Double Taxation Relief

double taxation relief

Maltese legislation provides for four types of relief from double taxation of foreign source income.

  • Treaty Relief: Malta has concluded over 60 double taxation agreements which are mostly based on the OECD Model Convention. Such treaties ensure that the same income is never taxed twice in different countries. In order to claim double tax relief in Malta, evidence of tax paid in a foreign country is required and it is also necessary that the person claiming such relief be resident in Malta
  • Commonwealth Relief: This limited type of relief is granted for taxes paid to British Commonwealth countries in respect of income received from such countries that provide a similar relief to Maltese-source income.
  • Unilateral Relief: This relief operates in the same way as treaty relief but it only applies where the treaty relief is not available. The unilateral relief also extends to the foreign underlying taxes, i.e. the taxes suffered by foreign companies on the profits out of which the dividends have been distributed to resident companies. The resulting effect of the treaty relief and the unilateral relief is that in the cases where foreign taxes are equal to or exceed the 35% Malta tax, no tax is payable in Malta on the foreign income.
  • Flat Rate Foreign Tax Credit (FRFTC): The FRFTC is equal to 25% of the net foreign income received and is added to such amount. Attributable expenses are deducted from this aggregate amount to arrive at the taxable income. Taxable income is taxable at 35% and the amount of FRFTC is deducted from the tax charge. In the year preceding the year of assessment.

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