Malta and Vietnam - Double Taxation Relief Treaty

November 29, 2016 | 2 minute read

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In July 2016, Maltese Foreign Affairs Minister George Vella and Vietnamese Foreign Affairs Minister Pham Binh Minh signed a double taxation agreement between the two states. The agreement will come into force in January 2017.

The agreement between the Republic of Malta and Socialist Republic of Vietnam is applicable to persons who are resident in one of the Contracting States countries and covers taxes on income imposed by Malta or Vietnam. It encourages growth of intercountry trade and helps to resolve any issues that may have existed in relation to taxation of passive and active income.

Important aspects of the treaty

The treaty provides for reduced rates of withholding tax when dividend income is paid by a Vietnamese entity to a Maltese recipient and when interest income or royalties are paid from, or arise in, one of the states and paid to residents of the other state.

The treaty also contains a wide exchange of information Article, providing for the exchange of information between the Maltese and the Vietnamese tax authorities as well as a limitation of benefits article providing that the treaty shall not be applied whereby residence or certain transactions are created for the main purpose of obtaining benefits under the treaty.

Treaty withholding tax rates

Provided certain conditions are met, the treaty reduces Vietnamese withholding tax rates upon the payment of a dividend from a Vietnamese entity to a Maltese recipient, as below:

  • 5% of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 50% of the voting power in the company paying the dividends; and
  • 15% of the gross amount of the dividends in all other cases.

In the case of interest income, provided the recipient is the beneficial owner of such interest, the maximum withholding tax rate that can be imposed is of 10%.

With respect to royalties, secondary jurisdiction to tax is allocated to the source state i.e. the state in which the royalties arise, with the residence state allocated primary jurisdiction to tax limited to:

  1. 5% of the gross amount of the royalties if they are paid as consideration for the use of, or the right to use, any patent, design or model, plan, secret formula or process, or for information concerning industrial or scientific experience;
  2. 10% of the gross amount of the royalties if they are paid as consideration for the use of, or the right to use, a trade mark or for information concerning commercial experience; and
  3. 15% of the gross amount of the royalties in all other cases.

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