By means of Legal Notice 168 of 2019, the Government of Malta has published the new treaty for the avoidance of double taxation with the Republic of Kosovo.
With respect to dividends and interest, the two States agreed to have a shared jurisdiction to tax (i.e. countries will both have the right to tax, with the residence State providing relief from double taxation). In the case of royalties, double taxation relief is provided by having the residence State being given exclusive jurisdiction to tax.
Article 10 – Where the dividends are paid by a company which is a resident of Kosovo to a resident of Malta, the tax charged in Kosovo shall not exceed 0% of the gross amount of the dividends if the beneficial owner is a Maltese company which holds directly at least 10% of the capital of the company in Kosovo throughout a 365 day period that includes the day of the payment of the dividend. The tax rate would be 10% of the gross amount of the dividends in all other cases. In view of Malta’s imputation system of tax, Malta will not withhold any tax on outbound distribution of dividends.
Article 11 – With respect to interest, both countries have agreed that the source State (i.e. the State where the interest income arises) will limit the taxation to 5% of the gross interest.
Article 12 – With respect to royalty income, both countries have agreed that the source State (i.e. the State in which the royalty income arises) will have no right to tax, while the residence State (i.e. the State where the recipient of the royalty income arises) is given an exclusive right to tax.
The agreement will come into force within 30 days when both States would have notified each other in writing through diplomatic channels that the legal requirements for the entry into force of the agreement have been complied with.
