Malta-Moldova sign new Convention for the Avoidance of Double Taxation

Chetcuti Cauchi | Published on 08 May 2014

Chetcuti Cauchi

Malta and Moldova signed a new tax treaty on 10th April 2014.  This is the first of its kind which provides the foundation for bilateral trade and investment and which is being viewed as an indication of Malta's support for Moldova's bid for greater integration in the EU. It falls in line with the EU's encouragement of the further European integration of Moldova and Georgia, and comes ahead of the conclusion by Moldova of a Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union, which is due to be signed in June this year.

Highlights of the main features of the treaty can be found below:

·        Dividends: withholding tax rate with respect to dividends distributed by a company resident in Moldova to a company resident in Malta who is the beneficial owner thereof is restricted to a maximum of 5% on the gross amount of dividend. No withholding tax will be effectively levied in Malta.

·        Interest and royalties: withholding tax shall not exceed 5% on the gross amounts.

·        Capital Gains:  Source state  may tax gains derived by residents of the other Contracting State from the transfer of shares whose value derives as to more than 50% whether directly or indirectly from immovable property located in the source state.

·        Elimination of double taxation:  Credit method.

·        The treaty does not contain a limitation of benefits provision.

·        The term “person” is deemed to include an investment fund

The Convention shall enter into force on the date when both countries have confirmed completion of the internal procedures necessary for its entry into force and its provisions shall have effect:

(a) in respect of taxes withheld at source, on income derived on or after 1st January of the calendar year next following the year in which the Convention enters into force;

(b) in respect of other taxes on income, to taxes chargeable for any tax year beginning on or after 1st January of the calendar year next following the year in which the Convention enters into force.



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