The President signed a law of ratification of Convention on Avoidance of Double Taxation and Prevention of Evasion of Taxation between the Russian Federation and Malta

07.04.2014

The Federal Law “On ratification of Convention on Avoidance of Double Taxation and Prevention of Evasion of Taxation between the Russian Federation and Malta”, adopted by the State Duma and approved by the Federation Council, was signed on the 2nd April by the President

The main content of the Convention is to ensure that individuals and legal entities of the Contracting Parties are exempted from obligation to pay taxes twice from one type of income. The aim of this act is mutual attraction of investments.

The Convention is applied to taxes levied on total income or on separate elements of income of persons, having domicile, residence, a place of management, a place of registration in the Russian Federation or in Malta, including taxes on income from the alienation of movable or immovable property and taxes on the total amounts of salaries paid by enterprises.

Based on: http://www.kremlin.ru/acts/20685

The full text of the Convention you can see on: http://www.mid.ru/bdomp/spd_md.nsf/0/3A9751710C8D086C44257CB300321455

Expert’s opinion

Negotiation and signing of the Convention has a very long history. Preparations for the signing of the revised and more favorable conditions for both parties to the Convention started in January of 2013. By May 2013 the Governments of Russia and Malta succeed to reach a final agreement on all issues (http://hbcomp.ru/about/news_and_mailings/news_jurisdictions/3678/), and new, more profitable for both parties Convention was signed. However, the signing of the law on ratification took almost a year, but now, finally, on 2^nd of April this law was signed by the President of the Russian Federation.

Now the agreement between Russia and Malta is not an uncertain project, but a legislative act, that will enter into force in the 14^th of April, 2014 (a date of publication of the Federal Law “On ratification of Convention between the Government of the Russian Federation and the government of Maltaon Avoidance of Double Taxation and Prevention of Evasion of Taxation” in “Rossiyskaya gazeta” is the 4^th of September, 2014.

Each convention between Russia and European jurisdiction gives new opportunities and new horizons for conducting and structuring of business. It should be marked that the terms of this Convention are really favorable. It largely follows the terms of the agreement between Russia and Cyprus. In particular, Malta, as well as Cyprus, does not charge withholding taxes on payments of dividends, interest and royalties in offshore.

In my view, one should pay attention to this jurisdiction as a possible alternative to Cyprus. However, the tax refund system in Malta is quite complicated, but with the right conduction of business a rate can be reduced to 3%

Alexandra Mikhno ( Lawyer of Legal Services and Bank Consulting Department)