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Malta and the US signed a double taxation agreement on the 8th August 2008, ending 11 years of efforts by successive US Ambassadors. This needs to be ratified by the Senate before coming into force.
Malta signed a double taxation agreement with the US in 1980 but it was suspended in 1997 when new tax legislation based on a nominee concept came into force in 1994/5 which US authorities feared could lead to tax avoidance, especially given Malta’s double taxation agreement with Libya.
Ambassador Anthony Gioia had been particularly blunt in 2004 describing the issue: “The double taxation issue is in the hands of the Treasury Department which has indicated that this is not an important issue for the US. When the US had threatened to cancel this agreement, we warned Malta on several occasions that the practices they were engaging in could jeopardise our double taxation agreement. When the treaty was cancelled, Malta then changed the policy, but that was after, as we say in the US, ‘the horse had left the barn’ so it is very difficult to get this restarted.”
Ambassador Molly Bordonaro has been pushing for an agreement since she took up her post in 2005. It was put on the agenda when Prime Minister Lawrence Gonzi met President George Bush, which finally got things moving.
There are a number of American companies in Malta like Baxter, Cardinal, Methode and Hetronic, which would benefit from the double taxation agreement, in both the manufacturing and service industries. The agreement is widely expected to facilitate growth in bilateral trade and services (particularly financial services), as well as making it more attractive for Malta to be a base for US companies operating in North Africa – especially Libya where Malta also has a double taxation agreement.
There are also several hundred Maltese residents receiving pensions from the US who pay withholding tax there.
The agreement will also help the increasing number of Maltese willing to invest in the US, such as the EC School of languages.
Malta exported €240 million worth of goods and services to the US last year.
The signing ceremony was a high profile affair attended by top executives from financial services and industries, as well as of the Maltese American Chamber of Commerce. In his speech, Finance Minister Tonio Fenech, whose secretariat was instrumental in coaxing this agreement to its finale, said that it would be a catalyst for further trade. He also noted that the agreement had provisions which meant that even Maltese residing in the EU and Australia would get fiscal benefits.
Ambassador Bordonaro said the agreement also included provisions for the exchange of information to prevent tax evasion, which was in line with the highest standards of the OECD. She also spoke glowingly of the impact of the agreement, saying that it marked a new chapter in the relations between Malta and the US.
Prime Minister Lawrence Gonzi noted that Malta now had double taxation agreements with some 50 countries with several others in the pipeline. The only outstanding issue is not the waiver of the visa requirement for Maltese visiting the US, which is dependent on the provision of biometric passports. Dr Gonzi said that there had been progress on this issue.
Source: www.di-ve.com
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