Earlier we already reported that Malta and Curaçao had signed a DTA. When we wrote our earlier article we had not yet been able to locate the text of the DTA. Now however, the English version of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income as concluded on November 18, 2015 between the Republic of Malta and the Kingdom of the Netherlands in respect of Curaçao (Hereafter: the DTA) has been made available on the website of the Malta Financial Services Authority (MFSA).
Although the DTA has been signed, it has not entered into force yet. For the DTA to enter into force, the respective ratification procedures have to have been finalized in both countries.
Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.
Taxes Covered
According to Article 2, Paragraph 3 of the DTA (“Taxes covered”) the existing taxes to which the DTA shall apply are in particular:
(a) in the case of Malta:
- the income tax;
(b) in the case of Curaçao:
- the income tax (inkomstenbelasting);
- the wage tax (loonbelasting);
- the profit tax (winstbelasting);
- the dividend tax (dividendbelasting).
Paragraph 4 of Article 2 of the DTA subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes.
Permanent Establishment
Paragraph 3 of Article 5 of the DTA (“Permanent establishment”) arranges that a building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months.
Paragraph 6 of Article 5 of the DTA arranges that notwithstanding the preceding provisions of Article 5 of the DTA, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State provided that the profits related to those premiums are not liable to tax in the first-mentioned Contracting State or insures risks situated therein. If such premiums are collected or such risks are insured by an agent of an independent status, paragraph 7 of Article 5 of the DTA applies to this person.
Business Profits
Article 7 of the DTA (“Business profits”) contains an interesting Paragraph 4, which reads as follows: “Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.”.
Associated Enterprises
Paragraph 2 of Article 9 of the DTA (“Associated enterprises”) contains a so-called appropriate adjustment clause.
Dividends
With respect to dividend withholding taxes Paragraph 2 of Article 10 of the DTA (“Dividends”) states the following: “However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but
(a) where the dividends are paid by a company which is a resident of Curaçao to a resident of Malta who is the beneficial owner thereof, the tax so charged in Curaçao shall not exceed:
(i) 0 per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 10 per cent of the capital of the company paying the dividends;
(ii) 5 per cent of the gross amount of the dividends in all other cases;
(b) where the dividends are paid by a company which is a resident of Malta to a resident of Curaçao who is the beneficial owner thereof, Malta tax on the gross amount of the dividends shall not exceed that chargeable on the profits out of which the dividends are paid.
This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.
The competent authorities of the Contracting States may by mutual agreement settle the mode of application of these limitations.”
Interest
Paragraph 1 of Article 11 of the DTA (“Interest”) arranges that interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State.
Subsequently Article 11 of the DTA contains an interesting Paragraph 2 (certainly taking into account the recent developments with respect to Directive 2003/48/EC), which reads as follows: “It is understood that the provisions of this Article shall not prevent the application of any agreement between Curaçao and the European Union pursuant to the stipulations of the EU Savings Directive No. 2003/48/EC, if the interest arises in or is paid through a paying agent of Curaçao to an individual who is a resident of Malta, or any agreement between the two Contracting States made on the basis of the aforementioned Savings Directive.”
Royalties
Article 12 of the DTA (“Royalties”) arranges that the Source State is not allowed to withhold withholding tax over royalties.
Capital Gains
With respect to capital gains Paragraph 1 of Article 13 of the DTA (“Capital gains”) arranges that Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Paragraph 4 of Article 13 of the DTA subsequently arranges that Gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State.
Article 13 of the DTA furthermore contains an interesting Paragraph 6, which reads as follows: “The provisions of paragraph 4 shall not affect the right of a Contracting State to levy according to its own law a tax on gains from the alienation of shares in a company, the capital of which is wholly or partly divided into shares and which under the law of that State is a resident thereof, derived by an individual who is resident of the other Contracting State and has been a resident of the first-mentioned State in the course of the last ten years preceding the alienation of the shares or “jouissance” rights, provided that said individual was a resident of the first-mentioned State for a period of at least twelve months in the aggregate during that ten-year period.”.
Other
The DTA furthermore includes articles containing provision regarding a Mutual Agreement Procedure (Article 24 of the DTA), an article on the Exchange of Information (Article 25 of the DTA) and an article on the Assistance in the Collection of Taxes (Article 26 of the DTA).
Furthermore in the relating Protocol a.o. the following is stated:
“With reference to Article 4
It is understood that for the purposes of paragraph 3 in case of a trust, if a trustee is resident in a Contracting State and none of the trustees is resident in the other Contracting State, the trust is considered to be a resident of the first-mentioned Contracting State. If trustees are resident in both Contracting States, then the trust is considered to be a resident in the Contracting State where the decisions concerning the administration of the trust are taken. In case such decisions are taken in both or in neither of the Contracting States, then the competent authorities of the Contracting States shall settle the residence of the trust by mutual agreement.
Click here to be forwarded to the (English) text of the DTA as available on the website of the Malta Financial Services Authority (MFSA).
Are you looking for an other DTA? Then check our section DTAs & TIEAs, a very efficient way to locate the text of numerous DTAs.
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