Malta Clarifies Taxation of Directors’ Fees

The Malta tax authority has released a guidance note that aims to clarify the tax treatment of fees received by non-resident directors from companies resident in Malta.

Directors’ fees - according to the Inland Revenue Department (IRD), are considered as income arising where the company is resident, that is, the jurisdiction in which the company is managed and controlled.

The Inland Revenue Department states that this position is consistent with the Organisation for Economic Cooperation and Development’s (OECD) Model Tax Convention commentary. “Director’s fees” should be interpreted as fees and similar payments received in a person’s capacity as a member of a board of director and does not include remuneration in respect of other services rendered to the company (such as employment, advisory services, and so on).

What this means that any remuneration which falls under the definition of directors’ fees as in the aforementioned definition is taxable in the state of residence (that is, the place of effective management) of the company. Other remuneration paid to a person, who is also a director, in respect of other services rendered to the company is however not taxable in Malta if the said person is neither resident nor domiciled in Malta, nor performing the services in Malta, nor is deemed to have permanent establishment in Malta.