The Government of Malta and the Government of the Hong Kong Special Administrative Region of the People’s Republic of China have just signed an agreement for the avoidance of double taxation and the prevention of fiscal evasion. The Agreement was signed on 8 November by the Secretary for Financial Services and the Treasury of Hong Kong SAR, Professor K C Chan and by the Ambassador of Malta to China, Mr. Joseph Cassar.
In a statement, the Hong Kong Government said that the agreement will boost closer economic and trade ties and will provide extra incentives for companies to invest and engage in business in Hong Kong and Malta. This is mainly as a result of the fact that the agreement provides for relief for tax paid in both countries by means of the credit mechanism, whereby tax paid in Hong Kong by Maltese residents in Hong Kong as well as by Maltese companies operating a branch in Hong Kong may be availed of as a credit against the tax payable in Malta.
The agreement, which was negotiated whilst taking into account the OECD Model Convention on Income and Capital and other recent tax treaties entered into between Malta as well as Hong Kong, provides for the allocation of taxing rights between both jurisdictions and provides for relief on tax rates for various types of passive income.
Other significant advantages brought about by the agreement are evident in the provisions which provide for the operation of air and maritime transport by an enterprise of a contracting state whereby it is stated that the profits of such an enterprise operating in shipping or air transport in international traffic shall be taxable in that contracting state, irrespective of whether the profits arise in that contracting state or the other contracting State This provision offers increased benefits to airlines and shipping companies based in Hong Kong since such airlines companies operating flights to Malta will now be taxed at the Hong Kong corporate tax rate which is lower than the Maltese tax rate. The agreement also provides for a beneficial withholding tax rate of not more than 3% for royalties arising in one of the Contracting States and derived by a resident of the other contracting state. Tax on royalties shall be paid in the Contracting State where the recipient is resident but royalties may also be taxed in the other state provided it does not exceed the tax rate of 3%, and provided that such royalties are not derived by a Permanent Establishment of the recipient in that Contracting State where the royalties arise.
The agreement signed with Hong Kong, (which is to come into force once the ratification procedures are completed by both parties) marks the 22nd agreement which the Hong Kong Government signed for the avoidance of double taxation and also means that Malta now has a Double Taxation Treaty network in force with over 50 countries, boosting Malta’s competitiveness in encouraging international investment.
For further information about the above benefits of Agreement and additional advantages, kindly contact us on: firstname.lastname@example.org