How to Avoid Double Taxation

  • Mark Edwards ·
  • January 31, 2018

Starting a business in a new country can be a good option for many investors. From enlarging the client database to expanding to new neighboring markets and exploring new possibilities, there are many reasons for which businessmen can decide to set up various types of companies in other countries than their own. However, there is a lot of planning to do before actually starting the activities, and one of the most important aspects to consider is taxation. This must be carefully considered and counselling from local advisors is employed by most of the investors.

Most Common Tax Issues an Investor Faces

All countries have their tax and accounting rules. The first thing after analyzing them and making profit projections based on the findings is to consider if any unexpected situations could appear. One of the most common issues an investor faces when starting a business in a country not familiar with is double taxation.

Double taxation occurs when a company is required to pay taxes both in the country it was registered in and in the state where it undertakes its activities. There are various ways in which double taxation can be avoided, like financial planning or tax minimization, however there are many countries which provide solutions to this kind of issues. These are double taxation treaties which are usually bilateral agreements which regulate how the incomes of foreign investors will be taxed in the countries they operate in. Among the incomes covered by double tax treaties are: business profits, withholding taxes, incomes generated by company managers, professors and sportsmen, therefore the tax base covered by these agreements is quite extensive and does not require additional measures to ensure a beneficial taxation system.

From a double taxation point of view, Malta is one of the European countries which has a wide network of very advantageous double taxation treaties which expands continuously.

Avoiding Double Taxation in Malta

Malta has signed double tax treaties with both large and emerging economies, and thus giving the opportunity to investors from all over the world to operate here under very advantageous conditions.

In order to benefit from these agreements, investors with operations in Malta must comply with certain requirements, such as residency and shareholding ownership, and they will be granted tax reliefs or tax credits depending on the provisions of the agreement.

Double tax treaties are important, however each country has its own tax regulations. This means that there is no general rule applying to all double tax treaties a country has signed, but specific rules under each convention.