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India-Malta Double Taxation Avoidance Agreement

The Double Taxation Avoidance Agreement (DTAA) between the government of India and the government of Malta is a pivotal agreement aimed at the avoidance of double taxation and the prevention of fiscal evasion concerning taxes on income. It officially came into force, along with its protocol, on February 7, 2014, effectively replacing the previous DTAA that had been in place since 1995.

Applicability

The India-Malta DTAA primarily applies to the following types of taxes:

  1. In India: This DTAA covers income tax, including any tax surcharges imposed by the Indian government.
  2. In Malta: The DTAA applies to the income tax levied in Malta.

Key Takeaways

Here are the key highlights and provisions of the India-Malta DTAA:

  1. Alienation of Property: Under this clause, property alienation in one of the contracting states may be subject to taxation in the other contracting state.
  2. Director’s Fees: Director’s fees are subject to taxation in the state where the company operates, and where the individual serves as a director.
  3. Taxation of Entertainers: Entertainers are liable to be taxed in the state where they are performing their services.
  4. Remuneration Related to Government Services: Remuneration associated with government services is taxable exclusively in the contracting state where the services are rendered, provided the recipient is a resident of that state.
  5. Unmentioned Income: In cases where items of income of a resident of one of the contracting states are not expressly mentioned in the DTAA, they are taxable solely in that resident’s state.
  6. Mutual Agreement Procedure: The mutual agreement procedure is governed by the national laws of the contracting states. It comes into effect when a dispute arises concerning the interpretation of any of the provisions of the DTAA.
  7. Withholding Tax Rates: The DTAA outlines a withholding tax rate of 10% for interest, dividends, royalties, and fees for technical services. Notably, an exemption has been granted for interest earned by government institutions.
  8. Exchange of Information: The India-Malta DTAA promotes the sharing of foreseeably relevant information related to taxation between the two contracting states. This sharing of information is crucial in the fight against tax evasion and avoidance.

Inferences

The India-Malta DTAA is a critical treaty designed to prevent double taxation of income earned by residents of both countries. It grants several tax benefits to residents of India and Malta, including reduced tax rates on income earned from sources in the other country. This agreement also facilitates the exchange of information between the tax authorities of both nations, which is essential for preventing tax evasion and avoidance.

The primary objectives of the India-Malta DTAA include promoting trade and investment between the two countries by providing a stable and predictable tax regime, eliminating double taxation, and reducing the tax burden on taxpayers in both countries.

If you need further information, legal advice, or assistance related to the India-Malta Double Taxation Avoidance Agreement or any other legal matters, please don’t hesitate to contact our firm. Our team of legal experts specializes in international tax agreements and is committed to providing personalized legal support tailored to your specific requirements.

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To know more about DTAA relations between India and Malta, please download our Guide.

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