Guernsey-Malta Double Tax Treaty

Justine Bielik | 12 Jun 2013

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On 12th March 2012 Malta and Guernsey signed the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. The treaty is in force as of march 2013 by L.N. 117 of 2013. This treaty is another step in structuring our co-operation, since on 17th January 2004 the Malta Financial Services Authority and the Guernsey Financial Services Commission have signed a Memorandum of Understanding on Exchange of Information between the two organisations.

Scope of the Malta-Guernsey Double Tax Agreement

The objective of double tax agreements is to structure the relation between two countries regarding taxation, and, in consequence, to facilitate economic co-operation and exchange. The Agreement defines a resident, a permanent establishment and allocates taxing rights for, i.a. business profits, dividends, interest, royalties and employment income. In general, provisions follow the OECD’s Model with very few alterations. Among others, taxing rights in case of dividends, interests and royalties are granted exclusively to the state of residency of a recipient, what minimizes a risk of double taxation.  Should any double taxation occur, it will be avoided by the credit method. Moreover, the Agreement explicitly clarifies the position of collective investment schemes and qualifies them as “persons” and does not contain a limitation of benefits clause.

An interesting solution is provided for taxation of pensions, since they could be taxed exclusively in the state where they are arising. The OECD Model, on the contrary, allocates taxing rights to the state of residency of a recipient.

Moreover, the Agreement regulates an exchange of information, which importance is strengthen by the fact that Guernsey has not concluded with Malta any bilateral Agreement on Tax Information Exchange, based on the OECD model (TIEA). On the other hand, Guernsey gave many proofs for its commitment to combating tax evasion, international co-operation and transparency in tax matters, what positions it as a reliable partner.

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