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Malta-USA Double Taxation Avoidance

Updated on Tuesday 19th April 2016

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Malta-USA-Double-Taxation-AvoidanceThe first double taxation agreement between Malta and the United States of America was first signed in 1980 and was terminated in 1997 by the United States due to certain changes in the Maltese taxation system. A new double taxation treaty was signed in 2006 and enforced in 2007. The 2006 tax treaty was drafted according to the United States’ Model Income Tax Treaty. New changes have been brought to the actual tax treaty in 2010, when a provision for the prevention of tax evasion was also incorporated in the agreement.

What is the purpose of the double tax treaty between Malta and the USA?

The main objectives of the USA-Malta double taxation agreement (DTA) are to promote investment between the two countries and also to facilitate trade between US and Maltese companies. In order to achieve these objectives, the double taxation treaty establishes the ways of preventing the double taxation of the incomes earned within one state to a resident of the other signatory state. Additionally, the double taxation avoidance agreement also contains provisions about reduced tax rates on transfers of payments of dividends, interests and royalties. The agreement also contains provisions about the elimination of taxes applied to dividend payments arising from pension funds. The last provision has turned Malta into a very attractive retirement destination.

For other information related to the double taxation agreement with the United States, you may contact our Maltese agents.

Tax rates according to the Malta-USA DTA

As mentioned above, the double tax treaty between Malta and the United States contains provisions about reduced withholding tax rates. The withholding taxes applied to dividends, interests and royalties, according to the Malta-USA double avoidance treaty, are as it follows:

  • - dividends paid by an US resident to a Maltese resident are applied a 15% tax rate,
  • - if the recipient owns at least 10% of the voting power of the payer, the tax rate is 5%,
  • - Maltese residents paying dividends to a US resident will not be taxed, if the gross amount of the dividends does not exceed the chargeable tax on the profits.

With respect to interest payments, the tax rate applied to an US or Maltese resident is 10% and the tax will be levied at source. Royalties are also applied a 10% tax rate in both contracting states.

For accounting services, you may refer to our company incorporation agents in Malta.

 

 

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