Malta Clarifies Taxation Of Directors' Fees

By Editorial 21 December, 2012

Malta's tax authority has released a guidance note clarifying the tax treatment of fees received by non-resident directors from companies resident in Malta.

According to the Inland Revenue Department (IRD), directors' fees are considered as income arising where the company is resident i.e. the jurisdiction in which the company is managed and controlled.

The IRD states that this position is consistent with the Organization for Economic Cooperation and Development's Model Tax Convention commentary. "Director’s fees" should be interpreted as fees and similar payments received in a person’s capacity as a member of a board of directors and does not include remuneration in respect of other services rendered to the company (such as employment, advisory services etc).

Therefore any remuneration which falls under the definition of directors' fees as in the aforementioned definition is taxable in the state of residence (i.e. the place of effective management) of the company. However, other remuneration paid to a person, who is also a director, in respect of other services rendered to the company is not taxable in Malta if the said person is neither resident nor domiciled in Malta, nor performing the services in Malta, nor is deemed to have permanent establishment in Malta.

Tags: Individuals | Expatriates | Tax | Investment | Malta | Law | Entrepreneurs | Employees | International Financial Centres (IFC) | Fees | Tax Authority | Offshore | Individual Income Tax |


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