TAX NEWS - June 2010

Double taxation agreements key to attracting further investment

Double taxation agreements play an important role in attracting further investment to Malta, Finance Minister Tonio Fenech said during the signing of a protocol amending an agreement on the avoidance of double taxation between Malta and Germany yesterday.

He went on to explain that such agreements provide the framework for investment and business opportunities between the two countries and guarantee the effective exchange of information and transparency, which has become ever more important since the crisis.

Mr Fenech expressed his satisfaction and added that this would enhance co-operation between the tax administrations of Malta and Germany, with the aim of combating tax evasion and avoidance.

The original agreement between Malta and Germany was signed on 8 March 2001, but the amendment brought it up-to-date and was in line with the recommendations of the Organisation for Economic Co-operation and Development, concerning effective exchange of information and transparency.

Mr Fenech went on to say that strong political and economic relations with Germany are crucial, with Germany being the leading economy in Europe.

Between 2005 and 2009 there was some €270 million imported from Germany and some €261 million was exported from Malta to Germany. Primary exports included machinery, electrical apparatus, toys and pharmaceuticals among other things.

A number of companies with German interest have a significant investment in Malta, he said, such as Lufthansa Technik's aircraft maintenance centre.

German Ambassador to Malta, Bernd Braun, said that Malta ranks ahead of countries like Russia and China, coming in 10th place in terms of German direct and indirect investment, which amounts to €26 billion, according to recent figures from the Federal Reserve Ban.

Ambassador Braun said he was certain that "this Protocol will attract an even greater number of German companies to invest in Malta." He was also sure it would attract a number of companies as Malta is seen as a country which offers sound economic and commercial opportunities, as opposed to an offshore location.

He also believes it will be the case that Maltese companies will become "more aware of the various investment opportunities in Germany and will make use of the Agreement either by entering the German market or investing in German companies".

The German tax authorities are scrutinising the present state of affairs, he said, to ensure there is no evasion or ambiguities in the way things stand.

Ambassador Braun said that the new protocol will not affect current investments, but would attract new investment. The conditions are favourable and that is why there is investment, he said.

Minister Fenech added that Malta is not considered a tax haven by the Germans, but our system clearly has its advantages. It was for this reason that the agreement was updated, so as to curb abuse.