The ‘Agreement for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to Taxes on Income’ signed between Malta and the Republic of Turkey in 2011 will come into effect on 1 January, 2014.
The DTA sets out a 10% withholding tax on dividends paid by a Turkish resident company to a Maltese company in which it has at least a 25% shareholding in the Turkish resident company. In all other circumstances a maximum withholding tax of 15% will be applied.
Under the terms of the DTA, Malta will not tax dividends paid by a Maltese resident company to a Turkish resident company.
The DTA also sets out that a maximum Turkish withholding tax of 10% on royalties and on interest paid by a Turkish resident to a Maltese resident beneficial owner of the interest/royalty income.
The DTA follows the OECD’s Model Tax Treaty, however the meaning of “permanent establishment” has been somewhat extended as it includes also a “service PE”.
