On 26th August 2009 Malta and Qatar signed the Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to Taxes on Income (L.N. 69 of 2010). This is the first double tax treaty between the two countries, which furnish co-operation in political, economic, and cultural relations. Very good Maltese relations with Qatar are supported by many bilateral agreements, including the Agreement on Economic and Technical Cooperation and the Agreement on Bilateral Cooperation, both signed on 17th April 2012. The double tax treaty however is one of the most effective tools.
1. Qatar-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, special attention should be paid to the definition of a resident of Qatar. The Convention differs here from the Model and links the residency status of Qatar with “permanent home, centre of vital interest, or habitual abode in Qatar” and in case of a company – a place of incorporation or a place of effective management. Moreover, it extends the definition of a permanent establishment for premises used as sales outlet and so-called “service PE”, which arises when furnishing of services in the other state continues for a period or periods aggregating more than 6 months 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.
2. Taxation of particular types of income
In case of dividends and interest the Convention grants taxing rights solely to the state of residency of a recipient. Therefore no withholding tax arise what decrease the risk of double taxation. Royalty payments, on the other hand, carry 5% withholding tax. 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.
To enhance and facilitate scientific co-operation, now supported also by the Agreement on Cultural Cooperation signed on 14th April 2010, the treaty provides for a tax exemption of income derived by teachers and researchers working in the other state for a period not exceeding three consecutive years. Special attention was also paid to students and trainees.
3. Exchange of information and 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 Qatar has not concluded with Malta any bilateral Agreement on Tax Information Exchange, based on the OECD model (TIEA); moreover, Qatar 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.
On 26th August 2009 Malta and Qatar signed the Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to Taxes on Income (L.N. 69 of 2010). This is the first double tax treaty between the two countries, which furnish co-operation in political, economic, and cultural relations. Very good Maltese relations with Qatar are supported by many bilateral agreements, including the Agreement on Economic and Technical Cooperation and the Agreement on Bilateral Cooperation, both signed on 17th April 2012. The double tax treaty however is one of the most effective tools.
1. Qatar-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, special attention should be paid to the definition of a resident of Qatar. The Convention differs here from the Model and links the residency status of Qatar with “permanent home, centre of vital interest, or habitual abode in Qatar” and in case of a company – a place of incorporation or a place of effective management. Moreover, it extends the definition of a permanent establishment for premises used as sales outlet and so-called “service PE”, which arises when furnishing of services in the other state continues for a period or periods aggregating more than 6 months 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.
2. Taxation of particular types of income
In case of dividends and interest the Convention grants taxing rights solely to the state of residency of a recipient. Therefore no withholding tax arise what decrease the risk of double taxation. Royalty payments, on the other hand, carry 5% withholding tax. 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.
To enhance and facilitate scientific co-operation, now supported also by the Agreement on Cultural Cooperation signed on 14th April 2010, the treaty provides for a tax exemption of income derived by teachers and researchers working in the other state for a period not exceeding three consecutive years. Special attention was also paid to students and trainees.
3. Exchange of information and 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 Qatar has not concluded with Malta any bilateral Agreement on Tax Information Exchange, based on the OECD model (TIEA); moreover, Qatar 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.