On 18 December 2018, Malta deposited its instrument of ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (‘MLI’) with the OECD, together with a list of reservations and notifications.
The Multilateral Instrument is a multilateral treaty that enables jurisdictions to swiftly modify their bilateral tax treaties to implement measures designed to better address multinational tax avoidance. These measures were developed as part of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project.
Malta had previously ratified the MLI by means of Legal Notice 142 of 2018. The MLI is expected to enter into force with respect to Malta on 1 April 2019, which is the first day of the month following the expiration of a period of three calendar months beginning on the date of the deposit by Malta of its instrument of ratification. The date of entry into force of the MLI in Malta will be published by means of a notice in the Malta Government Gazette.
The provisions of the MLI shall have effect in Malta with respect to a Covered Tax Agreement (‘CTA’):
- with respect to taxes withheld at source (‘WHT’) on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after the first day of the next calendar year that begins on or after the latest of the dates on which the MLI enters into force for each of the Contracting Jurisdictions to the CTA;
- with respect to other taxes, the date when the MLI enters into effect depends on: (i) the timing of the MLI ratification by the Contracting Jurisdictions to a CTA, (ii) the Contracting Jurisdictions’ position on the relevant MLI articles and (iii) the duration of the taxable period in each Contracting Jurisdiction.
The provisions of the MLI concerning WHT shall become effective as of 1 January 2020 to the extent that Contracting Jurisdictions to CTAs with Malta have deposited their instruments of ratification of the MLI with the OECD prior to 1 October 2019.