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Paying dividends and interest to Malta has become more expensive

On March 20, the law on the ratification of the protocol on amendments to the Agreement on the Avoidance of Double Taxation (AADT) between Malta and the Russian Federation entered into force.

In fact, the changes made by the protocol are already applied from January 1, 2021. Dividends and interest paid from Russia to Malta must now be withheld at source at a rate of 15% (previously the rates were 5% or 10%, depending on the circumstances).

The preferential rate of 5% is maintained for institutional investments and for public companies in Malta, subject to a number of conditions. The changes did not affect the interest income paid on Eurobonds, bond loans of Russian companies, as well as loans provided by foreign banks.

At the same time, as the Ministry of Finance of the Russian Federation noted earlier, the terminology of the Russian-Maltese convention does not allow applying a reduced 5% tax rate when paying dividends to public companies that have depositary receipts in free circulation, and not shares. In this sense, the provisions of the AADT between Russia and Malta differ from the terms of similar agreements with Cyprus and Luxembourg.

Recall that earlier changes were made to increase tax rates in the Russian AADT with Cyprus and Luxembourg, and the agreement with the Netherlands will be denounced due to the refusal of the kingdom from the offer of the Russian side.