Malta’s double taxation treaties: benefits for international business

October 22, 2024

Malta is renowned for its excellent business environment, consistently rated among the best in Europe. The country has received high scores from the World Bank and Transparency International. When considering where to establish a new venture, tax efficiency is one of the main factors. Malta stands out as an attractive destination due to its location, legal framework, and advantageous tax treaties. 

In this interview with Julia Loko, Investment Programs Expert at Immigrant Invest, we explore the benefits of Malta tax treaties and how foreigners can benefit international businesses with Maltese citizenship.

Why Malta is a popular business destination
Opportunity for businesspeople obtain citizenship by investment make it possible for foreigners to reside in the country and lunch the company. Malta citizenship for exceptional services by direct investment can be obtained if an applicant invests €690,000 or more in the local economy.

Passport ranking set Malta 23rd in the world due to the number of visa-free destinations. Maltese citizens travel freely to 169 countries.

Favourable location and EU membership. Malta is situated in the Mediterranean, offering access to European and North African markets. As an EU member, it provides businesses with the benefits of the single market, enhancing trade and investment opportunities.

Favourable business environment. Malta has a stable political climate, a strong legal system, and a pro-business regulatory environment. The country offers various incentives to attract foreign investment, including tax credits and grants for research and development.

High quality of life. Malta’s healthcare, education systems, and lifestyle make it an appealing location for expatriates and their families. The country’s multicultural society and English as an official language further ease the transition for international businesses.

3 Key features of Maltese double taxation agreements
 
1. Double taxation treaties are signed to prevent the income from being taxed twice in different jurisdictions. These agreements provide rules on which country has the right to tax specific types of income, reducing the risk of double taxation.

2. Malta’s double taxation treaties follow the OECD model, which provides a standardised framework for treaty negotiations. These treaties cover business profits, dividends, interest, royalties, and capital gains.

3. By clarifying tax obligations, these treaties help businesses manage their tax liabilities more effectively. They also provide mechanisms for resolving tax disputes and ensure transparency, which can enhance investor confidence.

Countries Malta has signed double tax treaties with
Malta has signed double taxation treaties with 70 countries, including major economies such as: 
the United States, 
the United Kingdom, 
Germany, 
China.

Within the EU, Malta has treaties with all member states, facilitating seamless business operations across the continent. These treaties align with EU directives, ensuring compatibility with broader European tax regulations.

Malta’s treaties with key trading partners, including Australia, Canada, and India, highlight its role as a hub for international business. These agreements enhance Malta’s attractiveness as a base for operations targeting these significant markets.

Tax Rates under Maltese double taxation treaties
One significant benefit of Malta’s treaties is the reduction of withholding tax rates on cross-border payments, leading to substantial savings for businesses. For example, withholding taxes on dividends, interest, and royalties are often reduced or eliminated under these agreements.

According to the treaties, business profits are generally taxed only in the country where the business is resident, unless the business has a permanent establishment in the other country. This principle helps avoid double taxation of business income.

The treaties also provide preferential tax rates for personal income and capital gains, benefiting individuals who have financial interests in multiple countries.

How to obtain Maltese passport
Wealthy foreigners who invest in Malta’s economy can apply for citizenship after one or three years of residency. The exact period depends on their contribution amount. Upon applying, they receive temporary residence permits, allowing them and their families to relocate to Malta and travel visa-free across Europe.

Investment requirements for Malta citizenship:
a contribution of €600,000 to the state fund if applying after three years of residency or €750,000 if applying after one year;
a contribution of €50,000 to the state fund for each family member;
a charitable donation of €10,000 to a non-governmental organisation in Malta;
purchase property worth €700,000 or rent property for at least €16,000 annually.

Citizenship is granted to the entire family, including a spouse, dependent children up to 29 years old, and dependent parents over 55.

Conclusion
Malta’s double taxation treaties offer substantial benefits for international businesses, including reduced tax liabilities, clear tax obligations, and mechanisms for resolving disputes. These advantages, mixed with Malta’s location and business environment, make it an ideal destination for investors and entrepreneurs.

If you are looking to expand your business internationally, consider the benefits of establishing operations in Malta. With its network of double taxation treaties, Malta provides a tax-efficient environment that supports international business activities.