On the 29th April 2016, the Government of Malta and the Republic of Azerbaijan signed a double taxation treaty (the Treaty). This was later ratified by the Maltese Authorities by virtue of Legal Notice 214 of 2016. This Factsheet sets out brief information on some of the salient provisions set out in the Treaty which are largely based on the OECD Model Tax Convention (OECD Model).
REDUCED WITHHOLDING TAX RATES
The treaty provides for a maximum withholding tax of 8% on dividends distributed by a company resident in Azerbaijan to a Maltese recipient who is the beneficial owner thereof. From a Maltese perspective, by virtue of Maltese domestic legislation, no tax is imposed on dividends distributed by Maltese resident companies to non-residents, provided certain basic conditions are satisfied.
Interests and royalties
In the case of interest and royalty payments, provided the recipient is the beneficial owner of such interest or royalty, the maximum withholding tax rate that can be imposed by the Source State is reduced to 8%.
In addition, no Maltese tax is imposed on interest and royalties derived by non-residents as long as the statutory conditions are complied with, particularly that the relevant income is not effectively connected with a permanent establishment through which the non-resident carries on business in Malta.
Other income derived by a resident of a Contracting State, arising in the other Contracting State and that is not dealt with in any of the other Articles of the Treaty may be taxed in that other Contracting State.
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