By means of LN 142 of 2018 Malta had adopted in its legislation the Multilateral Convention on implementing Tax Treaty related measures to prevent Base Erosion and Profit Shifting (BEPS).
The main purpose of this is to have an effective mechanism for Malta to implement the agreed changes in a synchronized and efficient manner across the network of existing agreements for the avoidance of double taxation on income without the need to bilaterally renegotiate each such agreement.
The package of measures developed under the OECD/G20 BEPS project includes tax treaty-related measures to address certain hybrid mismatch arrangements, prevent treaty abuse, address artificial avoidance of permanent establishment status, and improve dispute resolution.
Governments lose substantial corporate tax revenue because of aggressive international tax planning that has the effect of artificially shifting profits to locations where they are subject to non-taxation or reduced taxation. The treaty related measures ensure that profits will be taxed where substantive economic activities generating the profits are carried out and where value is created. The measures will also ensure that existing agreements for the avoidance of double taxation on income are interpreted to eliminate double taxation with respect to the taxes covered by those agreements without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance, including through treaty-shopping arrangements aimed at obtaining reliefs provided in those agreements for the indirect benefit of residents of third jurisdictions.