US Malta Tax Treaty

USA & Malta sign new income tax treaty

[U.S. Treasury Press Release, 8/8/08]:

The U.S. Treasury Department has announced that a new income tax treaty between the United States and Malta was signed on Aug. 8, 2008 . The treaty will have withholding tax ramifications for U.S. citizens working in Malta and citizens of Malta working in the United States. The treaty has 29 articles. Article 2 states that the treaty applies to federal income taxes under the Internal Revenue Code, but excludes Social Security and unemployment taxes. Article 14 covers income from employment. Generally, income earned by a U.S. or Malta resident is exempt from income tax in the other treaty country if the resident was not in that country for more than 183 days of the taxable year.

Article 15 covers directors’ fees. It says that directors’ fees and other compensation derived by a resident of a treaty country, for services rendered in the other treaty country, may be taxed in that other treaty country if the resident is serving in his capacity as a member of the board of directors of a company that is a resident of the other treaty country. There are special provisions for entertainers and sportsmen (see Article 16), government workers (see Article 19), and students and trainees (see Article 20). Article 26 calls for an exchange of information between the two countries to facilitate the administration of each country’s tax laws.

The treaty will enter into force on the date of the exchange of instruments of ratification. With respect to withholding taxes, the treaty will apply to amounts paid or credited on or after the first day of the second month following the date on which the treaty enters into force.

The final version of the treaty can be found at http://www.ustreas.gov/press/releases/reports/usmalta%20agreement.pdf

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