China, Malta Sign Tax Agreement

by Mary Swire, Tax-News.com, Hong Kong

27 October 2010

The Maltese Minister of Finance, the Economy and Investment Tonio Fenech and Minister for Taxation of the People’s Republic of China Xiao Jie have signed a new Agreement for the Avoidance of Double Taxation (DTA).

This Agreement, which will replace the existing DTA between Malta and China signed on February 2, 1993, will provide investors from both countries with more attractive conditions for investment in Malta or China.

The provisions of this DTA are in line with the Organization for Economic Cooperation and Development Model Tax Convention on Income and Capital and recent tax treaties concluded by both countries. The withholding tax rate for dividends for a holding of at least 25% of the company paying the dividends has been established at 5% as opposed to 10% under the existing treaty and the withholding tax rate for certain royalties has been reduced effectively from 10% to 7%.

The DTA introduces certain provisions to prevent tax avoidance through treaty abuse and updates the exchange of information article in accordance with current internationally agreed standards.

The Maltese government describes its relationship with China as dynamic, which is manifested in the fact that Malta and China signed almost one agreement per year since the establishment of diplomatic relations. An Agreement for the Reciprocal Promotion and Protection of Investments was signed in 2009.

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