Malta – Switzerland Double Taxation treaty
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The double taxation agreement between Malta and the Swiss Federal Council which was originally signed in August 2011 will become effective with effect from 1 January 2013. This treaty is of particular relevance to Maltese established companies and individuals who are in receipt of income covered by the treaty from Switzerland, as they may now start to benefit from the reduced tax rates as provided in the treaty.
Important aspects of the Treaty
The treaty provides for reduced rates of withholding tax when dividend income, interest income or royalties are paid by Swiss companies, subject to certain conditions being satisfied. The treaty also contains a wide exchange of information Article, providing for the exchange of information between the Maltese and the Swiss tax authorities.
Treaty Withholding Tax Rates
Provided certain conditions are met, the treaty reduces Swiss withholding tax rates upon the payment of a dividend from a Swiss entity to a Maltese recipient to 0% where the recipient has held 10% or more of the share capital in the Swiss entity for at least one year, and a maximum tax rate of 15% will apply in all other cases.
In the case of interest income, provided the recipient is the beneficial owner of such interest, the maximum withholding tax rate that can be imposed by the resident state of the payor is of 10%. However this can be reduced to 0%, provided certain additional conditions are met.
Exclusive jurisdiction to tax is also allocated to the residence State of the recipient of the interest where the interest payment is made between companies which are subject to tax (and not exempt) in a Contracting State, where one has a direct holding of at least 10% in the other for at least 1 year, or where both have a common direct parent with a minimum 10% participation in each company for at least 1 year. This also means a 0% rate when paid by a Swiss resident entity.
With respect to royalties, these may only be taxed in the residence State of the beneficial owner of the royalty.
Maltese Domestic Law Provisions
Irrespective of the existence or otherwise of a double taxation treaty, Malta does not levy any withholding taxes on the payment of dividends, interest or royalties when made to non-Maltese residents, provided certain conditions are satisfied.
For further information please contact:
Karl Cini - Tax and International Client Services Partner
Nexia BT, Suite 2, Tower Business Centre, Tower Street, Swatar BKR4013, Malta
Tel: +356 21637778