Tunisia-Malta Double Tax Convention

Justine Bielik | 31 Jul 2013

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On 31th May 2000 Malta and Tunisia concluded the Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to Taxes on Income. This treaty forms a part of long-lasting relations based on numerous agreements which enhance economic, political and social co-operation. The Tunisia-Malta double tax convention is in force by L.N. 225 of 2002.

Tunisia-Malta Double Tax Convention 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, like a “resident”, a “permanent establishment” or definitions of certain income for treaty purposes. In general, they follow the OECD’s Model.  However, in case of a permanent establishment the Tunisia-Malta treaty does not recognize so-called “service PE”; on the other hand, a permanent establishment can be constituted if an enterprise uses in the course of its activity in the other contracting state an equipment or carries related supervisory activities. It is also worth noticing that the construction permanent establishment (a building site or an installation) is created in a shorter, 6-month time than the general OECD’s rule of 12 months. The Convention keeps, abandoned by the OECD Model, provision on independent personal services, which completes the system of taxation of individuals.

Taxation of Particular Types of Income

Majority of provisions of the Tunisia-Malta double tax treaty allocate taxing rights to both countries. Dividends in all cases carry 10% withholding tax, interest and royalties – 12%. The Convention includes the leasing of industrial, commercial, or scientific equipment into the term “royalties”, although the OECD suggested that income generated on such transactions is not of a “royalty” nature and therefore should fall under business income. Nevertheless, many Maltese double tax treaties still apply the old approach (e.g. with Syria, Poland and Belgium).  Any ppotential double taxation will be avoided by the credit method.

It is worth to mention that the Capital Gains provision differentiates the alienation of shares of the company in which assets consist principally of immovable property located in the other state (a property company); sale of such shares may be taxed in both in Malta and in Tunisia, while in other cases taxing rights are granted to the state of residency of the alienator.

Exchange of Information and Anti-avoidance Measures

The exchange of information in tax matters is dealt with by the Convention and, moreover, enhanced by the fact that in July 2012 Tunisia signed the OECD’s amended 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 Tunisia-Malta convention does not contain limitation of benefits clause, even of a general character. However, it limits its benefits in case of non-remitted income – namely, any relief granted by the treaty provisions applies to the amount remitted or received in the other state. 

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