Jordan-Malta Double Tax Treaty

Justine Bielik | 18 Jun 2013

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On 19th April 2009 Malta and the Kingdom of Jordan concluded the Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to Taxes on Income. This is the first double tax treaty between the two countries, which furnish co-operation in political, economic, and cultural relations. The treaty is in force by L.N. 501 of 2010.

1. Jordan-Malta Tax Treaty Definitions

Bilateral double tax treaties regulate tax matters between the parties and, as a result, furnish economic co-operation and exchange. To facilitate this objective, the Convention provides for some definitions, such as a “resident”, a “permanent establishment” or definitions of certain income for treaty purposes. In general, they follow the OECD’s Model.  However, it extends the definition of a permanent establishment for so-called “service PE”, which arises when furnishing of services in the other state continues for a period or periods aggregating more than 1 month (which is relatively short and unusual) within any 12-month period. The Convention keeps, abandoned by the OECD Model, provision on independent personal services, which completes the system of taxation of individuals. Additionally, the Convention excludes from its scope tax on chargeable income of any person engaged in the production of petroleum or gas produced in either of the two states.

2. Taxation of Particular Types of Income

Majority of provisions allocate taxing rights to both countries. In case of dividends from Jordan withholding tax rate is 10% but in case of Malta is limited by tax chargeable on underlying profits.  In case of taxation of royalties and interest withholding tax rate is also 10%. It should be noted that the Convention follows the latest OECD’s improvements and does not include the leasing of industrial, commercial, or scientific equipment into the definition of “royalties”. Nevertheless, many Maltese double tax treaties still apply the old approach (e.g. with Syria, Poland, Singapore, Belgium). Any potential double taxation will be avoided by the credit method.

It is worth to mention that the Alienation of Property provision (capital gains) does not differentiate the alienation of shares forming substantial interest in the capital of a company from any ordinary alienation of shares. As a result, in any case of such alienation of shares capital gains will be taxed solely in the state where the alienator is a resident.

3. Tax Exchange of Information & Anti-avoidance Measures

The Convention regulates exchange of information, however within a limited scope (e.g. the provision does not include the extension which excludes bank secrecy). This provision is especially important since Jordan has not concluded with Malta any bilateral Agreement on Tax Information Exchange, based on the OECD model (TIEA); moreover, Jordan has not joined the Convention on Mutual Administrative Assistance in Tax Matters.  

Despite the latest trends and developments in the field of tracking tax evasion and tax avoidance, the treaty does not contain limitation of benefits clause, even of a general character.

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