July 16, 2020
On July 16, 2020 Malta and Switzerland signed a protocol amending the existing agreement for the avoidance of double taxation with respect to taxes on income (DTA). This protocol drafted to include the OECD standards and recommendations in terms of the Base Erosion and Profit Shifting (BEPS) action plan.
The following provisions of the agreement have been amended:
- Preamble: it now clearly indicates that the main purpose of the agreement is to exclude any type of “treaty shopping” and exclude any opportunity for non-taxation or reduced taxation through tax evasion or avoidance
- The definition of Business Profits has been extended by which no adjustment to the profits that are attributable to a permanent establishment of an enterprise of one of the Contracting States after 5 years from the end of the taxable year in which the profits would have been attributable to the permanent establishment.
- The allocation of profits and the calculations of taxes of Associated Enterprises in terms of the article 9 of the Agreement has been amended as well a new anti-abuse provision has been implemented under new title “Entitlement of Benefits”, where it is set out that obtaining a benefit was in accordance with the object and purpose of the relevant provisions of this Convention.
- Finally, it was decided that the protocol shall enter into force on the date of the receipt of the later of these notifications and shall have effect in these 2 following cases:
- in the case in respect of taxes withheld at source, for amounts paid or credited on or after the first day of January of the year next following the date on which the Protocol enters into force
- in respect of other taxes, for taxation years beginning on or after the first day of January of the year next following the date on which the Protocol enters into force
It shall be also noted that similar amending protocols were also agreed with Liechtenstein and Cyprus.
