US – Malta Double Taxation Agreement

16th February 2011

US – Malta Double Taxation Agreement. What does it mean for Maltese businesses?

The American Chamber of Commerce in Malta, AmCham Malta, in collaboration with the US Embassy in Malta, organised a forum on Wednesday 16th February 2011 entitled US – Malta Double Taxation Agreement. What does it mean for Maltese businesses?AmCham Malta brought together a distinguished panel of speakers to address the forum and give an insight into the technical and business aspects of this Agreement.

AmCham President Pierre Attard making the opening address

AmCham President Pierre Attard making the opening address

The members of the panel were Dr. Antoine Fiott, a leading tax consultant who was a consultant to the core negotiating team, Dr. Juanita Brockdorff, tax services partner at KPMG and Mr. Kenneth Farrugia Chairman of Finance Malta and the Ambassador of the United States of America to Malta, H.E. Douglas W Kmiec. After the presentations, AmCham President Pierre Attard moderated a Q&A session. Questions were taken from the audience of over 60 participants.

Ambassador Kmiec addressing the forum. At left are: Dr. Jaunita Brockdorff, Dr. Antoine Fiott, Mr Kenneth Farrugia, Mr Pierre Attard

Ambassador Kmiec addressing the forum. At left are: Dr. Jaunita Brockdorff, Dr. Antoine Fiott, Mr Kenneth Farrugia, Mr Pierre Attard

The forum was held in the conference centre at the Malta Financial Services Centre.

general view of the audience

general view of the audience

AmCham Malta write to US Senators urging ratification of Double Taxation Treaty

AmCham Logo copyAm-Cham Malta
The American Chamber of Commerce in Malta
c/o The Exchange Buildings, Republic Street, Valletta VLT05
Malta.
Tel: 00356 21 247233 Fax: 00356 21 245223 www.amcham-malta.org

page1image3024

8th December 2009

Support for the Treaty for the Avoidance of Double Taxation between the USA and Malta

Dear Senator Kerry,

The American Chamber of Commerce in Malta writes to inform you of our active support in favour of the ratification of the Treaty for the Avoidance of Double Taxation between the United States of America and Malta.

The American Chamber of Commerce in Malta represents companies and individuals having US- investment and US-business interests in Malta.

In your capacity as member of the US Senate’s Foreign Affairs Committee, we strongly invite you to favourably consider supporting the ratification of said Treaty, presently under review within your Committee.

Over the decades, Malta and the USA have enjoyed a strong political and business relationship. However, we firmly believe that the ratification of the Treaty by Senate will strengthen even further this relationship and open new opportunities of bilateral commercial cooperation between our respective countries, to the benefit of all.

On behalf of all members of the American Chamber of Commerce in Malta who would have liked to write to you directly, we look forward to the timely ratification of the Treaty.

We thank you in advance for your attention and cooperation and with optimism look forward to implementing the ideals set forth in the Treaty which will bear positive economic fruits once ratified and implemented.

Cordially Yours,

Dr Anton Tabone
President of the American Chamber of Commerce, Malta
cc:
Senator John Kerry, 218 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC20510 Senator Richard Lugar, 306 HART SENATE OFFICE BUILDING WASHINGTON DC 20510 Senator Jeanne Shaheen, 520 HART SENATE OFFICE BUILDING WASHINGTON DC 20510 Senator Kaufman, 383 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510

Double taxation (avoidance) agreement signed between Malta & USA

ADDRESS BY THE HON. LAWRENCE GONZI, PRIME MINISTER, AT THE SIGNING OF THE TEXT OF THE DOUBLE TAXATION TREATY WITH THE U.S.A. – AUBERGE DE CASTILLE, VALLETTA – 8TH AUGUST 2008

Your Excellency, Distinguished Guests, Ladies and Gentlemen, Good morning.

It is with great personal satisfaction that I stand here today announcing that we have reached another milestone through the signing of the text of the Double Taxation Treaty with the USA.

As you may recall, this issue was high on the agenda in the meeting I had with President Bush in Washington in 2005. Since then teams from our Ministry of Finance and the US Treasury have been working painstakingly to conclude this agreement.

The discussions, negotiations and the follow-up work have been successful and we look forward to having this treaty in operation in the not too distant future.

The USA makes a welcome addition to our tax treaty network. In fact, some 12 years ago we already had a similar agreement in place that is why it was important that we re-establish our relationship with the US at this level.

We now have treaties with about 50 countries, with some in the pipeline at various stages of negotiation. These ensure the removal of any potential trade barriers between our respective countries by establishing internationally accepted provisions for the avoidance of double taxation on the same income. They also establish appropriate channels for exchange of information between our respective countries in our mutual efforts to prevent fiscal evasion.

In the face of international developments, my Government will continue in its endeavour to negotiate tax treaties with other jurisdictions making this a central pillar of our increasingly diversified economy.

Malta and the United States established full diplomatic relations upon Malta’s independence in 1964. Over the years this relationship has developed, although there where some difficult times. However, what is certain is that under my government, this relationship has continued to strengthen and can currently be described as both active and cordial.

Today, Malta and the United States enjoy a good relationship on a number of levels.

Minister Fenech has already highlighted the good trade relations we have with the US. Through this agreement we hope to improve quality trade even further, strengthen our communication and encourage investment.

We always believed that our country has the potential to attract high quality investment from the USA. Recently, Foreign Direct Investment into Malta has been strong as a result of our highly educated, English-speaking population, excellent reputation for back-office and financial services and the significant investment going into such diverse areas as aviation, pharmaceuticals and Information and Communication Technology (ICT). The advent of SmartCity is another area where there is potential benefit for both countries.

The number of US firms participating in the Maltese economy has always been significant in relative terms. Firms operating in Malta that have US ownership or investment include major hotels, manufacturing and repair facilities, and some offices servicing local and regional operations.

Our proximity to North Africa, our EU membership, the island’s safety, the capability of our professionals, our application of international standards and our quality of life make Malta an attractive proposition. US participation is therefore expected to grow over time and this will be beneficial to both countries as economic ties expand.

On the social level we are inextricably linked through social ties created by Maltese migrants over the years. The familial ties of Maltese migrants have always remained strong as has the bond to their motherland. This is evidenced to this very day through active migrant communities, some of which I had the opportunity to meet personally on my visit to the USA, and the various local organisations and activities they organise to enhance migrant relations.

On the political front, the spirit of cooperation has also been extremely good. Just looking at some recent initiatives we can mention the good level of cooperation we have in the area of security where Maltese officers trained in the USA, we have benefited from donations of patrol boats and a state-of-the-art container screening system. We must also not forget that the US is helping us tremendously in our plight to cope with the huge influx of illegal immigrants coming to our shores.

In spite of these good relations and the benefits we are deriving and experiencing, there is still more that can be done. There is definitely the potential of promoting the natural beauty of Malta and its rich cultural treasures in the USA with the aim of attracting more visitors to our islands and to make travel between our two countries easier. Besides the requirement of better air links, it is just as important that the visa requirement for Maltese traveling to the US be waivered. This was another issue I raised with President Bush in 2005. Negotiations on this matter are ongoing and am pleased to state that are now at an advanced stage both at a bilateral and EU level. We remain hopeful that the matter will be concluded soon.

There is also scope for more cooperation at an educational level. The agreement between the University of Malta and James Madison University of Virginia to offer a dual post-graduate degree programme is a commendable initiative. I look forward to seeing more cooperation agreements of this type in the future.

The Double Taxation Agreement with the USA will soon be a reality and I would like to thank the US Treasury and especially the team lead by Michael Mundaca for their work in making this happen.

I join the Minister of Finance in commending the Commissioner for Inland Revenue and our Tax Treaty Negotiating Team, the Malta Financial Services Authority, the Malta Maritime Authority, the Financial Intelligence Analysis Unit, and Ambassador Mark Miceli and his excellent staff for all their efforts. Furthermore, I thank our industry leaders for their assistance throughout the process.

My sincere gratitude also goes to Ambassador Molly Bordonaro, a true friend of Malta, who together with her embassy personnel has played an important part in supporting the negotiation process and took an active interest in its completion.

Maltese-US relations are active and well and we have already managed to achieve a lot. However, by continuing to work together in a spirit of cooperation and goodwill we can achieve much more. Let us, therefore, use this Treaty for our mutual benefit.

Thank you.

Address by the Hon. Tonio Fenech, Minister of Finance

ADDRESS BY THE HON. TONIO FENECH, MINISTER OF FINANCE, THE ECONOMY AND INVESTMENT, ON THE SIGNING OF THE TEXT OF THE DOUBLE TAXATION TREATY WITH THE U.S.A. – AUBERGE DE CASTILLE, VALLETTA – 8TH AUGUST 2008

Your Excellency, Distinguished Guests, Ladies and Gentlemen, Good morning.

It is our pleasure to announce that we have taken another important step in the process leading to a Double Taxation Treaty between Malta and the United States of America.

After I initialled the text of the Treaty last March with Michael Mundaca from the US Treasury, work has continued in earnest and today we are signing the agreement. This will now go before the US Senate for ratification before coming into force. It will also be published by both the US Treasury and the Government of Malta to become a public document prior to ratification.

I would like to take this opportunity to thank the US Treasury, especially the team lead by Michael Mundaca, for making this treaty a reality. This is truly a momentous event for Malta which we cherish.

A Treaty for the Avoidance of Double Taxation with the US is of significant importance to Malta for a number of reasons.

Cross border trade, commerce and investment can only foster and grow if businesses are allowed to transact with a degree of certainty, double tax treaties are economic instruments that benefit individuals and corporate entities, as well as of the partner states involved.

Double Taxation treaties have played an integral role in the development of Malta’s economy since it became independent. These international agreements have allowed tax issues with partner countries to be clarified, international double taxation to be avoided, and fiscal evasion to be curtailed. In the local context, they have helped Malta develop trade relations with other countries, assisted the flow of inward direct investment and served as an important platform for Maltese residents doing business in partner countries.

Double tax treaties have thus become a vital tool in Malta’s drive to increase the level of cross- border business not just in the export of goods but also in services and capital movement, which are good growth areas for Malta.

The addition of the US, one of the world’s major economic players, to our comprehensive network of double taxation agreements was therefore inevitable.

This treaty is a historic accord in its own right. In 2007 we finalised our discussions for a new business taxation regime with the European Commission. This was accepted to certify, so to speak, the international acceptance of our business tax regime with international norms and requirements. This regime included various anti-abuse measures that were further strengthened in 2007 and 2008 by improving our legislation for better information exchange with tax authorities internationally to avoid tax fraud and similar crimes. We have seen the immediate effect of this as various large investors have honoured us with investments in Malta as their own tax authorities signalled their acceptance of Malta as a financial jurisdiction of repute.

This treaty with the USA furthers this recognition internationally. This double taxation agreement symbolises the good relationship Malta has with the US, regularises the investment channel and manifests the perception that Malta is acceptable as a place to do business. The USA and Malta

already have well established information exchange links through international networks and bodies combating tax fraud, terrorist financing and other forms of criminal activity.

The significance of this treaty therefore extends beyond the tax implications to improve Malta’s competitive and marketing position so that it is perceived to be clean, above board and accepted by our counterparts internationally, including the USA. We will maintain this reputation and will work with our counterparts in the USA to ensure the long term commitment to our reputation and to maintain the trust and confidence we have strived to win.

Malta’s economy has made significant strides forward in recent years with good GDP growth, the fulfilment of the Maastricht economic convergence criteria and adoption of the euro as our national currency. In the past two years alone, we have also managed to attract over US $3 billion worth of high quality FDI to our shores.

We already enjoy good economic relations with the US where we have experienced a favourable balance of trade in recent years. Exports to the US last year amounted to over €246 million. We believe that this treaty will act as a catalyst to increase trade between our countries even more. The indications are already good and we will work to continue facilitating this at different levels, even beyond fiscal frameworks.

The presence of international financial and business advisory institutions in Malta are contributing to enhancing relations with the US and facilitating increased economic activity. It is our intention to continue supporting them through our legislative and regulatory framework. The initiatives undertaken and marketing efforts of Malta Enterprise and FinanceMalta to promote Malta as an attractive location for business are to be commended.

The treaty in itself is quite unique, as there are provisions that also apply to significant Maltese communities living in other countries in particular those in the EU and Australia, so that these too may benefit from the tax provisions incentivising investment. This is an interesting development where, whilst strict anti abuse provisions to stop treaty shopping were drafted into the treaty, the US Treasury still understood the need for international trade and investment in Malta with key countries where there is a significant Maltese migrant population. This will ensure that the treaty is used for the benefit of Malta and Maltese communities abroad. Again, I must thank the Treasury for their understanding here and their grasp of the realities and economics of even a small country like Malta.

Arriving at this stage was not an easy task. I would, therefore, like to congratulate the Commissioner for Inland Revenue and our Tax Treaty Negotiating Team, the Malta Financial Services Authority, the Malta Maritime Authority, the Financial Intelligence Analysis Unit, and Ambassador Mark Miceli and his excellent staff for all their efforts and commitment to finalise this agreement. Last but not least, I thank our industry leaders for their support and assistance throughout the process.

My special thanks and appreciation go to Ambassador Bordonaro and her embassy people who have been very supportive of the negotiation process and instrumental in facilitating communication between Malta and the United States. Of course, I must also mention the continued support of AmCham and the US investor community in Malta as well as the practitioners who have supported us and consulted with us throughout the process.

I auger that this historic double taxation agreement will further strengthen relations with the US, stimulate economic activity and bring our nations closer together for the mutual benefit of Maltese and US citizens alike. Thank you.

A Treaty with a Message

A treaty with a message

Tonio Fenech

We have now achieved a new high in our economic relations with the US. A historic accord was signed last Friday, the Double Taxation Treaty between the two countries. This treaty is on its way to ratification by the US Senate for Foreign Relations after which it will come into force.

This is an important achievement that is expected to have a very positive impact on our economic growth and job creation prospects, to the benefit of business and worker alike. This is because this treaty is not just one of the 50 that we already have with so many other countries, but is with the US, the largest destination market and source of investment.

Over the years we have worked assiduously to build the economic framework that makes Malta the successful financial and business jurisdiction it is today. We have great people who are well educated, pleasant, and English speaking. We have a really good tax regime. We have introduced the Euro, one of the most highly traded currencies on the world markets. Our banking and financial system has grown with most of the big names with a presence here. We have joined the euro payments system, placing us on the international payments network together with all other EU member states. The best known financial services providers are here.

Our regulatory regime is very well established and has grown its connections internationally. Our quality of life and standard of living is really attractive with the right resources for health, education, international travel and other ingredients modernised and in place. The word is out and robust quality foreign direct investment is being received.

We did not stop here. Our strategy is to establish at least two more ingredients to trade and economic facilitation. The first is improved international marketing and communications through FinanceMalta and Malta Enterprise. The second is our international tax treaty network to open up more cross-border investment channels.

Treaties that avoid double taxation are a critical instrument in overcoming a major barrier to trade – that of being taxed twice by two different governments. So for example, if a Maltese investor establishes a business in the US and makes a profit there, that profit could be taxed in the US and again in Malta. This treaty avoids this situation and determines the tax regime to ensure fair treatment and to encourage investment in both countries.

These treaties therefore have helped Malta develop trade relations with other countries, improving the flow of inward direct investment and serving as an important platform for Maltese residents doing business in partner countries. We now have treaties with about 50 countries, and a few nearing completion.

We have grown our tax treaties network beyond our important trading partners and have expanded this to emerging economies, neighbouring countries and other jurisdictions expected to become trading or diplomatic partners over time.

The addition of the US, one of the world’s major economic players, to treaty partner level is critical in terms of true recognition of Malta’s progress internationally. This is not only positive for the benefits that can be achieved from the US-Malta relationship, but also because it sends a very positive international message to the global market that, having passed a very demanding US Treasury regime, Malta is a recognised quality jurisdiction. This is because the value of the treaty is also largely in its perception value. A treaty means normalised political and economic relations between two countries, and acceptance of the Malta jurisdiction by US regulatory and fiscal authorities.

Malta really means business. The significance of this treaty therefore extends beyond the tax implications to improve Malta’s competitive and marketing position so that it is perceived to be clean, above board and accepted by our counterparts internationally, including the US. We have based our reputation on these quality fundamentals.

To this end, the US and Malta already have well established information exchange links through international networks and bodies combating tax fraud, terrorist financing and other forms of criminal activity. However the treaty provides another necessary component to this network. The message it sends is also quite clear – we will protect our excellent reputation by working openly with the best in the world.

Malta’s economy has made significant strides forward in recent years with good GDP growth, the fulfilment of the Maastricht economic convergence criteria and adoption of the euro as our national currency. When taking all such factors into consideration, it is therefore no surprise that in the past two years alone, we have also managed to attract over US $3 billion worth of high quality FDI to our shores.

This success is everybody’s success. Everybody benefits from this. How else could we have afforded improving tax bands, large capital projects, and continued social benefits? Everybody benefits because we are a socially responsible government and have ensured that benefits are properly distributed.

We aim to continue this run of success – with everybody’s participation. We believe that we can continue to improve our attractiveness to investors abroad. We have already attracted and continue to attract investments such as Smart City and numerous other international organisations in the financial, manufacturing, tourism, gaming and other industries. We believe that we can do this in other areas too. This way, we can also enjoy employment opportunities in a variety of fields and a diversity of investment to make the Malta portfolio a truly resilient one.

Mr Fenech is Minister of Finance, the Economy and Investment.

AmCham Malta welcomes recent Malta – USA developments

The American Chamber of Commerce in Malta welcomes with great satisfaction the announcement that the Treaty for the Avoidance of Double Taxation between the Government of Malta and the Government of the United States of America has been initialled. The Chamber eagerly looks forward to the final signing of the Treaty that would effectively bring the Treaty into force…more here

Malta, US Malta sign MoU on visa waiver programme

Malta and the United States have signed a memorandum of understanding for Malta to form part of the US Visa Waiver Programme.

The MoU was signed by Justice and Home Affairs Minister Carm Mifsud Bonnici and US Ambassador Molly Bordonaro and marks the first step for Maltese citizens to eventually be able to travel to the United States without requiring a visa.

Ministry officials explained that Malta is expected to meet US requirements for eligibility to the visa waiver programme by the end of this year, following the introduction of biometric passports.

Last week the ambassador also announced that Malta and the US are shortly expected to formally sign a double taxation avoidance agreement.

The double taxation agreement and the visa issue have been the subject of talks between the United States and Malta for a number of years.