Entry into force of Malta’s tax treaty with Curaçao

In terms of the Double Taxation Relief (Taxes on Income) (The Kingdom of the Netherlands, in respect of Curacao) Order, 2016 (Legal Notice 209 of 2024), as published on 6 September 2024, the Convention between the Republic of Malta and the Kingdom of the Netherlands, in respect of Curaçao for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (the ‘Malta-Curaçao Treaty’) retrospectively entered into force on 1 September 2024.

Below is a summary of the noteworthy distinguishing aspects of the Malta-Curaçao Treaty which was originally signed on 18 November 2015:

Article 2 – Taxes covered

The Malta-Curaçao Treaty applies to Malta income tax and, in the case of Curacao, to income tax, wage tax, profit tax and dividend tax.

Article 4 - Resident

The terms ‘resident’ is defined in Article 4 of the Malta-Curaçao Treaty and is based on the 2014 OECD Model Tax Convention. In particular, in instances where a person (other than an individual) is resident of both Curaçao and Malta, the determining test to solve dual residence shall be the place of effective management.

In addition, the protocol to the Malta-Curaçao Treaty highlights that in the case of a trust, if a trustee is resident in a Contracting State and none of the trustees is resident in the other Contracting State, then the trust is a resident of the first-mentioned Contracting State. If trustees are resident in both Contracting States, then the trust is a resident in the contracting state where the decisions concerning the administration of the trust are taken. In case such decisions are taken in both or in neither of the Contracting States, then the relevant competent authorities are to settle the residence of the trust by mutual agreement.

Article 5 – Permanent Establishment

Article 5 of the Malta-Curaçao Treaty deviates from the 2014 OECD Model Convention by including an additional deeming rule relevant to the insurance industry.

In this regard, an insurance enterprise (to the exclusion of re-insurance) shall be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State provided that the profits related to those premiums are not liable to tax in the first mentioned Contracting State or insures risks situated therein.

Article 20 – Natural Resources

The Malta-Curaçao Treaty also contains a dedicated article focusing on specific taxing rights in connection with natural resources.

Deemed permanent establishment

In this respect, Article 20 expands on the concept of a permanent establishment referred to in Article 5 in relation to offshore resource exploration and exploitation. In terms of this article, a person resident in a Contracting State who carries on activities offshore in connection with the exploration or exploitation of the seabed and subsoil and their natural resources situated in the other Contracting State shall be deemed, in relation to those activities, to be carrying on business in that other State through a permanent establishment. This rule shall not apply if the activities last for less than thirty days in any twelve-month period, subject to certain specific exceptions in relation to associated enterprises.

Transportation of supplies or personnel

In addition, profits earned by a resident of a Contracting State from the transportation of supplies and personnel to a location (or between locations) where activities associated with natural resource exploration or exploitation are being carried out shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

Salaries, wages and similar remuneration

Wages, salaries and similar income derived by a resident of a Contracting State in relation to employment connected with natural resource exploration in the other Contracting State may be taxed in the other Contracting State to the extent that the offshore employment is carried on for a period of more than thirty days in a twelve-month period. On the other hand, salaries derived through employment exercised on board a ship or vessel or abroad tugboats or other vessels in relation to transportation of related supplies and personnel to a location (or between locations) in a Contracting State shall be taxable only in the Contracting State in which the place of effective management is situated.

Capital gains

Gains derived by a resident of a Contracting State from the alienation of exploration or exploitation rights, or of property situated in the other Contracting State and used in connection with these activities, or of shares deriving value from such property or rights may be taxed in that other Contracting State.

Article 22 – Elimination of Double Taxation

In the case of Malta, double taxation is to be eliminated through a credit allowed against Malta tax in respect of foreign tax. Conversely, in the case of Curacao, a reduction method is employed.