Malta – Israel Double Taxation Agreement enters into force

Benjamin Griscti  -  18/February/2014

Following the initialisation of a double tax treaty between Malta and the State of Israel, this has recently been ratified by both counterparts and is henceforth in force. The treaty in particular seeks to aid Israeli investors to reach the European Union’s market and capitalise onto Malta’s generally known tax efficient means. As is usually the case in respect to the Maltese double tax treaties, this treaty is based on the OECD Model Convention.

Most notably is the fact that the treaty restricts Israel from levying and withholding taxes on dividends paid by an Israeli company to a Maltese company holding at least 10% of the share capital thereof. This compliments considerably with Malta’s participation exemption regime (subject to certain conditions) as applicable to the receiving end. This makes the extraction of profits out of Israel possible with minimal taxation costs. Similar treatment will apply to royalties passing from an Israeli company to a Maltese counterpart. From Malta’s point of view, royalty income is generally also subject to an exemption, thus again offering efficient exit routes to Israeli investors. The treaty also gives particular attention to Real Estate Investment Companies.

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