Malta and Curaçao Enter into Double Taxation Agreement Effective from 1 September 2024
Malta’s Ministry for Finance has recently announced the activation of a Double Taxation Agreement (DTA) between Malta and the Kingdom of the Netherlands, in respect of Curaçao. The agreement, published under Legal Notice 1 of 2016, came into effect on 1 September 2024, marking a pivotal moment for taxpayers and businesses engaged in cross-border activities between Malta and Curaçao.
This agreement aims to eliminate double taxation on income earned by individuals and entities in both jurisdictions, ensuring that the same income is not taxed twice. It also focuses on preventing fiscal evasion, providing a clear framework for tax authorities to collaborate and share information where necessary.
Why Is This Agreement Important?
Double taxation can have severe financial implications for businesses and individuals operating in more than one country. Without a treaty like this, income earned in Curaçao by a Maltese resident, or vice versa, could be subject to taxes in both jurisdictions, significantly increasing the overall tax burden.
This agreement serves to clarify the rules on which country has the primary right to tax specific income sources, such as:
• Business profits: Ensuring that companies are not taxed on their profits in both Malta and Curaçao.
• Dividends, interest, and royalties: Clarifying the taxation of income streams that often attract taxes in both the country of residence and the country where the income is generated.
• Employment income and pensions: Avoiding double taxation for expatriates or individuals with international income sources.
Impact on Maltese and Curaçao Businesses
For businesses operating across borders, this DTA presents a valuable opportunity to streamline tax planning and ensure compliance while minimizing unnecessary tax liabilities. Companies incorporated in Malta with interests in Curaçao, and vice versa, can benefit from the treaty’s provisions to avoid the complexities of navigating both countries’ tax systems. This is particularly important for industries like shipping, finance, and real estate investment, where cross-border operations are common.
Key Provisions of the Agreement
1. Reduced Tax Rates on Cross-Border Payments: Dividends, interest, and royalties paid between Malta and Curaçao may benefit from reduced withholding tax rates, encouraging more efficient financial transactions between the two jurisdictions.
2. Permanent Establishments (PE): The agreement clarifies the rules around what constitutes a PE, or a taxable presence in the other country, which is critical for companies that have physical operations or assets in both locations.
3. Information Sharing and Transparency: One of the main pillars of the agreement is the prevention of fiscal evasion. By improving information exchange between Maltese and Curaçao tax authorities, the treaty fosters transparency, reducing the likelihood of tax evasion through hidden or undeclared income.
What Should You Do Next?
If you or your business earns income in Curaçao while being based in Malta, or if you are a Curaçao resident with Maltese ties, it’s essential to familiarize yourself with the details of this agreement. Not only does it provide the opportunity to reduce your tax burden, but it also offers peace of mind, knowing that both tax authorities are aligned on how income should be taxed.
Consulting with tax experts in both jurisdictions can help you make the most of this treaty and ensure that you are fully compliant with both countries’ tax regulations.
Final Thoughts
With this new agreement in place, Malta and Curaçao have taken a significant step toward fostering better economic relations, providing clarity and assurance for investors, businesses, and individuals alike. The treaty marks another milestone in Malta’s continued efforts to expand its network of international tax treaties, making it an even more attractive hub for global business.
If you have any questions about how the Malta-Curaçao Double Taxation Agreement could impact your personal or business tax strategy, feel free to reach out for expert advice and guidance.
