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The Malta-France double taxation agreement has been recently amended and the new provisions came into force on the 1 June 2010. The DTA has been in place since 1977 and was amended once in 1994. Amendments include a change in the tax rates thresholds in the context of certain cross-border payments, new anti-abuse provisions and a wider exchange of information clause. Below is a summary of the salient amendments to the DTA.
Scope of DTA/Taxes covered The DTA will extend to French tax on salaries (taxe sur les salaires), widespread social security contributions (contributions sociales généralisées) and contributions for the reimbursement of the social debt (contributions pour le remboursement de la dette sociale). Dividends Prior to the amendment, in the case of dividends payable by a French resident company to a Maltese resident, the French tax was capped at 5% of the gross dividends where the recipient holds at least 10% of the capital of the French company. The tax capping for distributions that do not fall within the above category is 15%. The amended DTA provides that where the dividends are paid by a French resident company to a Maltese resident who is the beneficial owner of the company, the French tax may not exceed 15% of the gross dividend. However, dividends paid by a French resident company that is beneficially owned by a Maltese resident company which holds directly at least 10% of the capital of the French subsidiary will only be taxable only in Malta. Interest Article 11 provides that interest arising in France and paid to Maltese resident may be taxed in Malta. Such interest may also be taxed in France but if the recipient is the beneficial owner of the interest, the French tax may not exceed 10% of the gross interest. The maximum French tax chargeable on a cross-border interest payment to a Maltese resident has now been reduced to 5%. It is to be noted that under Maltese law, interest paid to a French resident is not subject to Maltese tax (whether by way of withholding or otherwise). Anti-abuse provisions The amendments include new anti-abuse and anti-avoidance provisions. Certain benefits under the DTA will not apply where the main purpose or one of the main purposes behind a transaction is to take advantage of the DTA which consist in the reduction or deferment of tax. Extended Exchange of Information provisions