Malta Saudi Arabia double taxation agreement signed

On 1st December 2012, the Double Taxation Relief (Taxes on Income) (The Kingdom of Saudi Arabia) Order, 2013 entered into force. On 2nd January 2012, the convention was signed. The tax treaty had been approved by Saudi Arabia’s Cabinet on 17th September, 2012 and was published in Malta’s Government Gazette on the 15th of January 2013.

Although mainly based on the OECD Model Convention on Income and Capital, the Tax Treaty stipulates certain definite principles, being:

(1) no withholding tax is applicable on ‘income from debt claims’ (referred to as ‘interest’ in other tax treaties) and exclusive jurisdiction is granted by the treaty to the residence state of the recipient.

(2) 5% withholding tax rate on royalties (if these are paid for the use of, or the right to use, commercial, industrial, or scientific equipment) and at 7% (in all other cases) and secondary jurisdiction to tax is allocated to the residence state of the recipient.

(3) dividends may also be taxed in the residence state of the recipient, however, where these are paid by a company which is resident of the Kingdom of Saudi to a resident of Malta, who is the beneficial owner thereof, the tax rate on dividends charged in Saudi by such company shall not exceed 5% of the gross amount of the dividends.

(4) a building site, assembly or installation project, a construction, or supervisory activities, in connection therewith, qualify as a permanent establishment if such activity has a duration exceeding the period of 6 months.

Contact us for more information on our services