italian Republic, desiring to

conclude a Protocol to amend the Agreement for the avoidance of double taxation

with respect to taxes on income and the prevention of fiscal evasion, with Additional

Protocol and Exchange of Notes, signed at Valletta on 16th July, 1981 (hereinafter

referred to as "the Agreement"),

have agreed as follows

ARTICLE I

Paragraph (3) of Article 2 "Taxes Covered", shall be deleted and replaced by the

following

"(3) The existing taxes to which this Agreement shall apply are

(a) in the case of Italy

(i) the personal income tax;

(ii) the coporate income tax;

(iii) the regional tax on productive activities;

even if they are collected by withholding taxes at the source

(hereinafter referred to as "Italian tax");

(b) in the case of Malta

the income tax,

(hereinafter referred to as "Malta tax").".

DOUBLE TAXATION RELIEF ON TAXES ON INCOME

WITH THE REPUBLIC OF ITALY

ARTICLE II

With reference to Article 3 "General definitions", letter (i), subparagraph (i) of

paragraph (1) shall be replaced by the following

"(i) in the case of Italy, the Ministry of Economy and Finance;".

ARTICLE III

1. With reference to Article 22 "Elimination of double taxation", paragraph (2)

shall be deleted and replaced by the following

"(2) If a resident of Italy owns items of income which are taxable in Malta,

Italy, in determining its income taxes specified in Article 2 of this

Agreement, may include in the basis upon which such taxes are imposed

the said items of income, unless specific provisions of this Agreement

otherwise provide.

In such a case, Italy shall deduct from the taxes so calculated the

income tax paid in Malta but in an amount not exceeding that proportion

of the aforesaid Italian tax which such items of income bear to the entire

income.

The tax paid in Malta for which deduction is granted is only the pro rata

amount corresponding to the foreign income which is included in the

aggregate income.

However, no deduction shall be granted if the item of income is

subjected in Italy to a substitute tax or to a final withholding tax, or to

substitute taxation at the same rate as the final withholding tax, also by

request of the recipient, in accordance with Italian law.".

2. Paragraph 4 of Article 22 shall be deleted.

ARTICLE IV

Article 25 "Exchange of information" shall be deleted and replaced by the

"(1) The competent authorities of the Contracting States shall exchange such

information as is forseeably relevant for carrying out the provisions of

this Agreement or to the administration or enforcement of the domestic

laws concerning taxes of every kind and description imposed on behalf

of the Contracting States, or of their political or administrative

subdivisions or local authorities, insofar as the taxation thereunder is

not contrary to the Agreement as well as to prevent fiscal evasion and

tax avoidance. The exchange of information is not restricted by Articles

1 and 2.

(2) Any information received under paragraph (1) by a Contracting State

shall be treated as secret in the same manner as information obtained

under the domestic laws of that State and shall be disclosed only to

persons or authorities (including courts and administrative bodies)

concerned with the assessment or collection of, the enforcement or

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

taxes referred to in paragraph 1, or the oversight of the above. Such

persons or authorities shall use the information only for such purposes.

They may disclose the information in public court proceedings or in

judicial decisions.

(3) In no case shall the provisions of paragraph (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 V

Each Contracting State shall notify to the other the completion of the procedures

required by its domestic law for the entry into force of this Protocol. This Protocol

shall enter into force on the date of the receipt of the later of these notifications and

its provisions shall thereupon have effect in both States.

This Protocol shall remain into force as long as the Agreement remains into force.

In Witness thereof the undersigned, being duly authorized thereto by their

respective Governments, have signed this Protocol.

Done in duplicate in Rome this 13th day of March 2009 in the English and Italian

languages, all texts being equally authentic.

Tonio Borg

Vincenzo Scotti

For the Government

For the Government

of Malta

of the Italian Republic

It is hereby declared -

(a) that the arrangements specified in the Agreement set

out in the Schedule to this Order have been made with

the Government of the Republic of Italy with a view to

affording relief from double taxation in relation to the

following taxes imposed by the laws of the Republic of

Italy

(i)

the personal income tax (l’imposta sul reddito

delle persona fisiche);

(ii) the corporate income tax (l’imposta sul reddito

delle persona giuridiche);

even if they are collected by withholding taxes at the

source (hereinafter referred to as "Italian tax");

(b) that it is expedient that those arrangements should

have effect.