INDIA- MALTA DOUBLE TAXATION AVOIDANCE AGREEMENT

The government of India and the government of Malta had signed a Double Taxation Avoidance Agreement (“DTAA”) for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income, which came into force along with its protocol from 7 February, 2014. The two contracting states have had a DTAA in place since 1995, however, the current DTAA, replaces the older one.

Applicability

The treaty covers the following types of taxes-

a. In India:

• income tax including any tax surcharges.

b. In Malta:

• the income tax.

Key takeaways

1. Under alienation of property clause, the other contracting state may be taxed in that other state.
2. Director’s fees shall be subject to the state in which the company is operating and the person is working is as a director.
3. The entertainers shall be taxed in the same state in which they are operating.
4. Remuneration related to government services, shall be taxable only in the other contracting state if the services are rendered in that other state and the recipient is a resident of the other state.
5. Items of income of a resident of one of the contracting states which are not expressly mentioned in the DTAA, shall be taxable only in that state.
6. The clause related to mutual agreement procedure mentions that the national laws of the contracting state shall govern this clause. Mutual agreement procedure comes into action in case a dispute arises with respect to the interpretation of any of the provisions of this DTAA.
7. The DTAA signed between the contracting states has various beneficial provisions like a withholding tax rate of 10% for interest, dividend, royalty and fees for technical services. An exemption has been granted for interest earned by government institutions.
8. The DTAA facilitates the sharing of foreseeably relevant information related to taxation between the contracting states.

Inferences

The India-Malta DTAA is a treaty signed between the governments of India and Malta to avoid double taxation of income earned by residents of both countries. Under the treaty, residents of India and Malta are entitled to certain tax benefits, including reduced rates of tax on income earned from sources in the other country. The treaty also provides for the exchange of information between the tax authorities of the two countries to prevent tax evasion and avoidance. The India-Malta DTAA is aimed at promoting trade and investment between the two countries by providing a stable and predictable tax regime for businesses and investors. It is also intended to prevent double taxation and reduce the tax burden on taxpayers in both countries.