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When a Maltese company or a Maltese resident individual incurs tax outside Malta, whilst still having the obligation to declare that same income in Malta; it is very likely that the person has the possibility of obtaining a relief in respect of the foreign tax suffered.

Malta offers three main mechanisms by which to claim relief from double taxation:

a. Treaty Relief: Treaty relief is based on the availability of a double taxation treaty between Malta and the other contracting state. Malta boasts over 70 tax treaties, with the majority being based on the OECD Model Convention, and practices the credit method of double taxation relief. Most of the treaties provide for a reduced withholding tax on dividends, interest and royalties paid to Maltese residents. For an updated list of Malta’s network of double taxation treaties.

b. Unilateral Relief: Unilateral relief is a type of relief which may be claimed by Maltese resident individuals and/or Maltese registered companies including branches of overseas companies, who derive income arising outside Malta and in respect of which foreign tax would have been suffered. Unilateral relief may be availed of when a double taxation treaty is not in force between Malta and the State where the income has been sourced. Similarly to treaty relief, the credit provided will not exceed the total tax liability perceived in Malta.

c. Flat Rate Foreign Tax Credit (FRFTC): The FRFTC may be claimed by a Maltese registered company (including branches of overseas companies) in respect of income derived from abroad. The FRFTC involves a relief of 25% of the net foreign income, before deducting any allowable expenses. The FRFTC may be claimed without the need for the company to have incurred foreign tax, but a number of conditions must be satisfied.