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Benjamin Griscti

The double tax agreement between Malta and Russia has finally been ratified by both countries and is therefore in force. Business relations between the two countries should improve as the treaty caters for the following:

1. Dividends

Dividends paid by a Russian company to a Maltese company which holds at least 25% (amounting to at least €100,000) of its share capital shall be subject to a Russian withholding tax of not more than 5%, whereas if the recipient of such dividends is a pension fund, no tax at all should be withheld by Russia. In all other cases, Russia shall not withhold taxes of more than 10% on any dividends paid to Maltese persons. From a Maltese point of view, regardless of the treaty, no withholding taxes will be levied on any dividend paid by Maltese companies to Russian persons.

2. Interest

Qualifying interest arising in Russia and paid to a Maltese person, shall not be subject to a Russian withholding tax exceeding 5% thereof. From a Maltese point of view, regardless of the treaty, no withholding taxes will be levied on any interest paid by Maltese persons to Russian persons.

3. Royalties

Qualifying royalties arising in Russia and paid to a Maltese person, shall not be subject to a Russian withholding tax exceeding 5% thereof. From a Maltese point of view, regardless of the treaty, no withholding taxes will be levied on any royalties paid by Maltese persons to Russian persons.

From a Maltese point of view, notwithstanding the treaty, Malta has no CFC or thin capitalisation rules and in most cases allows a very attractive participation exemption regime which exempts dividends and capital gains derived from the holding of shares in foreign entities. Malta also allows for the redomiciliation of companies and the setting-up of resident, but non-domiciled companies which enjoy a substantial limitation on the income and gains that are subject to Maltese tax.