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Germany - Malta Tax Treaty (as amended by 2010 protocol) — Orbitax Tax Hub

Note: This Treaty may be impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). MLI impact on Tax Treaties is available with the Orbitax International Tax Research & Compliance Expert.


Avoidance of Double Taxation in the State of Residence

(1) Tax shall be determined in the case of a resident of the Federal Republic of Germany as follows:

  • (a) Unless foreign tax credit is to be allowed under sub-paragraph (b), there shall be exempted from the assessment basis of the German tax any item of income arising in Malta and any item of capital situated within Malta which, according to this Agreement, may be taxed in Malta. The Federal Republic of Germany, however, retains the right to take into account in the determination of its rate of tax the items of income and capital so exempted. In the case of items of income from dividends, the preceding provision shall apply only to such dividends as are paid to a company (not including partnerships) being a resident of the Federal Republic of Germany by a company being a resident of Malta at least 10 per cent of the capital of which is owned directly by the German company and which were not deducted when determining the profits of the company distributing these dividends. There shall be exempted from the assessment basis of the taxes on capital any shareholding the dividends of which, if paid, would be exempted according to the foregoing sentences.
  • (b) Subject to the provisions of German tax law regarding credit for foreign tax, there shall be allowed as a credit against German tax payable in respect of the following items of income the Malta tax paid under the laws of Malta and in accordance with this Agreement:
    • (aa) dividends not dealt with in sub-paragraph (a) above;
    • (bb) items of income that may be taxed in Malta according to paragraph (2) of Article 13;
    • (cc) directors' fees;
    • (dd) items of income of artistes and sportsmen.
  • (c) For the purposes of sub-paragraph (b) of this paragraph:
    • (aa) dividends referred to in sub-paragraph (b) of paragraph (3) of Article 10, and
    • (bb) dividends paid out of profits benefiting out of any time-limited exemption or reduction of tax granted under incentive provisions contained in the Malta law designed to promote economic development to the extent that such exemption or reduction is granted for profits from industrial or manufacturing activities, agriculture, fishing, tourism (including restaurants and hotels) and other activities as may be agreed upon by the competent authorities, provided that the activities have been carried out within Malta,
  • shall be subject to German tax on the amount after the deduction of Malta tax paid (if any) on the profits out of which the dividends are paid under the laws of Malta and in accordance with this Agreement, and a tax of 20 per cent calculated on the gross amount of the dividends shall be deemed to have been paid in Malta. The provisions of this sub-paragraph shall apply for the first ten years during which this Agreement is effective. This period may be extended by mutual agreement between the competent authorities.
  • (d) The provisions of sub-paragraph (b) shall apply instead of the provisions of sub-paragraph (a) to items of income as defined in Articles 7 and 10 and to the assets from which such income is derived if the resident of the Federal Republic of Germany does not prove that the gross income of the permanent establishment in the business year in which the profit has been realised or of the company resident in Malta in the business year for which the dividends were paid was derived exclusively or almost exclusively from activities within the meaning of nos. 1 to 6 of paragraph (1) of section 8 of the German Law on External Tax Relations (Aussensteuergesetz) or from participations within the meaning of paragraph (2) of section 8 of that Law; the same shall apply to immovable property used by a permanent establishment (paragraph (4) of Article 6) and to profits from the alienation of such immovable property (paragraph (1) of Article 13) and of the movable property forming part of the business property of the permanent establishment (paragraph (3) of Article 13).
  • (e) Where a company being a resident of the Federal Republic of Germany distributes income derived from sources within Malta, sub-paragraph (a) shall not preclude the compensatory imposition of corporation tax on such distributions in accordance with the provisions of German tax law.
  • (f) Notwithstanding the provisions of sub-paragraph (a), double taxation shall be avoided by allowing a tax credit as laid down in sub-paragraph (b)
    • (aa) if in the Contracting States items of income or capital are placed under differing provisions of the Agreement or attributed to different persons (except pursuant to Article 9) and this conflict cannot be settled by a procedure in accordance with paragraph (3) of Article 25 and if as a result of this difference in placement or attribution the relevant income or capital would remain untaxed or be too lowly taxed, or
    • (bb) if after proper consultation and subject to the limitations of its domestic law a Contracting State notifies the other Contracting State through diplomatic channels of other income to which it intends to apply the provisions of this paragraph. The notification shall not take effect until the first day of the calendar year following the year in which the notification was made and all legal requirements under the domestic law of the notifying State for the notification to take effect have been fulfilled.

(2) Tax shall be determined in the case of a resident of Malta as follows:

  • Subject to the provisions of the law of Malta regarding the allowance of a credit against Malta tax in respect of foreign tax, where, in accordance with the provisions of this Agreement, there is included in a Malta assessment income from sources within the Federal Republic of Germany, the German tax paid on such income shall be allowed as a credit against Malta tax payable thereon.