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HMRC internal manual

Double Taxation Relief Manual

Malta: Interest

Under the 1995 agreement, interest arising in Malta and paid to a resident of theUnited Kingdom who:

  • is the beneficial owner of the interest and
  • subject to tax (see INTM162020) in the UK in respect of the interest is taxable in Malta at a rate not exceeding 10 per cent, except where the interest is effectively connected with a permanent establishment or fixed base which the UK-resident recipient has in Malta.

If there is a PE or fixed base the Business Profits Article (Article 7) or theIndependent Personal Services Article (Article 14) will apply.

The EC Directive on Interest and Royalties (2003/49EC) (see INTM400010 to 400110) providesfor the abolition of source state taxation on interest and royalty payments made betweenassociated companies in different Member States. It also ensures that the payments aresubject to tax once in a Member State. It applies in the United Kingdom with effect from 1January 2004. Malta joined the EU on 1 May 2004.