On 11th March 2011 Malta (represented by Walter Balzan) and Uruguay (represented by Gustavo Alvarez) entered their first double tax treaty (now in force by L.N. 119 of 2013), which is also the first Maltese treaty with Latin American country in force. Both Ambassadors expressed the view that the agreement should serve to stimulate further economic growth between the two countries. Minister of Finance, the Economy and Investment Tonio Fenech pointed out that despite challenges created by the international crisis, South America is a region which has performed relatively well and continued to grow over the past years, and these agreements will therefore support Malta’s efforts at attracting trade and investments, not only through these two countries, but also as businesses from other parts of the world would be able to benefit from the agreements reached by our country.
The treaty is mostly in line with the wording of the OECD Model. It extends the definition of a permanent establishment, which now includes 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. In case of dividends, interests and royalties shared taxing rights were adopted, what gives rise to withholding taxes and potential double taxation – now eliminated by the credit method. Dividends received from Uruguay may suffer, alternatively, 5% of withholding tax in case collective investment vehicles or companies meeting 25% shareholding threshold, or 15% in remaining cases. On the other hand, withholding tax on dividends sourced in Malta is limited to tax chargeable on the profits out of which the dividends are paid. Interest payments may bear 10%, while royalty payments 5% or 10%, depending on the type. The treaty adopts abandoned by the OECD qualification as royalties fees received for the use of, or the right to use, any industrial, commercial or scientific equipment.
This treaty contains very rare provision on taxation of capital, which, generally speaking, constitutes complementary taxation of income from capital. The provision covers capital represented by immovables and movable property forming part of a business with shared taxing rights, and ships, aircrafts and other types of capital with exclusive taxing rights.
Moreover, the treaty regulates an exchange of information, which importance is strengthen by the fact that Uruguay neither concluded with Malta any bilateral Agreement on Tax Information Exchange, based on the OECD model (TIEA), nor joined OECD’s Convention on Mutual Assistance in Tax Matters.
On 11th March 2011 Malta (represented by Walter Balzan) and Uruguay (represented by Gustavo Alvarez) entered their first double tax treaty (now in force by L.N. 119 of 2013), which is also the first Maltese treaty with Latin American country in force. Both Ambassadors expressed the view that the agreement should serve to stimulate further economic growth between the two countries. Minister of Finance, the Economy and Investment Tonio Fenech pointed out that despite challenges created by the international crisis, South America is a region which has performed relatively well and continued to grow over the past years, and these agreements will therefore support Malta’s efforts at attracting trade and investments, not only through these two countries, but also as businesses from other parts of the world would be able to benefit from the agreements reached by our country.
The treaty is mostly in line with the wording of the OECD Model. It extends the definition of a permanent establishment, which now includes 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. In case of dividends, interests and royalties shared taxing rights were adopted, what gives rise to withholding taxes and potential double taxation – now eliminated by the credit method. Dividends received from Uruguay may suffer, alternatively, 5% of withholding tax in case collective investment vehicles or companies meeting 25% shareholding threshold, or 15% in remaining cases. On the other hand, withholding tax on dividends sourced in Malta is limited to tax chargeable on the profits out of which the dividends are paid. Interest payments may bear 10%, while royalty payments 5% or 10%, depending on the type. The treaty adopts abandoned by the OECD qualification as royalties fees received for the use of, or the right to use, any industrial, commercial or scientific equipment.
This treaty contains very rare provision on taxation of capital, which, generally speaking, constitutes complementary taxation of income from capital. The provision covers capital represented by immovables and movable property forming part of a business with shared taxing rights, and ships, aircrafts and other types of capital with exclusive taxing rights.
Moreover, the treaty regulates an exchange of information, which importance is strengthen by the fact that Uruguay neither concluded with Malta any bilateral Agreement on Tax Information Exchange, based on the OECD model (TIEA), nor joined OECD’s Convention on Mutual Assistance in Tax Matters.