Malta-Russia Tax Treaty

It is expected that the new tax treaty will be in force much quicker then its predecessor.

Following the Cyprus crises, Malta has remained a tax compliant and tax efficient jurisdiction for legitimate businesses.

Fitch has recently confirmed that Malta’s banking system is stable: Fitch Report: Malta Bank’s Stable – with the World Economic Forum stating that Malta is 13th in respect of sound banking systems – globally.

Added to which, French President Francois Hollande’s has recently endorsed the legitimacy and integrity of Malta’s banking sector, stating that Malta is ‘not a tax haven’ – but a legitimate low tax EU jurisdiction. 

The terms of the Russian – Malta tax treaty allows for the following benefits:

• 5% for interest and royalties
• 5 to 10% on dividends
• Business profits to be taxed at normal state tax

Malta, unlike the other contenders, provides unique tax benefits, which international groups with interests in Russia will be able to fully explore when the treaty becomes law in both countries.

Namely:

• Malta allows for an effective 5% rate of corporation tax on business income
• Companies, which are resident but not domiciled in Malta are taxed on the remittance basis of taxation

The Malta-Russia tax treaty provides generous exemptions for royalties and a quasi-full exemption from tax on foreign dividends. The absence of CFCs, little TP regulation and access to the EU tax directives also help. These combined factors make Malta an ideal jurisdiction to locate a group holding company, as well as a financing or an IPR holding SPV.

More importantly, Malta allows for the continuation of non-Maltese companies, for example a BVI holding entity subject to various restrictions can easily re-domicile (migrate) to Malta without losing its corporate personality.

Notably, on becoming Malta-resident the company can achieve a tax-free step-up in the base cost of its assets effectively avoiding tax on future disposals.

To see the text of the Russia – Malta Tax Treaty please go here.