Malta and China Sign New Double Tax Agreement

The Minister of Finance, Economy and Investment Tonio Fenech and the Minister for Taxation of the People’s Republic of China Xiao Jie have signed a new agreement for the avoidance of double taxation. This agreement will replace the existing double tax agreement between Malta and China signed on 2nd February 1993 and will provide investors and traders from both countries with a fiscal environment which incorporates beneficial conditions for investment in Malta and China.

The provisions of this double tax agreement comply with current internationally accepted standards, so much so that the negotiations were based on the principles laid down by the OECD Model Tax Convention on Income and Capital and other recent tax treaties concluded by both countries. Such an agreement presents an ideal opportunity for Chinese investors to effectively tap into the European market particularly due to the following factors:

  • The withholding tax rate for dividends for a holding of at least 25% of the company paying the dividends has been established at 5% as opposed to 10%;
  • The withholding tax rate for certain royalties has been reduced from 10% to 7%.

While the double tax agreement established an attractive investment climate for genuine business transactions it also introduces certain provisions which serve to prevent tax avoidance through abuse of the tax treaty. The signing of the double tax agreement presents another important milestone in the relations between Malta and China and continues to strengthen the already very good relations between the two countries.

The dynamic relationship which exists between Malta and China is manifested by the fact that the two countries sign almost one agreement per year since the establishment of diplomatic relations. In relation to such, a further step towards creating a favourable economic environment for investment between Malta and China was the signing of the Agreement for the Reciprocal Promotion and Protection of Investments in 2009.

The agreement will enter into force after it is ratified by both countries.