Market Taxation Guide - Malta

03.01.2013

This Market Taxation Guide (Malta)1 provides the following details:

  • Reference information about all taxes applied at source, through Clearstream Banking and its local depositories, to securities deposited in Clearstream Banking; and
  • Instructions for obtaining relief at source or a refund of withholding tax, where these are available, through Clearstream Banking.

New and improved tax information and procedures that become available will be included on an ongoing basis.

Important note:

This Market Taxation Guide (including any attachments and other links) is for informational purposes only and is not intended and should not be considered to be legal advice on any subject matter. Readers of this Market Taxation Guide, whether customers or otherwise, should not act or refrain from acting on the basis of any information included in this Market Taxation Guide without seeking appropriate legal or other professional advice.

Withholding tax

Relief at source and reclaim of withholding tax are not currently available through Clearstream Banking. Customers are recommended to submit their tax reclaim applications directly to the Maltese Tax Authorities under consideration of the respective Double Taxation Treaty and in consultation with a tax adviser.

Debt securitiesHolding restriction?Withholding
tax rate
Relief at
source
Quick
refund
Standard
refund
Yes0% / 15%
Residents of a Double Taxation Treaty (DTT) countryNoNoYes
Residents of MaltaNoNoNo
EquitiesHolding restriction?Withholding
tax rate
Relief at
source
Quick
refund
Standard
refund
Yes35%
Residents of a Double Taxation Treaty (DTT) countryNoNoYes
Residents of MaltaNoNoYes

For interest payments on Maltese corporate bonds and government bonds, it is assumed that customers do not hold Maltese securities on behalf of Maltese residents and, consequently, interest is always paid gross.

If, in exceptional circumstances, a Maltese resident nevertheless holds Maltese securities through Clearstream Banking, then the respective customer must, unrequested, inform Clearstream Banking, at the latest three business days before the coupon record date, of the corresponding split between Maltese resident and non-resident beneficiaries.

In such a case, interest payments would be subject to withholding tax as detailed above.

Residence Status Declaration for Maltese tax purposes

Clearstream Banking is under an obligation to disclose to the Malta Stock Exchange (MSE) the residence status for Maltese tax purposes of persons beneficially interested in the eligible securities. To avoid segregation on customer account level, Clearstream Banking assumes that customers will be holding eligible securities on behalf of beneficial owners that are not resident in Malta for Maltese tax purposes and thus not subject to Maltese final withholding tax on investment income in accordance with the provisions of articles 33(1) and 41(c) of the Income Tax Act (Chapter 123 of the Laws of Malta).

Where a beneficial owner who is a Clearstream Banking customer becomes resident in Malta, the customer undertakes to provide Clearstream Banking with a SWIFT MT568 Corporate Action Narrative message or MT599 free-format message, at the latest three business days before the coupon record date, disclosing the total position of securities held by residents of Malta (which will be taxed at a withholding tax rate of 15%) and by non-resident beneficial owners.

Independently from the custody event, securities held on behalf of an underlying Maltese resident must be transferred from the current MSE account designated as "MSE as Custodian of Clearstream Banking AG - Customer's Account" to a new MSE account designated as "Malta Stock Exchange plc. as Custodian of Clearstream Banking AG - Account of Residents in Malta". Following the transfer, the Issuer will be informed.

N.B.: A Maltese resident (or final beneficial owner whose tax-residence status changes to Maltese) who gives a late notice of such tax-residence status after the scheduled income event record date deadline must inform of this and file a mandatory tax income declaration to ratify its own individual position with the Maltese Tax Authorities after receipt of the income payment within statutory time-limits. Failure to do so may incur the imposition of penalties and interest on the actual tax due until final settlement.

Types of securities

The eligible securities issued in Malta are as follows:

  • Government bonds;
  • Treasury bills;
  • Domestic corporate bonds;
  • Ordinary shares.

Maltese government bonds, corporate bonds and equities are eligible for settlement and custody in Clearstream Banking via a Clearstream Banking Frankfurt (CBF) link with Malta.

Types of beneficial owner

The following types of beneficial owner of Maltese securities are recognised for tax purposes in Malta:

  • Residents of Double Taxation Treaty (DTT) countries;
  • Residents of Malta.

Double Taxation Treaty countries

Information regarding Double Taxation Treaties (DTTs) concluded by Malta and currently in force are available on the website of the Malta Financial Services Authority (MFSA).

Capital gains tax

There is no capital gains tax withheld through Clearstream Banking on securities held in Clearstream Banking. Malta currently does not impose a tax on capital gains.

Stamp duty

There is no stamp duty withheld through Clearstream Banking on securities held in Clearstream Banking.

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1. Details regarding settlement, including instruction formats and settlement timings, are described in the Creation Link Guide - Malta.