Article 17(1)(b) of the Treaty of Malta then contains the corresponding tax provision limiting the right of the United States to tax distributions of Maltese pension schemes on the amount that would have been taxable under Maltese law if they had been distributed to a Maltese person. In accordance with Article 1(5) of the Treaty of Malta, Articles 17(1)(b) and 18 are excluded from the savings clause. Therefore, the savings clause of the Treaty of Malta should not prevent a US citizen or a resident member of a Maltese pension from being entitled to benefits under the contract under the relevant provisions of Articles 17 and 18. Our expertise in international tax allows us to guide our clients through tax planning and compliance so they can focus on what`s important. At Freeman Law, our clients engage in a connected business environment that spans the globe. From supply chains to markets, cross-border taxation affects all global companies. . Overall, the new treaty includes higher withholding tax rates than other recent U.S. tax treaties for the taxation of home country interest and royalties, a provision on the application of the treaty provisions to fiscally transparent entities, a stricter limitation of benefits (“LOB”) provision than that included in the 2006 U.S. Model Income Tax Convention to reduce the risk of forum shopping by third-country nationals.
and comprehensive arrangements for the exchange of information. Technical explanations of contracts that contain this provision, including the 2006 model, usually include an example with a Roth IRA. The example states that “a distribution of a U.S. roth IRA to a resident [of the foreign country] in [that foreign country] would be exempt from tax in which the distribution would be exempt from U.S. tax if distributed to a U.S. citizen residing in the United States.” However, the corresponding tax provision works both ways, so that if a U.S. citizen or resident is a recipient of a foreign pension in a country that has a contract with the United States that includes that provision, if distributions from that foreign pension plan are made to the U.S. beneficiary, the U.S. can only tax the distribution to the extent that: in which the foreign contracting country would have taxed its own residents on such a distribution in accordance with its national law. 13 In the case of Bulgaria and the Slovak Republic, which have incredibly favourable national legislation on the taxation of pensions, the United States income tax treaties concluded with those countries do not contain an equivalent tax provision, with the result that the United States` right to tax is maintained in both cases. This should perhaps not be surprising in the Treaty on the Slovak Republic, since this Treaty was negotiated before the adoption of the Roth provisions.
An article entitled Malta`s Double Taxation Convention already exists in Saved Items Jeffrey L. Rubinger is a tax partner at Bilzin Sumberg in Miami and leads his international tax practice. He holds a Juris Doctor from the University of Florida`s Levin College of Law and an LL.M. in Taxation from New York University School of Law. He is admitted to the Florida and New York bar. To promote the growth of international trade, including trade in financial services, successive Maltese governments have sought to conclude double taxation agreements with key trading partners as well as with emerging economies. These bilateral agreements solve the problems associated with the double taxation of passive and active income. The applicable tax treaties in force can be found here. Companies that have both their habitual residence and registered office in Malta are generally taxed in Malta at a rate of 35% worldwide. Maltese tax legislation does not explicitly provide for the taxation of companies on the basis of retained earnings. In practice, however, in accordance with International Financial Reporting Standards, profit reported in the income statement is the basis for calculating income and taxable amount, subject to specific adjustments required and imposed under the relevant tax rules. Typically, a corporation`s profits from the transfer of capital assets are aggregated with its other income, and total income and capital gains are taxed at the general rate.
However, profits from the transfer of immovable property located in Malta are subject to a separate flat-rate property transfer tax. For businesses that are eligible for benefits under the Business Development Act, reduced tax rates of five to 15% apply. Malta has no thin capitalization rules regarding the deductibility of interest expenses, nor controlled rules for foreign companies or other similar specific anti-abuse laws. While several other treaties, including the United States The tax treaties concluded with Poland, Belgium and Chile10 also contain the corresponding tax provision and the deferral provision, in each of these cases either the relevant foreign legislation restricts the benefits of these agreements or the relevant contractual provisions are not exempt from the savings clause of the agreement, and therefore the U.S. taxing power is not limited by the agreement to U.S. citizens and residents. In the case of Poland, for example, the savings clause of the Treaty applies only to the deferral provision of the contract, but not to the corresponding tax provision. Therefore, the United States can continue to tax income accumulated under a Polish pension plan, but not distributions to U.S. beneficiaries of such a plan. In the case of Chile and Belgium, distributions are generally (at least partially) taxable under local law, so the United States may also tax distributions to this extent on the basis of the equivalent tax provisions of the treaties.
The only other country whose treaty with the United States contains the relevant treaty provisions discussed above and also has extremely favorable local legislation is Malta. As noted below, the combination of these factors (i.e. favourable contractual arrangements as well as favourable tax treatment of pensions in Malta) yields extremely tax-efficient results. As briefly mentioned above, the savings clause in most U.S. income tax treaties generally allows the U.S. to continue taxing its citizens (and in some cases, their green card holders and/or former citizens and green card holders in the long term) as if the convention had not gone into effect. In the 2006 model, for example, this clause is found in Article 1(5). The savings clauses of these treaties also provide for various spin-offs, so the United States is required to comply with the provisions of the treaties on these excluded areas also in the taxation of its citizens. .
