Malta, Turkey Sign Tax Treaty

The income tax treaty for the avoidance of double taxation signed by the governments of Malta and Turkey in 2011 will now be applicable as from 1 January 2014.

Provisions for this treaty:

• A 10% withholding tax on dividends paid by a Turkish resident company to a Maltese resident company where the Maltese resident company holds at least 25% of the capital of the Turkish resident company. The maximum Turkish withholding tax rate in all other cases will be 15%.
• Dividends paid by a Maltese resident company to a Turkish resident company will be exempt from tax chargeable on dividends in Malta, in addition to the tax chargeable in respect of the profits of the company.
• A maximum Turkish withholding tax rate of 10% on interest and royalties.

This treaty broadly follows the OECD's Model Tax Treaty, with some extensions such as the definition of permanent establishment ('PE') which now includes the possibility of a services PE. The treaty covers with the 'royalties' definition payments for the use of, or the right to use industrial, commercial, or scientific equipment (this was removed from the OECD Model).