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HMRC internal manual

Double Taxation Relief Manual

Malta: Royalties


Under the 1995 agreement, a UK-resident recipient of royalties arising in Malta must be both


  • the beneficial owner of the royalties


  • subject to tax in the UK in respect thereof

in order to qualify for the reduced rate of Maltese withholding tax (10 per cent) provided by Article 12(2).

The reduced rate does not apply, however, if the royalties are effectively connected witha permanent establishment or fixed base which the UK-resident recipient has in Malta. Inthe latter circumstances, the Business Profits Article (Article 7) or the Independent Personal Services Article (Article 14) will apply.

The EC Directive on Interest and Royalties (2003/49EC) (see INTM400010 to INTM400110) provides for the abolition of source state taxation on interest and royalty payments made between associated companies in different Member States. It also ensures that the payments are subject to tax once in a Member State. It applies in the United Kingdom with effect from 1 January 2004. Malta joined the EU on 1 May 2004.