CONVENTION BETWEEN 

 THE GOVERNMENT OF THE UNITED STATES OF AMERICA 

 AND THE GOVERNMENT OF MALTA 

 FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE 

 PREVENTION OF FISCAL EVASION 

 WITH RESPECT TO TAXES ON INCOME 

The Government of the United States of America and the Government of Malta, 

desiring to conclude a Convention for the avoidance of double taxation and the 

prevention of fiscal evasion with respect to taxes on income, have agreed as follows: 
 

 

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Article 1 

GENERAL SCOPE

1. This Convention shall apply only to persons who are residents of one or both of 

the Contracting States, except as otherwise provided in the Convention. 

2. This Convention shall not restrict in any manner any benefit now or hereafter 

accorded: 

a) by the laws of either Contracting State; or 

b) by any other agreement to which the Contracting States are parties. 

 

3. a) Notwithstanding the provisions of subparagraph b) of paragraph 2 of this 

Article: 

i) for purposes of paragraph 3 of Article XXII (Consultation) of the 

General Agreement on Trade in Services, the Contracting States agree that 

any question arising as to the interpretation or application of this 

Convention and, in particular, whether a taxation measure is within the 

scope of this Convention, shall be determined exclusively in accordance 

with the provisions of Article 25 (Mutual Agreement Procedure) of this 

Convention; and 

ii) the provisions of Article XVII of the General Agreement on Trade 

in Services shall not apply to a taxation measure unless the competent 

authorities agree that the measure is not within the scope of Article 24 

(Non-Discrimination) of this Convention. 

 b) For the purposes of this paragraph, a “measure” is a law, regulation, rule, 

procedure, decision, administrative action, or any similar provision or action. 

4. Except to the extent provided in paragraph 5, this Convention shall not affect the 

taxation by a Contracting State of its residents (as determined under Article 4 (Resident)) 

and its citizens. Notwithstanding the other provisions of this Convention, a former citizen 

or former long-term resident of a Contracting State may, for the period of ten years 

following the loss of such status, be taxed in accordance with the laws of that Contracting 

State. 

5. The provisions of paragraph 4 shall not affect: 
 

 

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a) the benefits conferred by a Contracting State under paragraph 2 of Article 

9 (Associated Enterprises), paragraphs 1 b), 2, and 5 of Article 17 (Pensions, 

Social Security, Annuities, Alimony, and Child Support), and Articles 18 

(Pension Funds), 23 (Relief from Double Taxation), 24 (Non-Discrimination), 

and 25 (Mutual Agreement Procedure); and 

b) the benefits conferred by a Contracting State under Articles 19 

(Government Service), 20 (Students and Trainees), and 27 (Members of 

Diplomatic Missions and Consular Posts), upon individuals who are neither 

citizens of, nor have been admitted for permanent residence in, that State. 

6. An item of income, profit or gain derived through an entity that is fiscally 

transparent under the laws of either Contracting State shall be considered to be derived 

by a resident of a State to the extent that the item is treated for purposes of the taxation 

law of such Contracting State as the income, profit or gain of a resident. 
 

 

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Article 2 

TAXES COVERED 

1. This Convention shall apply to taxes on income imposed on behalf of a 

Contracting State irrespective of the manner in which they are levied. 

2. There shall be regarded as taxes on income all taxes imposed on total income, or 

on elements of income, including taxes on gains from the alienation of property. 

3. The existing taxes to which this Convention shall apply are: 

a) in the case of the United States: the Federal income taxes imposed by the 

Internal Revenue Code (but excluding social security and unemployment taxes), and 

the Federal excise taxes imposed with respect to private foundations; 

b) in the case of Malta: the income tax. 

4. This Convention shall apply also to any identical or substantially similar taxes 

that are imposed after the date of signature of the Convention in addition to, or in place 

of, the existing taxes. The competent authorities of the Contracting States shall notify 

each other of any changes that have been made in their respective taxation or other laws 

that significantly affect their obligations under this Convention. 
 

 

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Article 3

GENERAL DEFINITIONS 

1. For the purposes of this Convention, unless the context otherwise requires: 

a) the term “person” includes an individual, an estate, a trust, a partnership, a 

company, and any other body of persons; 

b) the term “company” means any body corporate or any entity that is treated 

as a body corporate for tax purposes according to the laws of the state in which it 

is organized; 

c) the terms “enterprise of a Contracting State” and “enterprise of the other 

Contracting State” mean respectively an enterprise carried on by a resident of a 

Contracting State, and an enterprise carried on by a resident of the other 

Contracting State; the terms also include an enterprise carried on by a resident of 

a Contracting State through an entity that is treated as fiscally transparent in that 

Contracting State; 

 d) the term “enterprise” applies to the carrying on of any business; 

 e) the term “business” includes the performance of professional services and 

of other activities of an independent character; 

f) the term “international traffic” means any transport by a ship or aircraft, 

except when such transport is solely between places in a Contracting State; 

g) the term “competent authority” means: 

i) in the United States: the Secretary of the Treasury or his delegate; 

and 

ii) in Malta: the Minister responsible for finance or his authorized 

representative; 

h) the term “United States” means the United States of America, and 

includes the states thereof and the District of Columbia; such term also includes 

the territorial sea thereof and the sea bed and subsoil of the submarine areas 

adjacent to that territorial sea, over which the United States exercises sovereign 

rights in accordance with international law; the term, however, does not include 
 

 

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Puerto Rico, the Virgin Islands, Guam or any other United States possession or 

territory; 

i) the term “Malta” means the Republic of Malta and, when used in a 

geographical sense, means the Island of Malta, the Island of Gozo and the other 

islands of the Maltese archipelago including the territorial sea thereof as well as 

any area of the sea-bed, its sub-soil and the superjacent water column adjacent to 

the territorial sea, where the Republic of Malta exercises sovereign rights, 

jurisdiction or control in accordance with international law and its national law, 

including its legislation relating to the exploration of the Continental Shelf and 

exploitation of its natural resources; 

j) the term “national” of a Contracting State means: 

i) any individual possessing the nationality or citizenship of that 

State; and 

ii) any legal person, partnership or association deriving its status as 

such from the laws in force in that State; 

 k) the term “pension fund” means any person established in a Contracting 

State that is: 

i) in the case of pension funds established in the United States, 

generally exempt from income taxation, and in the case of pension funds 

established in Malta, a licensed fund or scheme subject to tax only on 

income derived from immovable property situated in Malta; and 

ii) operated principally either: 

 A) to administer or provide pension or retirement benefits; or 

 B) to earn income for the benefit of one or more persons 

meeting the requirements of subparagraph i) and clause A) 

of this subparagraph. 

2. As regards the application of the Convention at any time by a Contracting State 

any term not defined therein shall, unless the context otherwise requires, or the 

competent authorities agree to a common meaning pursuant to the provisions of Article 

25 (Mutual Agreement Procedure), have the meaning which it has at that time under the 

law of that State for the purposes of the taxes to which the Convention applies, any 
 

 

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meaning under the applicable tax laws of that State prevailing over a meaning given to 

the term under other laws of that State. 
 

 

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Article 4 

RESIDENT 

1. For the purposes of this Convention, the term “resident of a Contracting State” 

means any person who, under the laws of that State, is liable to tax therein by reason of 

his domicile, residence, citizenship, place of management, place of incorporation, or any 

other criterion of a similar nature, and also includes that State and any political 

subdivision or local authority thereof. This term, however, does not include any person 

who is liable to tax in that State in respect only of income from sources in that State or of 

profits attributable to a permanent establishment in that State. 

. 

2. The term “resident of a Contracting State” includes: 

a) a pension fund established in that State; and 

b) an organization that is established and maintained in that State exclusively 

for religious, charitable, scientific, artistic, cultural, or educational purposes, 

notwithstanding that all or part of its income or gains may be exempt from tax under the 

domestic law of that State. 

3. Where, by reason of the provisions of paragraph 1, an individual is a resident of 

both Contracting States, then his status shall be determined as follows: 

a) he shall be deemed to be a resident only of the State in which he has a 

permanent home available to him; if he has a permanent home available to him in 

both States, he shall be deemed to be a resident only of the State with which his 

personal and economic relations are closer (center of vital interests); 

b) if the State in which he has his center of vital interests cannot be 

determined, or if he does not have a permanent home available to him in either 

State, he shall be deemed to be a resident only of the State in which he has an 

habitual abode; 

c) if he has an habitual abode in both States or in neither of them, he shall be 

deemed to be a resident only of the State of which he is a national; 

d) if he is a national of both States or of neither of them, the competent 

authorities of the Contracting States shall endeavor to settle the question by 

mutual agreement. 
 

 

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 4. Where by reason of the provisions of paragraph 1 a company is a resident of both 

Contracting States, then if it is incorporated under the laws of one of the Contracting 

States or a political subdivision thereof, but not under the laws of the other Contracting 

State or a political subdivision thereof, such company shall be deemed to be a resident of 

the first-mentioned Contracting State. In all other cases involving dual resident 

companies, the competent authorities of the Contracting States shall endeavor to 

determine the mode of application of the Convention to such company. If the competent 

authorities do not reach such an agreement, that company will not be treated as a resident 

of either Contracting State for purposes of its claiming any benefits provided by the 

Convention. 

 

5. Where by reason of the provisions of paragraphs 1 and 2 of this Article a person 

other than an individual or a company is a resident of both Contracting States, the 

competent authorities of the Contracting States shall by mutual agreement endeavor to 

determine the mode of application of this Convention to that person. 
 

 

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Article 5

PERMANENT ESTABLISHMENT 

1. For the purposes of this Convention, the term “permanent establishment” means a 

fixed place of business through which the business of an enterprise is wholly or partly 

carried on. 

2. The term “permanent establishment” includes especially: 

a) a place of management; 

b) a branch; 

c) an office; 

d) a factory; 

e) a workshop; and 

f) a mine, an oil or gas well, a quarry, or any other place of extraction of 

natural resources. 

3. A building site or construction or installation project, or an installation or drilling 

rig or ship used for the exploration of natural resources, constitutes a permanent 

establishment only if it lasts, or the exploration activity continues for more than twelve 

months. 

4. Notwithstanding the preceding provisions of this Article, the term “permanent 

establishment” shall be deemed not to include: 

a) the use of facilities solely for the purpose of storage, display or delivery of 

goods or merchandise belonging to the enterprise; 

b) the maintenance of a stock of goods or merchandise belonging to the 

enterprise solely for the purpose of storage, display or delivery; 

c) the maintenance of a stock of goods or merchandise belonging to the 

enterprise solely for the purpose of processing by another enterprise; 

d) the maintenance of a fixed place of business solely for the purpose of 

purchasing goods or merchandise, or of collecting information, for the enterprise; 
 

 

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e) the maintenance of a fixed place of business solely for the purpose of 

carrying on, for the enterprise, any other activity of a preparatory or auxiliary 

character; 

f) the maintenance of a fixed place of business solely for any combination of 

the activities mentioned in subparagraphs a) through e), provided that the overall 

activity of the fixed place of business resulting from this combination is of a 

preparatory or auxiliary character. 

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person -- other 

than an agent of an independent status to whom paragraph 6 applies -- is acting on behalf 

of an enterprise and has and habitually exercises in a Contracting State an authority to 

conclude contracts that are binding on the enterprise, that enterprise shall be deemed to 

have a permanent establishment in that State in respect of any activities that the person 

undertakes for the enterprise, unless the activities of such person are limited to those 

mentioned in paragraph 4 that, if exercised through a fixed place of business, would not 

make this fixed place of business a permanent establishment under the provisions of that 

paragraph. 

6. An enterprise shall not be deemed to have a permanent establishment in a 

Contracting State merely because it carries on business in that State through a broker, 

general commission agent, or any other agent of an independent status, provided that 

such persons are acting in the ordinary course of their business as independent agents. 

7. The fact that a company that is a resident of a Contracting State controls or is 

controlled by a company that is a resident of the other Contracting State, or that carries 

on business in that other State (whether through a permanent establishment or otherwise), 

shall not be taken into account in determining whether either company has a permanent 

establishment in that other State. 

 
 

 

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Article 6 

INCOME FROM REAL (IMMOVABLE) PROPERTY

1. Income derived by a resident of a Contracting State from real (immovable) 

property, including income from agriculture or forestry, situated in the other Contracting 

State may be taxed in that other State. 

2. The term “real (immovable) property” shall have the meaning which it has under 

the law of the Contracting State in which the property in question is situated. The term 

shall in any case include property accessory to real (immovable) property (including 

livestock and equipment used in agriculture and forestry), rights to which the provisions 

of general law respecting landed property apply, usufruct of real (immovable) property 

and rights to variable or fixed payments as consideration for the working of, or the right 

to work, mineral deposits, sources and other natural resources. Ships and aircraft shall 

not be regarded as real (immovable) property. 

3. The provisions of paragraph 1 shall apply to income derived from the direct use, 

letting, or use in any other form of real (immovable) property. 

4. The provisions of paragraphs 1 and 3 shall also apply to the income from real 

(immovable) property of an enterprise. 

5. A resident of a Contracting State who is liable to tax in the other Contracting 

State on income from real (immovable) property situated in the other Contracting State 

may elect for any taxable year to compute the tax on such income on a net basis as if such 

income were business profits attributable to a permanent establishment in such other 

State. In the case of income from real (immovable) property situated in the United 

States, any such election shall be binding for the taxable year of the election and all 

subsequent taxable years unless the competent authority of the United States agrees to 

terminate the election. 
 

 

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Article 7 

BUSINESS PROFITS 

1. The profits of an enterprise of a Contracting State shall be taxable only in that 

State unless the enterprise carries on business in the other Contracting State through a 

permanent establishment situated therein. If the enterprise carries on business as 

aforesaid, the profits of the enterprise may be taxed in the other State but only so much of 

them as are attributable to that permanent establishment. 

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting 

State carries on business in the other Contracting State through a permanent 

establishment situated therein, there shall in each Contracting State be attributed to that 

permanent establishment the profits that it might be expected to make if it were a distinct 

and independent enterprise engaged in the same or similar activities under the same or 

similar conditions. For this purpose, the profits to be attributed to the permanent 

establishment shall include only the profits derived from the assets used, risks assumed 

and activities performed by the permanent establishment. 

3. In determining the profits of a permanent establishment, there shall be allowed as 

deductions expenses that are incurred for the purposes of the permanent establishment, 

including executive and general administrative expenses so incurred, whether in the State 

in which the permanent establishment is situated or elsewhere. 

4. No profits shall be attributed to a permanent establishment by reason of the mere 

purchase by that permanent establishment of goods or merchandise for the enterprise. 

5. For the purposes of the preceding paragraphs, the profits to be attributed to the 

permanent establishment shall be determined by the same method year by year unless 

there is good and sufficient reason to the contrary. 

6. Where profits include items of income that are dealt with separately in other 

Articles of the Convention, then the provisions of those Articles shall not be affected by 

the provisions of this Article. 

7. In applying this Article, paragraph 6 of Article 10 (Dividends), paragraph 5 of 

Article 11 (Interest), paragraph 4 of Article 12 (Royalties), paragraph 3 of Article 13 

(Gains), and paragraph 2 of Article 21 (Other Income), any income or gain attributable to 

a permanent establishment during its existence is taxable in the Contracting State where 

such permanent establishment is situated even if the payments are deferred until such 

permanent establishment has ceased to exist. 
 

 

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Article 8 

SHIPPING AND AIR TRANSPORT

1. Profits of an enterprise of a Contracting State from the operation of ships or 

aircraft in international traffic shall be taxable only in that State. 

2. For purposes of this Article, profits from the operation of ships or aircraft include, 

but are not limited to: 

a) profits from the rental of ships or aircraft on a full (time or voyage) basis; 

b) profits from the rental on a bareboat basis of ships or aircraft if the rental 

income is incidental to profits from the operation of ships or aircraft in international 

traffic; and 

c) profits from the rental on a bareboat basis of ships or aircraft if such ships or 

aircraft are operated in international traffic by the lessee. 

Profits derived by an enterprise from the inland transport of property or passengers within 

either Contracting State shall be treated as profits from the operation of ships or aircraft in 

international traffic if such transport is undertaken as part of international traffic. 

 

3. Profits of an enterprise of a Contracting State from the use, maintenance, or rental 

of containers (including trailers, barges, and related equipment for the transport of 

containers) shall be taxable only in that Contracting State, except to the extent that those 

containers are used for transport solely between places within the other Contracting State. 

4. The provisions of paragraphs 1 and 3 shall also apply to profits from participation 

in a pool, a joint business, or an international operating agency. 
 

 

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Article 9 

ASSOCIATED ENTERPRISES 

1. Where: 

a) an enterprise of a Contracting State participates directly or indirectly in 

the management, control or capital of an enterprise of the other Contracting State; 

or 

b) the same persons participate directly or indirectly in the management, 

control, or capital of an enterprise of a Contracting State and an enterprise of the 

other Contracting State, 

and in either case conditions are made or imposed between the two enterprises in their 

commercial or financial relations that differ from those that would be made between 

independent enterprises, then any profits that, but for those conditions, would have 

accrued to one of the enterprises, but by reason of those conditions have not so accrued, 

may be included in the profits of that enterprise and taxed accordingly. 

2. Where a Contracting State includes in the profits of an enterprise of that State, 

and taxes accordingly, profits on which an enterprise of the other Contracting State has 

been charged to tax in that other State, and the other Contracting State agrees that the 

profits so included are profits that would have accrued to the enterprise of the 

first-mentioned State if the conditions made between the two enterprises had been those 

that would have been made between independent enterprises, then that other State shall 

make an appropriate adjustment to the amount of the tax charged therein on those profits. 

 In determining such adjustment, due regard shall be had to the other provisions of this 

Convention and the competent authorities of the Contracting States shall if necessary 

consult each other. 
 

 

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Article 10 

 DIVIDENDS

1. Dividends paid by a company that is a resident of a Contracting State to a resident 

of the other Contracting State may be taxed in that other State. 

2. However, such dividends may also be taxed in the Contracting State of which the 

company paying the dividends is a resident and according to the laws of that State, but: 

a) if the dividends are paid by a company that is a resident of the United 

States to a resident of Malta who is the beneficial owner thereof, except as 

otherwise provided in this Convention, the tax charged by the United States shall 

not exceed: 

i) 5 percent of the gross amount of the dividends if the beneficial 

owner is a company that owns directly at least 10 percent of the voting 

stock of the company paying the dividends; 

ii) 15 percent of the gross amount of the dividends in all other cases. 

b) if the dividends are paid by a company that is a resident of Malta to a 

resident of the United States who is the beneficial owner thereof, the tax charged 

by Malta on the gross amount of the dividends shall not exceed that Malta tax 

chargeable on the profits out of which the dividends are paid. 

This paragraph shall not affect the taxation of the company in respect of the profits out of 

which the dividends are paid. 

3. Notwithstanding paragraph 2, dividends shall not be taxed in the Contracting 

State of which the company paying the dividends is a resident if: 

a) the beneficial owner of the dividends is a pension fund that is a resident of 

the other Contracting State; and 

b) such dividends are not derived from the carrying on of a trade or business 

by the pension fund or through an associated enterprise. 

4. a) Clause i) of subparagraph a) of paragraph 2 shall not apply in the case of 

dividends paid by a U.S. Regulated Investment Company (RIC) or a U.S. Real 

Estate Investment Trust (REIT). In the case of dividends paid by a RIC, clause ii) 

of subparagraph a) of paragraph 2 and paragraph 3 shall apply. In the case of 

dividends paid by a REIT, clause ii) of subparagraph a) of paragraph 2 and 
 

 

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paragraph 3 shall apply only if: 

i) the beneficial owner of the dividends is an individual or pension 

fund, in either case holding an interest of not more than 10 percent in the 

REIT; 

ii) the dividends are paid with respect to a class of stock that is 

publicly traded and the beneficial owner of the dividends is a person 

holding an interest of not more than 5 percent of any class of the REIT’s 

stock; or 

 iii) the beneficial owner of the dividends is a person holding an 

interest of not more than 10 percent in the REIT and the REIT is diversified. 

b) For purposes of this paragraph, a REIT shall be "diversified" if the value 

of no single interest in real property exceeds 10 percent of its total interests in real 

property. For the purposes of this rule, foreclosure property shall not be 

considered an interest in real property. Where a REIT holds an interest in a 

partnership, it shall be treated as owning directly a proportion of the partnership's 

interests in real property corresponding to its interest in the partnership. 

5. For purposes of this Article, the term "dividends" means income from shares or 

other rights, not being debt-claims, participating in profits, as well as income that is 

subjected to the same taxation treatment as income from shares under the laws of the 

State of which the payer is a resident. 

6. The provisions of paragraphs 2 through 4 shall not apply if the beneficial owner 

of the dividends, being a resident of a Contracting State, carries on business in the other 

Contracting State, of which the payer is a resident, through a permanent establishment 

situated therein, and the holding in respect of which the dividends are paid is effectively 

connected with such permanent establishment. In such case the provisions of Article 7 

(Business Profits) shall apply. 

7. A Contracting State may not impose any tax on dividends paid by a resident of 

the other State, except insofar as the dividends are paid to a resident of the firstmentioned State or the dividends are attributable to a permanent establishment, nor may 

it impose tax on a corporation's undistributed profits, except as provided in paragraph 8, 

even if the dividends paid or the undistributed profits consist wholly or partly of profits 

or income arising in that State. 

8. a) A company that is a resident of one of the States and that has a permanent 

establishment in the other State or that is subject to tax in the other State on a net 

basis on its income that may be taxed in the other State under Article 6 (Income 
 

 

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from Real (Immovable) Property) or under paragraph 1 of Article 13 (Gains) may 

be subject in that other State to a tax in addition to the tax allowable under the 

other provisions of this Convention. 

 b) Such tax, however, may be imposed: 

i) on only the portion of the business profits of the company 

attributable to the permanent establishment and the portion of the income 

referred to in subparagraph a) that is subject to tax under Article 6 or 

under paragraph 1 of Article 13 that, in the case of the United States, 

represents the dividend equivalent amount of such profits or income and, 

in the case of Malta, is an amount that is analogous to the dividend 

equivalent amount; and 

ii) at a rate not in excess of the rate specified in clause i) of 

subparagraph a) of paragraph 2. 
 

 

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Article 11 

INTEREST 

1. Interest arising in a Contracting State and beneficially owned by a resident of the 

other Contracting State may be taxed in that other State. 

2. Such interest may also be taxed in the Contracting State in which it arises, and 

according to the laws of that State, but the tax so charged shall not exceed 10 percent of 

the gross amount of the interest. 

3. Notwithstanding the provisions of paragraphs 1 and 2: 

a) interest arising in the United States that is contingent interest of a type that 

does not qualify as portfolio interest under United States law may be taxed by the 

United States but, if the beneficial owner of the interest is a resident of Malta, the 

interest may be taxed at a rate not exceeding 15 percent of the gross amount of the 

interest; and 

b) interest that is an excess inclusion with respect to a residual interest in a 

real estate mortgage investment conduit may be taxed by each State in accordance 

with its domestic law. 

4. The term “interest” as used in this Article means income from debt-claims of 

every kind, whether or not secured by mortgage, and whether or not carrying a right to 

participate in the debtor's profits, and in particular, income from government securities 

and income from bonds or debentures, including premiums or prizes attaching to such 

securities, bonds or debentures, and all other income that is subjected to the same 

taxation treatment as income from money lent by the taxation law of the Contracting 

State in which the income arises. Income dealt with in Article 10 (Dividends) and 

penalty charges for late payment shall not be regarded as interest for the purposes of this 

Convention. 

5. The provisions of paragraphs 1, 2, and 3 shall not apply if the beneficial owner of 

the interest, being a resident of a Contracting State, carries on business in the other 

Contracting State, in which the interest arises, through a permanent establishment situated therein, and the debt-claim in respect of which the interest is paid is effectively 

connected with such permanent establishment. In such case the provisions of Article 7 

(Business Profits) shall apply. 

6. Interest shall be deemed to arise in a Contracting State where the payer is a 

resident of that State. Where, however, the person paying the interest, whether the 

person is a resident of a Contracting State or not, has in a Contracting State a permanent 
 

 

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establishment in connection with which the indebtedness on which the interest is paid 

was incurred, and such interest is borne by such permanent establishment, then such 

interest shall be deemed to arise in the State in which the permanent establishment is 

situated. 

7. Where, by reason of a special relationship between the payer and the beneficial 

owner or between both of them and some other person, the amount of the interest, having 

regard to the debt-claim for which it is paid, exceeds the amount which would have been 

agreed upon by the payer and the beneficial owner in the absence of such relationship, 

the provisions of this Article shall apply only to the last-mentioned amount. In such case 

the excess part of the payments shall remain taxable according to the laws of each State, 

due regard being had to the other provisions of this Convention. 

8. In the case of the United States, the excess, if any, of the amount of interest 

allocable to the profits of a company resident in the other Contracting State that are either 

attributable to a permanent establishment in the United States or subject to tax in the 

United States under Article 6 (Income from Real (Immovable) Property) or paragraph 1 

of Article 13 (Gains) over the interest paid by that permanent establishment or trade or 

business in the United States shall be deemed to arise in the United States and be 

beneficially owned by a resident of the other Contracting State. The tax imposed under 

this Article on such interest shall not exceed the rate specified in paragraph 2. 
 

 

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Article 12 

ROYALTIES

1. Royalties arising in a Contracting State and beneficially owned by a resident of 

the other Contracting State may be taxed in that other State. 

2. Such royalties may also be taxed in the Contracting State in which they arise, and 

according to the laws of that State, but the tax so charged shall not exceed 10 percent of 

the gross amount of the royalties. 

3. For purposes of this Article, the term “royalties” means: 

a) payments of any kind received as a consideration for the use of, or 

the right to use, any copyright of literary, artistic, scientific or other work 

(including cinematographic films), any patent, trademark, design or 

model, plan, secret formula or process, or for information concerning 

industrial, commercial or scientific experience; and 

b) gain derived from the alienation of any property described in 

subparagraph a), to the extent that such gain is contingent on the 

productivity, use, or disposition of the property. 

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the 

royalties, being a resident of a Contracting State, carries on business in the other 

Contracting State through a permanent establishment situated therein and the right or 

property in respect of which the royalties are paid is effectively connected with such 

permanent establishment. In such case the provisions of Article 7 (Business Profits) shall 

apply. 

5. Royalties shall be deemed to arise in a Contracting State when they are in 

consideration for the use of, or the right to use, property, information or experience in 

that State. 

6. Where, by reason of a special relationship between the payer and the beneficial 

owner or between both of them and some other person, the amount of the royalties, 

having regard to the use, right, or information for which they are paid, exceeds the 

amount which would have been agreed upon by the payer and the beneficial owner in the 

absence of such relationship, the provisions of this Article shall apply only to the 

last-mentioned amount. In such case the excess part of the payments shall remain taxable 

according to the laws of each Contracting State, due regard being had to the other 

provisions of the Convention. 
 

 

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Article 13 

GAINS

1. Gains derived by a resident of a Contracting State that are attributable to the 

alienation of real (immovable) property situated in the other Contracting State may be 

taxed in that other State. 

2. For the purposes of this Article the term “real (immovable) property situated in 

the other Contracting State” shall include: 

a) real (immovable) property referred to in Article 6 (Income from Real 

(Immovable) Property); 

b) where that other State is the United States, a United States real property 

interest; and 

c) where that other State is Malta, 

i) shares, including rights to acquire shares, in a company resident in 

Malta whose assets consist wholly or principally of real (immovable) 

property referred to in subparagraph a) of this paragraph situated in Malta; 

and 

ii) an interest in a partnership or trust to the extent that the assets of 

the partnership or trust consist of real (immovable) property situated in 

Malta, or of shares referred to in clause i) of this sub-paragraph. 

3. Gains from the alienation of movable property forming part of the business 

property of a permanent establishment that an enterprise of a Contracting State has in the 

other Contracting State, including such gains from the alienation of such a permanent 

establishment (alone or with the whole enterprise), may be taxed in that other State. 

4. Gains derived by an enterprise of a Contracting State from the alienation of ships 

or aircraft operated or used in international traffic or personal property pertaining to the 

operation or use of such ships or aircraft shall be taxable only in that State. 

5. Gains derived by an enterprise of a Contracting State from the alienation of 

containers (including trailers, barges and related equipment for the transport of 

containers) used for the transport of goods or merchandise shall be taxable only in that 

State, unless those containers are used for transport solely between places within the 
 

 

25

other Contracting State. 

6. Gains from the alienation of any property other than property referred to in 

paragraphs 1 through 5 and other than gain described in subparagraph b) of paragraph 3 

of Article 12 (Royalties) shall be taxable only in the Contracting State of which the 

alienator is a resident. 
 

 

26

Article 14 

 INCOME FROM EMPLOYMENT

1. Subject to the provisions of Articles 15 (Directors’ Fees), 17 (Pensions, Social 

Security, Annuities, Alimony, and Child Support) and 19 (Government Service), salaries, 

wages, and other similar remuneration derived by a resident of a Contracting State in 

respect of an employment shall be taxable only in that State unless the employment is 

exercised in the other Contracting State. If the employment is so exercised, such 

remuneration as is derived therefrom may be taxed in that other State. 

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a 

resident of a Contracting State in respect of an employment exercised in the other 

Contracting State shall be taxable only in the first-mentioned State if: 

a) the recipient is present in the other State for a period or periods not 

exceeding in the aggregate 183 days in any twelve month period commencing or 

ending in the taxable year concerned; 

b) the remuneration is paid by, or on behalf of, an employer who is not a 

resident of the other State; and 

c) the remuneration is not borne by a permanent establishment which the 

employer has in the other State. 

3. Notwithstanding the preceding provisions of this Article, remuneration described 

in paragraph 1 that is derived by a resident of a Contracting State in respect of an 

employment as a member of the regular complement of a ship or aircraft operated in 

international traffic shall be taxable only in that State. 
 

 

27
 

 

28

Article 15 

 DIRECTORS’ FEES

Directors’ fees and other compensation derived by a resident of a Contracting 

State for services rendered in the other Contracting State in his capacity as a member of 

the board of directors of a company that is a resident of the other Contracting State may 

be taxed in that other Contracting State. 
 

 

29

Article 16 

 ENTERTAINERS AND SPORTSMEN

1. Income derived by a resident of a Contracting State as an entertainer, such as a 

theater, motion picture, radio, or television artiste, or a musician, or as a sportsman, from 

his personal activities as such exercised in the other Contracting State, which income 

would be exempt from tax in that other Contracting State under the provisions of Articles 

7 (Business Profits) and 14 (Income from Employment) may be taxed in that other State, 

except where the amount of the gross receipts derived by such entertainer or sportsman, 

including expenses reimbursed to him or borne on his behalf, from such activities does 

not exceed twenty thousand United States dollars ($20,000) or its equivalent in Euros for 

the taxable year of the payment. 

2. Where income in respect of activities exercised by an entertainer or a sportsman 

in his capacity as such accrues not to the entertainer or sportsman himself but to another 

person, that income, notwithstanding the provisions of Article 7 (Business Profits) or 14 

(Income from Employment), may be taxed in the Contracting State in which the activities 

of the entertainer or sportsman are exercised unless the contract pursuant to which the 

personal activities are performed allows that other person to designate the individual who 

is to perform the personal activities. 
 

 

30

Article 17 

PENSIONS, SOCIAL SECURITY, ANNUITIES, 

 ALIMONY, AND CHILD SUPPORT 

1. a) Pensions and other similar remuneration beneficially owned by a resident 

of a Contracting State shall be taxable only in that State. 

b) Notwithstanding subparagraph a), the amount of any such pension or 

remuneration arising in a Contracting State that, when received, would be exempt 

from taxation in that State if the beneficial owner were a resident thereof shall be 

exempt from taxation in the Contracting State of which the beneficial owner is a 

resident. 

2. Notwithstanding the provisions of paragraph 1, payments made by a Contracting 

State under provisions of the social security or similar legislation of that State to a resident of the other Contracting State or to a citizen of the United States shall be taxable 

only in the first-mentioned State. 

3. Annuities derived and beneficially owned by an individual resident of a 

Contracting State shall be taxable only in that State. The term “annuities” as used in this 

paragraph means a stated sum paid periodically at stated times during a specified number 

of years, or for life, under an obligation to make the payments in return for adequate and 

full consideration (other than services rendered). 

4. Alimony paid by a resident of a Contracting State to a resident of the other 

Contracting State shall be taxable only in that other State. The term “alimony” as used in 

this paragraph means periodic payments made pursuant to a written separation agreement 

or a decree of divorce, separate maintenance, or compulsory support, which payments are 

taxable to the recipient under the laws of the State of which he is a resident. 

5. Periodic payments, not dealt with in paragraph 4, for the support of a child made 

pursuant to a written separation agreement or a decree of divorce, separate maintenance, 

or compulsory support, paid by a resident of a Contracting State to a resident of the other 

Contracting State, shall be exempt from tax in both Contracting States. 
 

 

31

Article 18 

PENSION FUNDS 

 Where an individual who is a resident of one of the States is a member or 

beneficiary of, or participant in, a pension fund that is a resident of the other State, 

income earned by the pension fund may be taxed as income of that individual only when, 

and, subject to the provisions of paragraph 1 of Article 17 (Pensions, Social Security, 

Annuities, Alimony, and Child Support), to the extent that, it is paid to, or for the benefit 

of, that individual from the pension fund (and not transferred to another pension fund in 

that other State). 
 

 

32

Article 19 

GOVERNMENT SERVICE

1. Notwithstanding the provisions of Articles 14 (Income from Employment), 15 

(Directors’ Fees), 16 (Entertainers and Sportsmen) and 20 (Students and Trainees): 

a) Salaries, wages and other remuneration, other than a pension, paid to an 

individual in respect of services rendered to a Contracting State or a political 

subdivision or local authority thereof shall, subject to the provisions of 

subparagraph b), be taxable only in that State; 

b) such remuneration, however, shall be taxable only in the other Contracting 

State if the services are rendered in that State and the individual is a resident of 

that State who: 

i) is a national of that State; or 

ii) did not become a resident of that State solely for the purpose of 

rendering the services. 

2. Notwithstanding the provisions of paragraph 1 of Article 17 (Pensions, Social 

Security, Annuities, Alimony, and Child Support): 

a) any pension and other similar remuneration paid by, or out of funds 

created by, a Contracting State or a political subdivision or a local authority 

thereof to an individual in respect of services rendered to that State or subdivision 

or authority (other than a payment to which paragraph 2 of Article 17 applies) 

shall, subject to the provisions of subparagraph b), be taxable only in that State; 

b) such pension, however, shall be taxable only in the other Contracting State 

if the individual is a resident of, and a national of, that State. 

3. The provisions of Articles 14 (Income from Employment), 15 (Directors’ Fees), 

16 (Entertainers and Sportsmen) and 17 (Pensions, Social Security, Annuities, Alimony, 

and Child Support) shall apply to salaries, wages and other remuneration, and to 

pensions, in respect of services rendered in connection with a business carried on by a 

Contracting State or a political subdivision or a local authority thereof. 
 

 

33

Article 20 

STUDENTS AND TRAINEES 

1. Payments, other than compensation for personal services, received by a student or 

business trainee who is, or was immediately before visiting a Contracting State, a 

resident of the other Contracting State, and who is present in the first-mentioned State for 

the purpose of his full-time education or for his full-time training, shall not be taxed in 

that State, provided that such payments arise outside that State, and are for the purpose of 

his maintenance, education or training. The exemption from tax provided by this 

paragraph shall apply to a business trainee only for a period of time not exceeding one 

year from the date the business trainee first arrives in the first-mentioned Contracting 

State for the purpose of training. 

2. A student or business trainee within the meaning of paragraph 1 shall be exempt 

from tax by the Contracting State in which the individual is temporarily present with 

respect to income from personal services in an aggregate amount equal to $9,000 or its 

equivalent in Euros annually. The competent authorities shall, every five years, adjust the 

amount provided in this subparagraph to the extent necessary to take into account 

changes in the U.S. personal exemption and the standard deduction and in the Maltese 

personal tax rates. 

3. For purposes of this Article, a business trainee is an individual: 

a) who is temporarily in a Contracting State for the purpose of securing 

training required to qualify the individual to practice a profession or professional 

specialty; or 

b) who is temporarily in a Contracting State as an employee of, or under 

contract with, a resident of the other Contracting State, for the primary purpose of 

acquiring technical, professional, or business experience from a person other than 

that resident of the other Contracting State (or a person related to such resident of 

the other Contracting State). 

 
 

 

34

Article 21

OTHER INCOME

1. Items of income beneficially owned by a resident of a Contracting State, wherever 

arising, not dealt with in the foregoing Articles of this Convention shall be taxable in that 

State. 

2. The provisions of paragraph 1 shall not apply to income, other than income from 

real (immovable) property as defined in paragraph 2 of Article 6 (Income from Real 

(Immovable) Property), if the beneficial owner of the income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent 

establishment situated therein and the income is attributable to such permanent 

establishment. In such case the provisions of Article 7 (Business Profits) shall apply. 

3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a 

resident of one of the Contracting States not dealt with in the foregoing Articles of this 

Convention from sources in the other Contracting State may also be taxed in the other 

Contracting State, but the tax so charged shall not exceed 10 percent of the amount of 

such items. 
 

 

35

Article 22 

LIMITATION ON BENEFITS

1. Except as otherwise provided in this Article, a resident of one of the Contracting 

States that derives income from the other Contracting State shall be entitled, in that other 

Contracting State, to all the benefits of this Convention otherwise accorded to residents 

of a Contracting State only if such resident is a “qualified person” as defined in 

paragraph 2 of this Article and satisfies any other conditions specified in the Convention 

for the obtaining of such benefits. 

2. A resident of one of the Contracting States is a qualified person for a taxable year 

only if such resident is either: 

a) an individual; 

b) a Contracting State, political subdivision or local authority thereof; 

c) a company, if: 

 i) 

A) its principal class of shares (and any disproportionate class 

of shares) is listed on a recognized stock exchange located in the 

Contracting State of which the company is a resident; 

B) its principal class of shares (and any disproportionate class 

of shares) is regularly traded on one or more recognized stock 

exchanges located in the Contracting State of which the company 

is a resident; 

C) its principal class of shares is primarily traded on one or 

more recognized stock exchanges located in the Contracting State 

of which the company is a resident; and 

D) the company satisfies the requirements of clause ii) of 

subparagraph f) of this paragraph; or 

 ii) 

A) at least 75 percent of each such class of shares in the 

company is owned directly or indirectly by companies entitled to 

benefits under clause i), provided that in the case of indirect 

ownership, each intermediate owner is a resident of the same 
 

 

36

Contracting State entitled to benefits of the Convention under this 

clause ii); and 

B) the company satisfies the requirements of clause ii) of 

subparagraph f) of this paragraph; 

d) an entity described in subparagraph b) of paragraph 2 of Article 4 

(Resident) that is generally exempt from income taxation in its Contracting State 

of residence; 

e) a pension fund, provided that more than 75 percent of the beneficiaries, 

members or participants of the pension fund are individuals who are residents of 

either Contracting State; or 

f) a person other than an individual, if: 

i) on at least half the days of the taxable year at least 75 percent of 

each class of shares or other beneficial interests in the person is owned, 

directly or indirectly, by residents of that Contracting State that are 

entitled to the benefits of this Convention under subparagraph a), 

subparagraph b), clause i) of subparagraph c), subparagraph d), or 

subparagraph e) of this paragraph, provided that, in the case of indirect 

ownership, each intermediate owner is a qualified person that is a resident 

of that Contracting State; and 

ii) less than 25 percent of the person’s gross income for the taxable 

year, as determined in the person’s State of residence, is paid or accrued, 

directly or indirectly, to persons who are not residents of either 

Contracting State entitled to the benefits of this Convention under 

subparagraph a), subparagraph b), clause i) of subparagraph c), 

subparagraph d), or subparagraph e) of this paragraph (other than in the 

form of arm’s length payments in the ordinary course of business for 

services or tangible property). 

3. Notwithstanding that a company that is a resident of a Contracting State may not 

be a qualified person, it shall be entitled to all the benefits of this Convention otherwise 

accorded to residents of a Contracting State with respect to an item of income if it 

satisfies any other specified conditions for the obtaining of such benefits and: 

a) at least 95 percent of each class of shares of the company are owned, 

directly or indirectly, by seven or fewer persons who are equivalent beneficiaries; 

and 
 

 

37

b) less than 25 percent of the company’s gross income for the taxable year in 

which the item of income arises is paid or accrued, directly or indirectly, to 

persons who are not equivalent beneficiaries (other than in the form of arm’s 

length payments in the ordinary course of business for services or tangible 

property). 

4. 

a) A resident of a Contracting State will be entitled to benefits of the 

Convention with respect to an item of income derived from the other State, 

regardless of whether the resident is a qualified person, if: 

i) the resident is engaged in the active conduct of a trade or business 

in the first-mentioned State (other than the business of making or 

managing investments for the resident’s own account, unless these 

activities are banking or insurance activities carried on by a bank or 

insurance company), and the income derived from the other Contracting 

State is derived in connection with, or is incidental to, that trade or 

business; and 

ii) the resident satisfies the requirements of clause ii) of subparagraph 

f) of paragraph 2. 

b) If a resident of a Contracting State derives an item of income from a trade 

or business activity conducted by that resident in the other Contracting State, or 

derives an item of income arising in the other Contracting State from a related 

person, the conditions described in clause i) of subparagraph a) shall be 

considered to be satisfied with respect to such item only if the trade or business 

activity carried on by the resident in the first-mentioned Contracting State is 

substantial in relation to the trade or business activity carried on by the resident or 

such person in the other Contracting State. A trade or business will be deemed 

substantial if, for each of the three preceding taxable years, the asset value, the 

gross income, and the payroll expense that are related to the trade or business in 

the first-mentioned Contracting State each equals at least 10 percent of the 

resident’s (and any related parties’) proportionate share of the asset value, gross 

income and payroll expense, respectively, related to the activity that generated the 

income in the other Contracting State, and the average of the three ratios in each 

such year exceeds 15 percent. 

c) For purposes of applying this paragraph, activities conducted by persons 

connected to a person shall be deemed to be conducted by such person. A person 
 

 

38

shall be connected to another if one possesses at least 50 percent of the beneficial 

interest in the other (or, in the case of a company, at least 50 percent of the 

aggregate vote and value of the company's shares or of the beneficial equity 

interest in the company) or another person possesses at least 50 percent of the 

beneficial interest (or, in the case of a company, at least 50 percent of the 

aggregate vote and value of the company's shares or of the beneficial equity 

interest in the company) in each person. In any case, a person shall be considered 

to be connected to another if, based on all the relevant facts and circumstances, 

one has control of the other or both are under the control of the same person or 

persons. 

5. Notwithstanding the preceding provisions of this Article, where an enterprise of a 

Contracting State derives income from the other Contracting State, and that income is 

attributable to a permanent establishment which that enterprise has in a third jurisdiction, 

the tax benefits that would otherwise apply under the other provisions of the Convention 

will not apply to that income if the combined tax that is actually paid with respect to such 

income in the first-mentioned Contracting State and in the third jurisdiction is less than 

60 percent of the tax that would have been payable in the first-mentioned State if the 

income were earned in that Contracting State by the enterprise and were not attributable 

to the permanent establishment in the third jurisdiction. Any dividends, interest or 

royalties to which the provisions of this paragraph apply shall be subject to tax at a rate 

that shall not exceed 15 percent of the gross amount thereof. Any other income to which 

the provisions of this paragraph apply will be subject to tax under the provisions of the 

domestic law of the other Contracting State, notwithstanding any other provision of the 

Convention. 

6. A person that is a resident of one of the Contracting States, who is not entitled to 

some or all of the benefits of this Convention because of the foregoing paragraphs, may, 

nevertheless, be granted benefits of this Convention if the competent authority of the 

Contracting State in which the income in question arises so determines. 

7. Where under any provision of this Convention income or gains arising in one of 

the Contracting States are relieved from tax in that Contracting State and, under the law 

in force in the other Contracting State, a person, in respect of the said income or gains, is 

subject to tax by reference to the amount thereof which is remitted to or received in that 

other Contracting State and not by reference to the full amount thereof, then the relief to 

be allowed under this Convention in the first-mentioned Contracting State shall apply 

only to so much of the income or gains as is taxed in the other Contracting State. 

8. For the purposes of this Article: 

a) the term “recognized stock exchange” means: 
 

 

39

i) the NASDAQ System and any stock exchange registered with the 

U.S. Securities and Exchange Commission as a national securities 

exchange under the U.S. Securities Exchange Act of 1934; 

ii) the Malta Stock Exchange; and 

iii) any other stock exchange agreed upon by the competent authorities 

of the Contracting States; 

b) the term “principal class of shares” means the ordinary or common shares 

of the company, provided that such class of shares represents the majority of the 

voting power and value of the company. If no single class of ordinary or common 

shares represents the majority of the aggregate voting power and value of the 

company, the “principal class of shares” are those classes that in the aggregate 

represent a majority of the aggregate voting power and value of the company; 

c) the term “disproportionate class of shares” means any class of shares of a 

company resident in one of the Contracting States that entitles the shareholder to 

disproportionately higher participation, through dividends, redemption payments 

or otherwise, in the earnings generated in the other State by particular assets or 

activities of the company; 

d) For purposes of this paragraph an equivalent beneficiary is a resident of a 

member state of the European Union or of a European Economic Area state or of 

Australia or of a party to the North American Free Trade Agreement but only if 

that resident: 

i) 

A) would be entitled to all the benefits of a comprehensive 

convention for the avoidance of double taxation between any 

member state of the European Union or a European Economic 

Area state or any party to the North American Free Trade 

Agreement or Australia and the State from which the benefits of 

this Convention are claimed under provisions analogous to 

subparagraph a), subparagraph b), clause i) of subparagraph c), 

subparagraph d), or subparagraph e) of paragraph 2 of this Article, 

provided that if such convention does not contain a comprehensive 

limitation on benefits article, the person would be a qualified 

person under subparagraph a), subparagraph b), clause i) of 

subparagraph c), subparagraph d), or subparagraph e) of paragraph 

2 of this Article if such person were a resident of one of the States 

under Article 4 (Resident) of this Convention; and 
 

 

40

B) with respect to income referred to in Articles 10 

(Dividends), 11 (Interest) or 12 (Royalties) of this Convention, 

would be entitled under such convention to a rate of tax with 

respect to the particular class of income for which benefits are 

being claimed under this Convention that is at least as low as the 

rate applicable under this Convention; or 

ii) is a resident of a Contracting State that is a qualified person by 

reason of subparagraph a), subparagraph b), clause i) of subparagraph c), 

subparagraph d), or subparagraph e) of paragraph 2 of this Article; 

e) With respect to dividends, interest or royalties arising in Malta and 

beneficially owned by a company that is a resident of the United States, a 

company that is a resident of a member state of the European Union will be 

treated as satisfying the requirements of clause i) B) of subparagraph d) for 

purposes of determining whether such United States resident is entitled to benefits 

under this paragraph if a payment of dividends, interest or royalties arising in 

Malta and paid directly to such resident of a member state of the European Union 

would have been exempt from tax pursuant to any directive of the European 

Union, notwithstanding that the income tax convention between Malta and that 

other member state of the European Union would provide for a higher rate of tax 

with respect to such payment than the rate of tax applicable to such United States 

company under Article 10 (Dividends), 11 (Interest), or 12 (Royalties) of this 

Convention. 
 

 

41

Article 23 

RELIEF FROM DOUBLE TAXATION

1. In accordance with the provisions and subject to the limitations of the law of the 

United States (as it may be amended from time to time without changing the general 

principle hereof), the United States shall allow to a resident or citizen of the United 

States as a credit against the United States tax on income applicable to residents and 

citizens: 

a) the income tax paid or accrued to Malta by or on behalf of such resident or 

citizen; and 

b) in the case of a United States company owning at least 10 percent of the 

voting stock of a company that is a resident of Malta and from which the United 

States company receives dividends, the income tax paid or accrued to Malta by or 

on behalf of the payer with respect to the profits out of which the dividends are 

paid. 

For the purposes of this paragraph, the taxes referred to in paragraphs 3 a) and 4 of 

Article 2 (Taxes Covered) shall be considered income taxes. 

2. In accordance with and subject to the provisions of the law of Malta regarding the 

allowance of a credit against Malta tax in respect of foreign tax: 

a) where, in accordance with the provisions of this Convention, there is 

included in a Malta assessment income from sources within the United States, the 

United States tax on such income shall be allowed as a credit against the relative 

Malta tax payable thereon; and 

b) where a Maltese company owns at least 10 percent of the voting stock of a 

company that is a resident of the United States and from which the Maltese 

company receives dividends that are included in a Malta assessment in 

accordance with the provisions of this Convention, the income tax paid or accrued 

to the United States by or on behalf of the payer with respect to the profits out of 

which the dividends are paid shall, if those profits are included in a Malta 

assessment, be allowed as a credit against the relative Malta tax payable thereon. 

3. For the purposes of applying paragraph 1 of this Article, an item of gross income, 

as determined under the laws of the United States, derived by a resident of the United 

States that, under this Convention, may be taxed in Malta shall be deemed to be income 
 

 

42

from sources in Malta. 

4. Where a United States citizen is a resident of Malta: 

a) with respect to items of income that under the provisions of this 

Convention are exempt from United States tax or that are subject to a reduced rate 

of United States tax when derived by a resident of Malta who is not a United 

States citizen, Malta shall allow as a credit against Malta tax, only the tax paid, if 

any, that the United States may impose under the provisions of this Convention, 

other than taxes that may be imposed solely by reason of citizenship under the 

saving clause of paragraph 4 of Article 1 (General Scope); 

b) for purposes of applying paragraph 1 to compute United States tax on 

those items of income referred to in subparagraph a), the United States shall allow 

as a credit against United States tax the income tax paid to Malta after the credit 

referred to in subparagraph a); the credit so allowed shall not reduce the portion 

of the United States tax that is creditable against the Malta tax in accordance with 

subparagraph a); and 

c) for the exclusive purpose of relieving double taxation in the United States 

under subparagraph b), items of income referred to in subparagraph a) shall be 

deemed to arise in Malta to the extent necessary to avoid double taxation of such 

income under subparagraph b). 
 

 

43

Article 24 

NON-DISCRIMINATION

1. Nationals of a Contracting State shall not be subjected in the other Contracting 

State to any taxation or any requirement connected therewith that is more burdensome 

than the taxation and connected requirements to which nationals of that other State in the 

same circumstances, in particular with respect to residence, are or may be subjected. 

This provision shall also apply to persons who are not residents of one or both of the 

Contracting States. However, for the purposes of United States taxation, United States 

nationals who are subject to tax on a worldwide basis are not in the same circumstances 

as nationals of Malta who are not residents of the United States. 

2. The taxation on a permanent establishment that an enterprise of a Contracting 

State has in the other Contracting State shall not be less favorably levied in that other 

State than the taxation levied on enterprises of that other State carrying on the same 

activities. 

3. The provisions of paragraphs 1 and 2 shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, 

reliefs, and reductions for taxation purposes on account of civil status or family responsibilities that it grants to its own residents. 

4. Except where the provisions of paragraph 1 of Article 9 (Associated Enterprises), 

paragraph 7 of Article 11 (Interest), or paragraph 6 of Article 12 (Royalties) apply, 

interest, royalties, and other disbursements paid by a resident of a Contracting State to a 

resident of the other Contracting State shall, for the purpose of determining the taxable 

profits of the first-mentioned resident, be deductible under the same conditions as if they 

had been paid to a resident of the first-mentioned State. Similarly, any debts of a resident 

of a Contracting State to a resident of the other Contracting State shall, for the purpose of 

determining the taxable capital of the first-mentioned resident, be deductible under the 

same conditions as if they had been contracted to a resident of the first-mentioned State. 

5. Enterprises of a Contracting State, the capital of which is wholly or partly owned 

or controlled, directly or indirectly, by one or more residents of the other Contracting 

State, shall not be subjected in the first-mentioned State to any taxation or any 

requirement connected therewith that is more burdensome than the taxation and 

connected requirements to which other similar enterprises of the first-mentioned State are 

or may be subjected. 
 

 

44

6. Nothing in this Article shall be construed as preventing either Contracting State 

from imposing a tax as described in paragraph 8 of Article 10 (Dividends). 

7. The provisions of this Article shall, notwithstanding the provisions of Article 2 

(Taxes Covered), apply to taxes of every kind and description imposed by a Contracting 

State or a political subdivision or local authority thereof. 
 

 

45

Article 25 

MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting States 

result or will result for such person in taxation not in accordance with the provisions of 

this Convention, it may, irrespective of the remedies provided by the domestic law of 

those States, and the time limits prescribed in such laws for presenting claims for refund, 

present its case to the competent authority of either Contracting State. 

2. The competent authority shall endeavor, if the objection appears to it to be 

justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case 

by mutual agreement with the competent authority of the other Contracting State, with a 

view to the avoidance of taxation which is not in accordance with the Convention. Any 

agreement reached shall be implemented notwithstanding any time limits or other 

procedural limitations in the domestic law of the Contracting States. Assessment and 

collection procedures shall be suspended during the period that any mutual agreement 

proceeding is pending. 

3. The competent authorities of the Contracting States shall endeavor to resolve by 

mutual agreement any difficulties or doubts arising as to the interpretation or application 

of the Convention. They also may consult together for the elimination of double taxation 

in cases not provided for in the Convention. In particular the competent authorities of the 

Contracting States may agree: 

a) to the same attribution of income, deductions, credits, or allowances of an 

enterprise of a Contracting State to its permanent establishment situated in the 

other Contracting State; 

b) to the same allocation of income, deductions, credits, or allowances 

between persons; 

c) to the settlement of conflicting application of the Convention, including 

conflicts regarding: 

i) the characterization of particular items of income; 

ii) the characterization of persons; 

iii) the application of source rules with respect to particular items of 

income; 
 

 

46

iv) the meaning of any term used in the Convention; 

v) the timing of particular items of income; 

d) to advance pricing arrangements; and 

e) to the application of the provisions of domestic law regarding penalties, 

fines, and interest in a manner consistent with the purposes of the Convention. 

4. The competent authorities also may agree to increases in any specific dollar 

amounts referred to in the Convention to reflect economic or monetary developments. 

5. The competent authorities of the Contracting States may communicate with each 

other directly, including through a joint commission, for the purpose of reaching an 

agreement in the sense of the preceding paragraphs. 
 

 

47

Article 26 

EXCHANGE OF INFORMATION AND ADMINISTRATIVE ASSISTANCE

1. The competent authorities of the Contracting States shall exchange such 

information as may be relevant for carrying out the provisions of this Convention or of 

the domestic laws of the Contracting States concerning taxes of every kind imposed by a 

Contracting State to the extent that the taxation thereunder is not contrary to the Convention, including information relating to the assessment or collection of, the enforcement or 

prosecution in respect of, or the determination of appeals in relation to, such taxes. The 

exchange of information is not restricted by paragraph 1 of Article 1 (General Scope) or 

Article 2 (Taxes Covered). 

2. Any information received under this Article by a Contracting State shall be 

treated as secret in the same manner as information obtained under the domestic laws of 

that State and shall be disclosed only to persons or authorities (including courts and 

administrative bodies) involved in the assessment, collection, or administration of, the 

enforcement or prosecution in respect of, or the determination of appeals in relation to, 

the taxes referred to above, or the oversight of such functions. Such persons or 

authorities shall use the information only for such purposes. They may disclose the 

information in public court proceedings or in judicial decisions. The competent authority 

of the Contracting State that receives information under the provisions of this Article 

may, with the written consent of the Contracting State that provided the information, also 

make available that information to be used for other purposes allowed under the 

provisions of an existing mutual legal assistance treaty between the Contracting States 

that allows for the exchange of tax information. 

3. In no case shall the provisions of the preceding paragraphs be construed so as to 

impose on a Contracting State the obligation: 

a) to carry out administrative measures at variance with the laws and 

administrative practice of that or of the other Contracting State; 

b) to supply information that is not obtainable under the laws or in the 

normal course of the administration of that or of the other Contracting State; 

c) to supply information that would disclose any trade, business, industrial, 

commercial, or professional secret or trade process, or information the disclosure 

of which would be contrary to public policy (ordre public). 

4. If information is requested by a Contracting State in accordance with this Article, 

the other Contracting State shall use its information gathering measures to obtain the 
 

 

48

requested information, even though that other State may not need such information for its 

own purposes. The obligation contained in the preceding sentence is subject to the 

limitations of paragraph 3 but in no case shall such limitation be construed to permit a 

Contracting State to decline to supply information because it has no domestic interest in 

such information. 

5. In no case shall the provisions of paragraph 3 be construed to permit a 

Contracting State to decline to supply information requested by the other Contracting 

State because the information is held by a bank, other financial institution, nominee or 

person acting in an agency or a fiduciary capacity or because it relates to ownership 

interests in a person. 

6. If specifically requested by the competent authority of a Contracting State, the 

competent authority of the other Contracting State shall provide information under this 

Article in the form of depositions of witnesses and authenticated copies of unedited 

original documents (including books, papers, statements, records, accounts, and 

writings). 

7. The requested State shall allow representatives of the requesting State to enter the 

requested State to interview individuals and examine books and records with the consent 

of the persons subject to examination.

8. The competent authorities of the Contracting States may develop an agreement 

upon the mode of application of this Article, including agreement to ensure comparable 

levels of assistance to each of the Contracting States, but in no case will the lack of such 

agreement relieve a Contracting State of its obligations under this Article. 
 

 

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Article 27 

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

 Nothing in this Convention shall affect the fiscal privileges of members of 

diplomatic missions or consular posts under the general rules of international law or 

under the provisions of special agreements. 
 

 

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Article 28 

 ENTRY INTO FORCE 

1. This Convention shall be subject to ratification in accordance with the applicable 

procedures of each Contracting State, and instruments of ratification will be exchanged 

as soon thereafter as possible. 

2. This Convention shall enter into force on the date of the exchange of instruments 

of ratification, and its provisions shall have effect: 

a) in respect of taxes withheld at source, for amounts paid or credited on or 

after the first day of the second month next following the date on which the 

Convention enters into force; 

b) in respect of other taxes, for taxable periods beginning on or after the first 

day of January next following the date on which the Convention enters into force. 

3. Notwithstanding paragraph 2, the provisions of Article 26 (Exchange of 

Information and Administrative Assistance) shall have effect from the date of entry into 

force of this Convention, without regard to the taxable period to which the matter relates. 
 

 

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Article 29 

TERMINATION

This Convention shall remain in force until terminated by a Contracting State. Either 

Contracting State may terminate the Convention by giving notice of termination to the 

other Contracting State through diplomatic channels. In such event, the Convention shall 

cease to have effect: 

1) in respect of taxes withheld at source, for amounts paid or credited after 

the expiration of the 6 month period beginning on the date on which notice of 

termination was given; and 

2) in respect of other taxes, for taxable periods beginning on or after the 

expiration of the 6 month period beginning on the date on which notice of 

termination was given. 

IN WITNESS WHEREOF, the undersigned, being duly authorized thereto by 

their respective Governments, have signed this Convention. 

DONE at Valletta, in duplicate, this 8th day of August, 2008. 

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF 

THE UNITED STATES OF AMERICA: MALTA: 

MOLLY BORDONARO TONIO FENECH