The Agreements for the Avoidance of Double Taxation (with 67 countries)
Elimination of double taxation in the area of personal income tax in the light of the OECD model will divide the country’s sovereign right of taxation.
If they do not, there is a risk of double taxation. Behind conventions drawn up by the Organisation for Economic Cooperation and Development Model Tax Convention (Model Tax Convention of Income and Capital) – OECD stands. Model Convention corresponds to one of the details of any existing agreements, so it is always necessary to start a specific application of the Convention.
Malta has signed double tax treaties with 67 countries and jurisdictions, in order to avoid the double taxation of income and provide low withholding taxes on dividends, incomes and royalties for the companies where the foreign investors doesn’t have a residency in Malta, but their business is located here and it’s producing profits.
The incomes can be exempt from Maltese taxation or can be taxed here and receive a refund in the country of residence (only in the limit of the sum that would have been taxed locally), according to the signed tax treaty.
The withholding tax on dividends, interests and royalties depends on many factors, but one thing is certain, there are lower taxes for a treaty country than for a non treaty one.
Some examples regarding the modality of application of the regulations of the double tax treaties.
If a non resident entity has at least 25% of a Maltese company’s capital and it has as residency country Albania, China, Finland, Germany, Hungary, Korea, Kuwait, Latvia, Luxembourg or the Netherlands, than the withholding tax on dividends is 5%, while in the rest of cases is 15%. A company which has at least 25% of the capital held by a Denmark resident won’t pay any withholding tax on dividends and 15% in the rest of the cases.
A Maltese company with at least 10% of the capital held by a resident of France, Poland, Sweden or Switzerland will have an exemption on the dividends’ tax.
The withholding taxes on interests and royalties don’t exceed 15% and in many cases are not charged at all.
Agreement Between Malta and The Republic of Hungary for the avoidance of double taxation
The Government of Malta and the Government of the Republic of Hungary desiring to conclude an Agreement for the Avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on income.
This Agreement shall apply to persons who are residents of one or both of the Contracting States.
The existing taxes to which this Agreement shall apply are:
• in Hungary:
the income tax on individuals; and
the profit taxes (hereinafter referred to as “Hungarian tax”)
• in Malta:
the income tax (hereinafter referred to as “Malta tax”).
This Agreement shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify to each other any significant changes, which have been made in their taxation laws.
Notwithstanding the other provisions of this Article this Agreement shall not apply to tax paid or payable in Malta at the rate provided for in subsection (11) of section 31 of the Income Tax Act (Cap. 123).
This agreement can be changed only with the congruent, mutual ordinance of the two parties.
• Malta (member of EU, OECD, EES.)
• Malta is not an offshore area.
• In Malta the corporate tax is 35%.
• Malta has concluded many tax conventions worldwide. The result is that many incomes can be tax-free.
A corporate registered in Malta allocates income to a Hungarian person according to a softver/licence contract.
The personal income tax is 0%, according to the agreement for the avoidance of double taxation.
The product could be: immaterial goods, softver, know-how, intellectual products, rules of procedure etc.
Taxation Treaties In Force:
Treaties Signed But Not In Force :
Tax Information Exchange Agreements – In Force:
Tax Information Exchange Agreements – Signed But Not In Force