Relief from Double Taxation

Relief from double taxation of income and refunds available to shareholder

Various forms of relief from double taxation are available under Malta law, the most commonly being through the application of any one of:-

  1. Double taxation agreements (DTAs)
  2. Unilateral relief
  3. Flat Rate Foreign Tax Credit

Malta has signed and ratified DTAs with more than sixty countries spread over five continents and carries out continuous negotiations to conclude more. Extensive negotiations are currently in place for the arrangement of DTAs with South American countries. DTAs entered into by Malta are generally based on the OECD model and generally provide for exemptions from taxation / that tax paid outside Malta be allowed as a credit to reduce Malta tax payable, as applicable. In the case of the credit system, evidence of non-Malta tax suffered must be produced.

Where Malta does not have a DTA with a foreign country in which the income arises, unilateral relief may be applied that likewise allows foreign tax to be used as a credit to reduce Malta tax payable. Likewise, evidence of non-Malta tax suffered is required to be produced.

The Flat Rate Foreign Tax Credit (FRFTC) is a credit given by the Malta tax authorities in respect of a tax that is deemed to have been suffered with respect to foreign source income of a Malta company. The FRFTC is available notwithstanding that no evidence is available of non-Malta tax suffered on such foreign source income.

Refund available to shareholder when Malta company has claimed relief from double taxation of income

Where double taxation relief has been availed of by the Malta company, in any of the forms available, the extent of the refund that may be claimed by the shareholder is 6/7ths or 2/3rds of the tax suffered by the Malta company on such income depending on the circumstances.