The latest Malta-China Double Tax Treaty sets the scene for a more attractive investment climate for business transactions and strongly addresses the issue concerning the prevention of tax avoidance through treaty abuse.
Furthermore, the Malta-China DTA updates the Exchange of Information provision, thereby establishing better channels for the exchange of information in a effort to fight fiscal evasion and also sets effective reductions of withholding tax rates for dividends - 5% (for a holding of at least 25% of the company paying the dividends), and 7% for royalties.
On the 23rd October 2010, Malta and China signed a new double tax agreement (DTA) for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, replacing the existing one signed on 2nd February 1993.
The new Malta-China DTA is designed to provide investors from both countries with more attractive conditions for investment; particularly in respect of Chinese investors, allowing the latter to tap into the European market more effectively and in a more efficient way than before. Not only does this DTA help to create a more attractive investment climate for genuine business transactions, but it also introduces certain provisions addressing the prevention of tax avoidance through treaty abuse. Moreover, the Malta-China DTA updates the Exchange of Information article thereby establishing better channels for the exchange of information in a mutual effort to prevent fiscal evasion.
Additional key provisions of the Malta-China DTA deal with an effective reduction of withholding tax rates for dividends from 10% to 5% (for a holding of at least 25% of the company paying the dividends), and from 10% to 7% for royalties.
The Malta-China DTA is subject to ratification by both Malta and China in order for it to enter into force.
