MALTA: Double Taxation Relief
Before the 1994 amendments, double tax relief was only available in Malta
under the domestic provisions of the Income Tax Act if the foreign tax had
been suffered in a country with which Malta has a double tax treaty or in
respect of British Commonwealth income tax. The present regime provides
for two further systems of double tax relief in Malta:
For a list of Malta’s
double taxation agreements, click
Malta allows relief from double taxation on a unilateral basis where
overseas tax is suffered on income received from a country with which
Malta does not have a tax treaty. The overseas tax suffered is allowed as
a credit against the tax chargeable in Malta on the gross amount. The
credit shall not exceed the total tax liability in Malta on the receipt.
Unilateral relief for underlying tax suffered is available where the
taxpayer is a Maltese company that holds more than 10% of the voting power
of the overseas company paying the dividend.
When claiming unilateral relief, the recipient of the income must prove
the following to the satisfaction of the Commissioner:
Flat Rate Foreign Tax Credit
The flat-rate foreign tax credit is available to a Maltese company which
receives income or capital gains from overseas allocated to its Foreign
Income Account. A certificate from the auditor stating that the income
to be allocated to the Foreign Income Account is sufficient for this
The flat-rate foreign tax credit is calculated at 25% of the amount of the
overseas income or gain received by the company, before deductions. The
income plus the credit (less deductible expenses) is subject to full
Maltese income tax with relief for the deemed credit.
Interaction of the Four Reliefs
The provisions regarding unilateral relief
are available where double taxation relief under a double tax treaty and
relief in respect of British Commonwealth income tax are not available to
the person making the claim.
The provisions regarding the flat-rate
foreign tax credit are applied where none of the other reliefs of double
taxation is available. The interaction of the four reliefs is illustrated
in Appendix 3 at the end of this document.
International Trading Companies
- Holding Companies
Malta Tax Resources Index