Malta-China sign new Double Taxation Avoidance agreement

The agreement was signed in Valletta between Finance minister Tonio Fenech and Chinese minister for taxation Xiao .

This Agreement, which will replace the existing DTA between Malta and China signed on 2 February 1993, will provide investors from both countries with more attractive conditions for investment in Malta or China.

The purpose of the Agreement is the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.  The Agreement will enter into force after it is ratified by both countries.  The provisions of this DTA are in line with current internationally accepted standards and, in fact, the negotiations took into account the OECD Model Tax Convention on Income and on Capital and recent tax treaties concluded by both countries.  

This is yet another opportunity for both Maltese and Chinese investors and traders.  Such conditions may also help Chinese investors to tap in a more efficient way into the European market.  In particular: the withholding tax rate for dividends for a holding of at least 25% of the company paying the dividends has been established at 5% as opposed to 10% under the existing treaty; the withholding tax rate for certain royalties has been reduced effectively from 10% (under existing DTA) to 7%.

While this DTA helps to create a more attractive investment climate for genuine business transactions, at the same time it introduces certain provisions to prevent tax avoidance through treaty abuse.  The new DTA also updates the Exchange of Information article in accordance with current internationally agreed standards and therefore establishes better channels for exchange of information in a mutual effort to prevent fiscal evasion.