DOUBLE TAXATION RELIEF ON SHIPS AND AIRCRAFT WITH THE UNITED STATES OF AMERICA ORDER

DOUBLE TAXATION RELIEF ON SHIPS AND AIRCRAFT

WITH THE UNITED STATES OF AMERICA

SUBSIDIARY LEGISLATION 123.44

DOUBLE TAXATION RELIEF ON SHIPS AND

AIRCRAFT WITH THE UNITED STATES OF

AMERICA ORDER

11th March, 1997

LEGAL NOTICE 230 of 1997.

The title of this Order is Douhle Taxation Relief on Ships

and Aircraft with the United States of America Order.

The Embassy of Malta presents its compliments to the Department of State of the

United States of America and has the honour to propose, that the two governments

conclude an agreement to exempt from income tax, on a reciprocal basis, income

derived by residents of the other country from the international operation of ships

and aircraft. The following proposed terms of agreement have been drafted on the

basis of similar agreements the United States has with other governments

The Government of Malta agrees to exempt from tax gross income derived from

the international operations of ships or aircraft by individuals who are residents of

the United States (other than citizens of Malta) and corporations which are

incorporated in the United States.

In case of a U.S. corporation, the exemption shall apply only if the corporation

meets one of the following conditions

(1) the corporation’s stock is primarily and regularly traded on an

established securities market in the U.S., another country which grants a

reciprocal exemption to Maltese corporations or Malta, or

(2) more than fifty (50) per cent of the value of the corporation’s stock is

owned directly or indirectly by individuals who are residents of the

United States or of another foreign country which grants an equivalent

exemption to Maltese corporations or by a corporation organized in a

country which grants an equivalent exemption to Maltese corporations

and whose stock is primarily and regularly traded on an established

securities market in that country, another country which grants an

equivalent exemption to Maltese corporations, or Malta.

The Government of the United States of America, in accordance with articles

872(b) and 883(A) of the Internal Revenue Code, agrees to exempt from tax gross

income derived from the international operation of ships or aircraft by individuals

who are residents of Malta (other than United States citizens) and corporations

which are incorporated in Malta.

In case of a Maltese corporation, the exemption shall apply only if the corporation

meets one of the following conditions

(1) the corporation’s stock is primarily and regularly traded on an

established securities market in Malta. another country which grants a

reciprocal exemption to U.S. corporations or the United States, or

(2) more than fifty (50) percent of the value of the corporation’s stock is

owned directly or indirectly by individuals who are residents of Malta

or of another foreign country which grants an equivalent exemption to

U.S. corporations or by a corporations organized in a country which

grants an equivalent exempion to U.S. corporations and whose stock is

primarily and regularly traded on an established securities market in

that country, another country which grants an equivalent exemption to

U.S. corporations, or the United States.

For the purposes of exemption from the U.S. tax, the Government of Malta will be

treated as an individual resident of Malta, and sub-paragraph (2) shall be considered

to be satisfied if the corporation is a "controlled foreign corporation" under the

Internal Revenue Code, so however, that U.S. shareholders of such corporations

shall be treated as residents of Malta.

DOUBLE TAXATION RELIEF ON SHIPS AND AIRCRAFT

WITH THE UNITED STATES OF AMERICA

In this agreement -

(a) the terms "contracting state" and "other contracting state" mean Malta or the

United States of America, the governments of which have concluded this agreement.

(b) gross income includes all income derived from the international operation of

ships or aircraft, including

(1) income from the rental on full (time or voyage) basis of ships or aircraft

used in international transport;

(2) income from the rental on a bareboat basis of ships or aircraft used in

international transport;

(3) income from the rental of containers and related equipment used in

international transport that is incidental to income from the

international operation of ships and aircraft; and

(4) gains from the sale or other alienation of ships or aircraft used in

international transport derived by a person primarily engaged in the

international operation of ships or aircraft.

In the application of this agreement by a contracting state, any term not defined in

this agreement shall, unless the context otherwise requires, have the meaning which

it has under the laws of that state relating to the taxes to which the agreement

applies.

The Government of Malta proposes that, if the foregoing is acceptable to the

Government of the United States, this note and the Department’s note in reply shall

constitute an agreement. The agreement shall enter into force on the date of the

Department’s note in reply and shall have effect in respect of income derived on or

after 1 January, 1997.

This agreement shall continue in force until the Government of either contracting

state gives written notice of termination of the agreement to the other Contracting

State through the diplomatic channel.

The Embassy of Malta takes this opportunity to renew to the Department of State

of the United States of America the assurance of its highest consideration.

26 December, 1996

Embassy of Malta

Washington. D.C.

DOUBLE TAXATION RELIEF ON SHIPS AND AIRCRAFT

WITH THE UNITED STATES OF AMERICA

The Department of State refers the Embassy of Malta to the Embassy’s note 1065

of December 26, 1996, regarding the reciprocal exemption from income tax of

income derived from the international operation of ships and aircraft.

The Department of State confirms that the proposals contained in the Embassy’s

note are acceptable to the Government of the United States of America. Therefore,

this note and the Embassy’s note of December 26, 1996, constitute an agreement

which shall enter into force on the date of this note in reply and shall be effective in

respect of income derived on or after January 1, 1997. This agreement shall continue

in force until the Government of either contracting state gives written notice of

termination of the agreement to the other contracting state through the diplomatic

channel.

Department of State,

Washington,

March 11, 1997.

It is hereby declared that -

(a) the Agreement specified in the Exchange of Notes

Verbales reproduced in the Schedule to this Order has

been made with the United States of America with a

view to affording relief from double taxation in

relation to the taxation of income derived from the

international operation of ships and aircraft; and

(b) the Agreement has entered into force on the 11th

March, 1997 and is effective in respect of income

derived on or after the 1st January, 1997.

DOUBLE TAXATION RELIEF ON SHIPS AND AIRCRAFT

WITH THE UNITED STATES OF AMERICA