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Malta-UK Double Taxation Avoidance

Updated on Monday 26th October 2020

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Malta-UK-Double-Taxation-AvoidanceMalta has signed until now about 70 double taxation treaties and is still under negotiations with other countries. All types of Maltese companies benefit from the country’s double taxation agreements (DTAs), which were drafted according to the Organization for Economic Co-operation and Development Model Convention. One of our company formation agents in Malta can offer assistance for company incorporation in this coutry and for tax registration.
 

What does the Malta-UK double tax treaty cover?

 

The double tax avoidance treaty Malta signed with the United Kingdom covers several taxes. In the case of the United Kingdom, the double tax treaty covers the following taxes:
  • - the income tax,
  • - the corporate tax,
  • - the capital gains tax.
In the case of Malta, the tax treaty covers the income tax. The double tax treaty also applies to all similar withholding taxes in Malta and in the UK. Among these, there are the dividend tax and taxes applied to earnings from interests and royalties. Special provisions exist with respect to the taxation of petroleum companies in Malta, which the double tax agreement does not cover, according to the provisions of Chapter 123 in the Income Tax Act.
 

Tax residency according to the Malta-UK DTA

Considering the double tax treaty applies to both UK and Maltese citizens and companies, the agreement also contains provisions about how tax residency applies. In the case of the United Kingdom, the term “person” means any natural person or company, but does not include partnerships, while for Malta the same term covers both companies and natural persons. With respect to companies, any type of company paying the Maltese corporate tax is subject to the agreement. Another term employed by the DTA refers to the “enterprise of a contracting state”, meaning any enterprise carrying business activities by a resident of one of the contracting states in the other state.

 

Tax rates according to the Malta-UK double tax treaty

 
The double taxation agreement between Malta and the UK covers the following income taxes:
 
  • - the immovable property tax,
  • - business profits,
  • - profits derived from shipping and air transport,
  • - incomes from independent and dependent personal services,
  • - director’s fees,
  • - pensions.
 
The tax rates for the withholding taxes applied according to the Maltese legislation are:
 
  • - 0% for dividends,
  • - 10% for interests,
  • - 10% for royalties.

 

Social Security Reciprocal Agreement

 
The Social Security Reciprocal Agreement has been signed by Malta and UK, at the time the double tax treaty was agreed. This kind of convention allows access to national public healthcare services for UK citizens who otherwise would not be permitted to such services in Malta. Moreover, owners of the RHA Entitlement Card issued under the above-mentioned agreement are eligible to free of charge healthcare services in local public healthcare institutes, including other professional services provided for a Maltese citizen. This agreement shows the good relations between the two countries who also signed the double taxation treaty.
 

The UK Malta double tax treaty respects the OECD

 
The UK Malta double tax treaty is based on the rules imposed by OECD (Organization for Economic Co-operation and Development). The convention mentions the taxes that fall under the double taxation agreement in both contracting states, the mechanism under which the avoidance of double taxation will take place (tax credits, refunds, exemptions, etc.), and how the residency of foreign citizens or companies covered by the double tax treaty is established. There are also other special provisions mentioned by the UK Malta double tax treaty, like the enforcement and termination of the contract. If you would like to know more in this direction, please feel free to discuss all the terms with one of our company formation agents in Malta.
 

FAQ about UK Malta double tax treaty

 
1. What is the withholding tax rate for dividends?
There is no withholding tax imposed on dividends, according to the UK Malta double tax treaty. You can talk to our agents for more details on this matter.
 
2. What is the withholding tax applied to interests and royalties according to the laws in Malta.
Both royalties and interests are subject to a 10% withholding tax rate according to the legislation.
 
3. What kind of income taxes are protected by the UK Malta double tax treaty?
Profits from air transport and shipping, immovable property tax, pensions, director’s fee, incomes from independent and dependent personal services, business revenues are covered by the double tax treaty signed by Malta and the UK for the avoidance of double taxation.
 
4. What is the enterprise of a contracting state?
The enterprise of a contracting state is the company that carries activities in one of the countries, Malta or UK respectively. If you need more details on this matter, please get in touch with us.
 
5. What are the taxes covered by the UK Malta double tax treaty?
The capital gains tax, the corporate tax, and the income tax are covered by the UK Malta double taxation treaty
 
6. What stands at the base of the UK Malta double tax treaty?
All treaties signed by Malta respect the OECD rules. If you need assistance and information, please talk to us.
 
7. Is my UK LLC covered against double taxation in Malta?
Yes, all business forms from the UK and established in Malta benefit from the protection of the double taxation treaty signed by both countries.
 
8. Is the Maltese corporate tax subject to the agreement?
Yes, the Maltese corporate tax is mentioned by the double tax treaty signed by Malta and UK.
 
9. Are profits derived from air transport and shipping covered?
Yes, profits derived from air transport and shipping benefit from the protection of the UK Malta double tax treaty.
 
10. Can I solicit help for tax registration in Malta if I’m an investor from the UK?
Yes, if you need support for tax registration and also information about the UK Malta double tax treaty, feel free to address your inquiries to our team of specialists. We can provide in-depth details and assistance.
 

Why invest in Malta?

 
Malta is a small insular state with great business potential. The tourism sector is quite abundant and attracts a large number of investors every year. There are many UK companies established in Malta that benefit from a great business climate and also from the protection of the double tax treaty signed by the countries. Here are some interesting facts and figures about Malta’s business and economy:
 
  • The insular state hosts around 31,000 foreign companies.
  • Around USD 206 billion was the total FDI stock registered in 2019 in Malta.
  • 97% of the investments made in the finance and insurance sectors contributed to Malta’s GDP.
  • About 1.425% was the GDP registered in Malta in 2019.
  • Communications, pharmaceuticals, and electronics are Malta’s thriving sectors where most FDI’s are directed.
 
For complete information about the taxation system, please contact our Maltese company registration agents.

 

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