The Russia-Malta double taxation treaty was amended. What's new?

In March 2020, Vladimir Putin, the president of the Russian Federation, addressed the nation to announce the main measures being taken to tackle coronavirus. As part of that, Vladimir Putin instructed the government to quickly initiate negotiations with foreign jurisdictions to amend Russia’s current DTTs to set the minimum withholding tax rate on dividends and interest paid from Russia at 15%.

Putin pointed out that companies take advantage of the DTTs to pay lower personal income tax rates. Following this event, several countries revised their double tax treaties with Russia. On the 1st of October 2020, the new agreement was signed to amend the double taxation treaty between Russia and Malta, thereby increasing tax at source to 15% on dividend and interest income. The ratification of the protocol should take place before the end of this year, so that its provisions can be applied from 1 January 2021. On the Russian side, the document was signed by State Secretary and Deputy Minister of Finance, Alexei Sazanov. From Malta’s end, was Malta’s ambassador to Russia Pierre Clive Agius.

Like the previously signed Protocol with other countries like Cyprus, this document set out a list of exemptions that will apply preferential treatment to dividend and interest income. The exemptions apply to institutional investments as well as public companies with at least 15% of the free float and holding at least 15% of the capital of the company paying the dividend and interest income during the year. The tax rate for such income is set at 5%.

The changes will not affect interest income paid on Eurobonds, bond issued by Russian companies and loans from foreign banks.

"Today we have taken another step in our struggle for the Russian tax base. I would like to thank my colleagues from Malta for their high level of cooperation and constructive dialogue. We are now working on amendments to tax agreements with other jurisdictions. The next signing of a similar agreement is planned with Luxembourg. Negotiations are continuing with the Netherlands," said Alexei Sazanov.

The need to amend the agreements is dictated by the economic situation both in Russia and in the world, which requires the concentration of financial resources to support the population and economy in the context of the pandemic.

Malta is a popular business centre for Russian investors with one of the lowest income tax rates in the European Union. It is also a hub for IT professionals in gaming and other online applications and has a Russian Cultural Centre situated in the Maltese capital, Valletta.

It’s also worth mentioning that Russia’s Ministry of Finance recently submitted a draft law with amendments to the Tax Code, allowing Russians who own stakes in foreign companies to avoid additional reporting in the event of a flat tax of 5 million rubles.

The details of the Double Taxation Treaty between Malta and Russia will be updated shortly on Malta’s official government website:
https://legislation.mt/eli/sl/123.146/eng/pdf