Details of the Malta – Qatar Treaty

The Malta Qatar treaty has been implemented into Maltese Legislation by way of Legal Notice 69 of 2010. The treaty has entered into force on the 9th of December 2009 which implies that residents of these two States may start applying the treaty as from 1st January 2010.

The provisions of the treaty are based on OECD Model Convention with some minor differences.

The treaty provides for a complete withholding tax exemption on dividends and interests. Withholding tax on royalties is capped to a maximum of 5%. Notwithstanding this, Malta still does not levy any withholding tax on royalties.

One major departure from the standard provisions of the OECD Model Convention is Article 13(4). In general, the treaty allows the state where the immovable property is located, to tax any gains on shares if 75% or more of the value of such shares is derived directly or indirectly from immovable property situated in that State. However, Article 13(4) precludes a State to tax a capital gain derived from alienation of shares (the value of which is derived from immovable property situated in that state to the extent of 75% or more) if such immovable property is used in a manufacturing activity which is carried for a continuous period of 5 years.

Another major departure from the standard OECD Model Convention provisions is Article 15(4) of the treaty. Notwithstanding the ‘normal’ conditions as to when the Contracting States are entitled to tax the salary employee, this sub-Article exempts such employee from tax in the country where he /she is stationed provided that such employee is a top-level manager employed by an airline company established in the Other Contracting State. Accordingly, any top-level managers stationed in Malta who are engaged by an airline company established in Qatar are exempt from paying any income tax on their employment income in Malta.

Amongst other recommendations, we specifically recommend the use of a Maltese intermediate holding company for Qatari investors who might wish to invest in the European Union. A Maltese holding company offers a very flexible solution for tax efficient injection of capital and repatriation of profits. For more details please see our article of Maltese holding companies.

For more information, kindly contact:

Neville Cutajar - Managing Partner: neville.cutajar@3a.com.mt