Owen, Christopher: Offshore Survey - April 2011

25 January 2011, Guernsey and Jersey announced that Steve Williams, currently UK Ambassador to Bulgaria, had been appointed to head a new Channel Islands’ office in Brussels. Williams, whose title will be director of European affairs, was to assume the post on 4 April.
The new Channel Islands Brussels office will represent the political and economic interests of Guernsey and Jersey, which previously were handled by the Brunswick public relations and lobbying firm. The Isle of Man has also announced plans to open a representative office in Brussels.

Williams has worked for the UK Foreign & Commonwealth Office for almost 30 years, with postings including Oslo, Buenos Aires, Sofia and the UK Permanent Representation to the EU in Brussels. Jersey Chief Minister, Senator Terry Le Sueur, said: “We are pleased to have someone of Williams’ calibre and experience representing us in Brussels.”

9 March 2011, the UK Court of Appeal handed down a judgment that will substantially restrict the scope for trustees to unwind actions that have resulted in unintended consequences. The judgment is the first Court of Appeal judgment on the so-called rule in Re Hastings-Bass, a Court of Appeal judgment of 1975.
The appeal was a consolidated appeal, relating to the High Court’s decisions in the cases of Pitt and another v Holt and another [2010] EWHC 45 (Ch) and Futter and another v Futter and others [2010] EWHC 449 (Ch). Futter concerned a transfer from an offshore trust which, it was believed, would not give rise to capital gains tax provided that the beneficiaries’ available annual exemption for CGT and allowable loses were sufficient to absorb any gains attributed to them. Pitt v Holt concerned a transfer of assets into an ordinary discretionary trust with disastrous, unintended, inheritance tax consequences.

In both cases, the trustees were successful, in the first instance, in having their decisions, which led to the unintended tax consequences, set aside. On appeal by HMRC, however, Lloyd LJ set aside the High Court orders.

In accordance with the Hastings-Bass principle, as applied by Lloyd LJ in the case of Sieff v Fox (2005) 1WLR 3811, it was explained that a court was able to treat trustees’ exercise of a discretionary power as void if the effect of that exercise of the power was different to what they had intended; and the trustees would have acted differently if they had not either failed to take into account all relevant factors or had taken into account any irrelevant factors.

In the Court of Appeal, Lloyd LJ considered on further analysis of the case law that his statement of the Hastings-Bass principle in Sieff v Fox was incorrect. He identified two strands of cases – where trustees have acted outside their powers so that the purported exercise will be void; and where the trustees have acted within their powers but have not taken into account a relevant matter or have taken into account an irrelevant matter, such that there has been a breach of trust.

It was in reference to this second strand where the Court of Appeal ruling differed from previous analyses of the principle. The Court ruled that if trustees obtained and followed advice from “apparently competent advisors”, there would have been no breach of their fiduciary duty where the advice is incorrect because the trustees have discharged their duties by seeking the advice in the first place.

The actions of the receiver in Pitt v Holt and the trustees in Futter v Futter were both within their respective powers and so were not void, as in the first strand. Additionally, they both sought and acted on professional advice and, even though the advice was wrong in both cases, there was no breach of trust because the advice had been sought and so their actions were not voidable. This analysis thus imposes a major limitation on the future application of the Hastings-Bass principle.

Separately, in Pitt v Holt, on the subject of mistake, the Court reiterated that the mistake must be as to the legal effect of the action rather than as to its consequences. The inadvertent tax liability in this case, as in many other cases where the Hastings-Bass principle has been invoked in the past, was a consequence, not a legal effect, of the trustees’ action and so that action could not be set aside as a mistake.

This marks a significant change. There has been a long line of cases in the lower courts where trustees who had made a mistake as to the tax consequences of their actions were successful in applications to have their actions set aside, on the basis that the trustees’ actions had been voidable under the Hastings-Bass principle.

Longmore LJ, approving the judgment of Lloyd LJ, said: “These appeals provide examples of that comparatively rare instance of the law taking a seriously wrong turn, of that wrong turn being not infrequently acted on over a 20-year period but this court being able to reverse that error and put the law back on the right course.”

18 February 2011, Cyprus and Germany signed a new tax treaty to replace the existing 1974 agreement. The move followed the visit of German Chancellor Angela Merkel to Cyprus earlier this year. The earliest date this agreement may be effective is 1 January 2012.
Withholding rates on dividends have been reduced from 10 % to 5%, subject to the beneficial owner of the dividend being a company holding directly 10% of the capital of the dividend issuing company. In any other case a 15% withholding rate will be applied on the gross amount of the dividends. Withholding rates on interest and royalties has been reduced from 10% to 0%.

The new treaty updates the provisions of exchange of information to reflect the provisions of the OECD Tax Convention.

Cyprus has also avoided inclusion on Ukraine’s new blacklist, issued on 23 February, despite the Cypriot government’s decision to withdraw approval of a draft text for a new tax treaty to replace the existing treaty inherited from the USSR era.

Negotiations have been underway since 1997 but the draft would have increased withholding tax rates from the current zero rate. Cyprus also insists on removal of the condition in the draft text permitting taxation in the source country of capital gains from the disposal of shares in companies owning immoveable property.

16 February 2011, the European Commission formally requested the UK to amend two discriminatory anti-avoidance tax regimes that concern the transfer of assets abroad and attribution of gains to members of non-UK resident companies.
The first infringement relates to the UK’s “transfer of assets abroad” legislation. Under this legislation, if a UK resident individual invests in a company by transferring assets to it, and if this company is incorporated and managed in another Member State, then the investor is subject to tax on the income generated by the company to which they contributed the assets. But if the same individual invested the same assets in a UK company, only the company itself would be liable for tax.

The second infringement relates to the attribution gains to member of non-UK resident companies regime. Under this legislation, if a UK-resident company acquires more than a 10% share of a company in another Member State, and the latter company realises capital gains from the sale of an asset, the gains are immediately attributed to the UK company, which becomes liable for corporation tax on these capital gains. If, on the other hand, the UK company had invested in another UK resident company, only the latter would be taxable on its capital gains.

In both cases, the Commission considers there to be discrimination, seeing as investments outside the UK are taxed more heavily than domestic investments. The difference in tax treatment between domestic and cross-border transactions restricts two fundamental principles of the EU’s Single Market, namely of the freedom of establishment and the free movement of capital contrary to the Treaty on the Functioning of the European Union (TFEU) and of the EEA Agreement.

The Commission is of the opinion that both restrictions are disproportionate, in the sense that they go beyond what is reasonably necessary in order to prevent abuse or tax avoidance and any other requirements of public interest.

The function of both rules, from the UK’s point of view, is to stop taxpayers reducing their tax liability on income and capital gains by holding them through a foreign entity. Any change in the law could have a profound impact on how foreign businesses and investments are held.

The requests take the form of Reasoned Opinions, the second step of an infringement procedure. In the absence of a satisfactory response within two months, the Commission may refer the UK to the European Court of Justice.

16 February 2011, the European Commission formally requested France to amend provisions that allow investments in new residential property situated in France (that is intended for letting for a minimum of nine years) to benefit from accelerated depreciation. The provisions do not apply to similar investments abroad.
The Commission said that provisions are incompatible with the free movement of capital as guaranteed by Article 63 of the Treaty on the Functioning of the European Union and Article 40 of the EEA Agreement, because they dissuade resident taxpayers from investing in immovable property situated abroad.

In a similar case, the EU’s Court of Justice (C-35/08, Busley from 15 October 2009) has confirmed that such discriminatory tax treatment is in breach of EU rules on the free movement of capital.

The request takes the form of a Reasoned Opinion, the second step of an infringement procedure). In the absence of a satisfactory response within two months, the Commission may refer France to the European Court of Justice.

10 February 2011, the European Court of Justice (ECJ) issued its decision in the joined cases of Haribo and Österreichische Salinen, which deal with Austria’s disparate taxation of foreign portfolio dividends. The ECJ confirmed part of the Austrian rules as compatible with EU law, but specifically found the taxation of portfolio dividends from third countries, the requirement of enforcement assistance in the case of certain EEA countries and the absence of tax credit carry forwards in loss situations to be discriminatory.
Both cases both involved Austrian companies that received portfolio dividends through Austrian investment funds that were paid by companies in EU/EEA Member States and third countries. Salinen also incurred an operating loss in the year at issue.

The Austrian tax authorities refused to grant Haribo and Salinen an exemption in respect of the dividends paid by the EU/EEA and third countries. The taxpayers argued that the Austrian rules violated the free movement of capital principle in the EU/EEA Treaty, which prohibits all restrictions on the movement of capital and payments between Member States and between Member States and third countries. After the taxpayers appealed to the Austrian court, the lower fiscal court referred the case to the ECJ.

The ECJ found that Austria is permitted to link the exemption of portfolio dividends from EEA countries to the requirement of mutual administrative assistance, but it may not require assistance in the enforcement of taxes.

The exemption method and the credit method are generally equal. Therefore, additional administrative burdens inherent to the credit system are not contrary to the free movement of capital.

The fact that portfolio dividends from third (non-EEA) countries are always subject to tax infringes Article 63 of the Treaty on the Functioning of the European Union (TFEU). As both the exemption method and the credit method are equal, Austria may apply either method on such portfolio dividends. In addition, Austria not providing for a carry forward of a foreign underlying tax credit is not in conformity with EU law, but no carry forward of withholding tax on dividends is required.

20 January 2011, the European Court of Justice ruled that the Greek government is behaving illegally by allowing Greek residents to buy their first property tax-free, while taxing foreigners on similar purchases.
The European Commission asserts that the exemption is counter to EU treaty principles that EU nationals should be able to move freely between member states without penalty. The Commission first formally notified its objection to the Greek rule in December 2007, and again in September 2008. On both occasions the Greek government rejected the Commission’s view.

The ECJ proceeded to a final judgment without first obtaining a preliminary opinion. It found that the exemption – which is available both to Greek citizens who are resident in Greece at the date of purchase of the property, as well as those who are not resident in Greece but are of Greek origin – was explicitly discriminatory on nationality as well as residence grounds.

19 January 2011, Swiss police arrested Rudolf Elmer, a former executive of the Swiss bank Julius Baer, hours after he was found guilty of breaching Swiss bank secrecy laws for disclosing private client data and of threatening an employee at Julius Baer.
At a news conference in London on 17 January, Elmer, who ran the Cayman Islands branch of the Swiss bank until he was dismissed in 2002, handed over data on many of Baer’s offshore bank account holders to Wiki Leaks’ founder Julian Assange, saying he wanted to draw attention to financial abuses.

“The state prosecutor’s office is checking to see whether Rudolf Elmer has violated Swiss banking law by handing the CD over to Wiki Leaks,” the Zurich cantonal police and state prosecutor said in a joint statement. They declined to give further details.

Earlier, the court sentenced Elmer to a fine of 7,200 Swiss francs ($7,505), suspended for two years. The prosecution had demanded a sentence of eight months jail and a fine of 2,000 francs. But the Court acquitted Elmer of charges that he had sought $50,000 for returning client data to Julius Baer and that he had made a bomb threat to the bank’s headquarters.

Elmer, who helped bring Wiki Leaks to prominence three years ago when he used the Website to publish secret client details, had admitted sending data to tax authorities. But he denied blackmail and a bomb threat against Julius Baer and said he had never taken payments in return for secret data.

“I am a critic of the system and want to tell society what happens in these murky oases,” Elmer said before the verdict. Elmer said Baer had waged a campaign against him and his family and offered him 500,000 francs to keep quiet.

Julius Baer, which has denied its Cayman branch was used for tax evasion, says Elmer waged a “campaign of personal intimidation and vendetta” against the bank after it refused his demands for financial compensation following his 2002 dismissal. “We have supported the prosecution, the judge largely followed the prosecutor’s argument,” said Kurt Langhard, a lawyer for Julius Baer. “We are satisfied.”

21 December 2010, German-owned Deutsche Bank agreed to pay the US government $553,633,153 in a settlement to avoid prosecution for helping US clients use illegal tax shelters. The bank’s activities, which it admitted amounted to criminal offences, generated $29 billion in fake tax losses, according to the US Department of Justice.
The penalty, agreed with the US Attorney’s Office in Manhattan, was calculated by totalling the fees charged by Deutsche Bank to the 2,100 clients involved and the amount of taxes and interest the US Internal Revenue Service was unable to collect, together with a $149 million civil penalty.

The bank also had to agree to cooperate with the investigation and not to offer further pre-packaged tax shelter products. The DoJ has appointed an “independent” expert to scrutinise and correct the bank’s internal compliance procedures. The bank must accept his recommendations or risk prosecution.

The tax offences admitted by Deutsche Bank took place between 1996 and 2002. According to the bank’s statement of facts, it created transactions that were intended to give the appearance of investment activity in order to generate legitimate losses for the its clients. Some of the offences were linked to accountancy firm KPMG, which paid the DoJ $456 million in 2005 to settle similar tax shelter charges.

“Deutsche Bank is pleased that this investigation, which concerned transactions that ceased more than eight years ago, has come to a resolution,” said the bank in a statement. “Since 2002, the bank has significantly strengthened its policies and procedures as part of an ongoing effort to ensure strict adherence to the law and the highest standards of ethical conduct.”

21 February 2011, Hong Kong’s Companies Registry and the Inland Revenue Department (IRD) jointly launched a new regime of one-stop company and business registration, together with a one-stop notification of change of company particulars.
Under the new regime, the Registry will process the simultaneous business registration applications and notify IRD of changes of the relevant company particulars.

Any person who submits an incorporation form of a local company, or an application form for registration of a non-Hong Kong company, will be deemed to make a business registration application at the same time. Therefore, under this new registration regime, companies will only require to lodge one single application for both company and business registration.

The new registration regime applies to both paper and electronic applications. Upon the approval of the application, the Registry will issue a Certificate of Incorporation together with a Business Registration Certificate to the applicant.

For applications lodged through the e-incorporation service at the “e-Registry”, if approved, the Registry will issue both Certificate of Incorporation and Business Registration Certificate in the form of electronic records. Any request for the issue of the certificates in paper will not be entertained.

The new registration regime will not be applicable to application for business registration by other types of businesses such as sole proprietorship, partnership businesses and branch registration. These should be lodged directly with the Business Registration Office, as previously.

Last year, the Companies Registry posted a record high of almost 140,000 local companies, an increase of 27.5% over the registrations seen in 2009. By the end of last year, the total number of live local companies registered under the Companies Ordinance was 863,762, up more than 91,500 from that in 2009. The total number of non-Hong Kong companies that had established a place of business stood at 8,165 at the end of the year.

Hong Kong’s new Companies Bill has been gazetted and was introduced into the Legislative Council for its first reading on 26 January 2011.

The Secretary for Financial Services and the Treasury, Professor K C Chan, said: “The Companies Bill aims to achieve four main objectives, namely, enhancing corporate governance, ensuring better regulation, facilitating business and modernising the law. Rewriting the Companies Ordinance (CO) allows us to leverage the developments regarding company law in other comparable jurisdictions and enhance our competitiveness. We look forward to enactment of the Bill in the 2011-12 legislative session.”

The rewrite of the CO started in mid-2006, and three public consultations were conducted to gauge views on a number of complex subjects. Some of the measures introduced by the Bill to enhance corporate governance include: improving the accountability of directors to enhance transparency and accountability, and clarifying the directors’ duty of care, skill and diligence; emphasising shareholder engagement in the decision-making process; improving the disclosure of company information; and strengthening auditors’ rights.

19 January 2011, former Union Law Minister Ram Jethmalani petitioned India’s Supreme Court to recover so-called “black money” – untaxed funds concealed by wealthy individuals – from European banks. Jethmalani is demanding that the government hand over relevant correspondence with the German authorities, with the Swiss bank UBS and with the Liechtenstein bank LGT.
But the Indian federal government has refused to cooperate and has withheld the suspects’ names on grounds of privilege. It filed a court affidavit declining to divulge details of funds alleged by Jethmalani to have been deposited at LGT by 26 Indian individuals.

Jethmalani’s counsel accused the government of “indulging in a cover-up operation”. The Supreme Court bench also admonished the government for its refusal to reveal the names. It described the unlawful movement of funds offshore as “looting of national money”.

India’s prime minister, Manmohan Singh, replied that there was no instant solution to the problem and that his government was bound to secrecy by its treaty obligations with the German government. The Solicitor-General told the court that the Indian tax authority was already taking recovery action under the Double Taxation Avoidance Act.

A Swiss parliamentary committee has approved the tax information exchange agreement negotiated between India and Switzerland. The treaty now goes to the full Swiss parliament for approval.

India’s Income Tax Department will soon open overseas units in eight countries to permit it to liaise more closely with local tax authorities and better coordinate the exchange of tax information under India’s income tax treaties. The units will be established in Cyprus, France, Germany, Japan, the Netherlands, the United Arab Emirates, the UK and the US. The department opened overseas units in Mauritius and Singapore in May last year.

The overseas units will be headed by senior Income Tax Department officers, who will be designated as first secretaries at the Indian mission or embassy of the foreign country where the unit is located. Indian Finance Minister Pranab Mukherjee has asked the tax authorities to expedite the hiring process so that the new units can begin operating within two months, according to a 6 January report in The Economic Times.

Mukherjee also said, on 25 January, that the government has set up a panel to examine if an amnesty scheme should be unveiled to tackle black money. He detailed a five-pronged strategy that consisted of joining the global crusade against black money, creating a legislative framework, setting up institutions dealing with illicit funds, developing systems to implement and impart skills to manpower for effective action.

“Amnesty schemes have a double side. Sometimes when it is announced, it is highly criticized that it is at the cost of honest taxpayers, and sometimes, it helps to bring in some money. That’s why I have appointed a group to look into it and to make suggestions and recommendations to me,” said when asked if the government was considering an amnesty scheme,” said Mukherjee.

15 February 2011, Jersey and the Isle of Man announced that they would retain their controversial zero-ten corporation tax regimes under which most foreign-owned companies pay no tax on their profits. The regimes have been under scrutiny from the European Union.
In late 2010, a critical review by the EU Code of Conduct Group and High Level Working Party concluded that zero-ten “gave rise to harmful effects” because it was combined with special anti-avoidance rules imposed by the Crown Dependencies. These are Jersey’s “deemed distribution rules” and the Isle of Man’s “attribution regime for individuals”.

Under these rules, resident shareholders of a resident company pay personal income tax on undistributed company profits. The EU regards this as a device used by the Crown Dependencies to tax locally owned businesses while exempting foreign-owned ones.

Jersey and the Isle of Man have therefore decided to drop their special anti-avoidance provisions, starting in 2012. Jersey chief minister Terry Le Sueur and Manx treasury minister Anne Craine both issued statements that this policy should end the EU’s concerns.

Guernsey’s response is not yet clear. Its government has previously indicated willingness to abolish the zero-ten system in favour of a flat rate of corporation tax. On 16 March it announced that its zero-ten legislation had received royal assent and that “work continues on the development of a revised system of corporate tax.”

Deputy Charles Parkinson, said: “Receiving Royal Assent removes any uncertainty about the island’s current system of corporate tax and ensures that there will be no unintended consequences when that system is eventually replaced”.”

1 February 2011, the OECD published a toolkit for national tax administrations to help them counter “aggressive” tax planning by large corporations and wealthy individuals with funds offshore. The toolkit is intended to help tax administrations identify key risk areas and decide how to respond, by focusing on early disclosure schemes rules.
The OECD defines aggressive tax planning as making tax avoidance transactions that comply with the letter of the law but abuse its spirit. The report examines how countries are tackling aggressive tax planning through improved transparency and disclosure. It covers a range of approaches from mandatory disclosure rules to forms of co-operative compliance.

The report, approved by all OECD members, concludes that disclosure initiatives can help fill the gap between the creation or promotion of aggressive tax planning schemes and their identification by the authorities, therefore enabling governments to proceed immediately to an assessment of the issue and its resolution. Strategies recommended include cooperative compliance programmes and increased reporting obligations.

“I hope that this report will be widely used by tax policy makers, tax administrators, other stakeholders and the public at large and that it will contribute to the discussions on the design or revision of disclosure initiatives around the world,” said Jeffrey Owens, director of the OECD’s Centre for Tax Policy and Administration, in the foreword.

21 February 2011, the South African government concluded its first tax information exchange agreement (TIEA) with Guernsey. Under the terms of a TIEA, Guernsey will, on request, exchange bank and other information relating to both criminal and civil tax matters.
In a joint declaration, signed at the same time as the TIEA, both treaty partners expressed a wish to strengthen their economic and trading relationship, each country recognising the other’s commitment to operating financial regulatory systems that meet the highest international standards in order to combat money laundering, terrorist financing and other financial and fiscal crimes.

“This TIEA, with South Africa, is the twenty-second TIEA that Guernsey has signed to date, and the third Agreement signed during 2011,” said Guernsey Chief Minister Lyndon Trott. “I am particularly delighted that, not only is this Guernsey’s first TIEA with a country in the African continent, but also that South Africa’s first TIEA is with Guernsey.”

17 January 2011, Spanish officials said that Spain would no longer classify the Cayman Islands as a tax haven under its domestic legislation once the tax information exchange agreement (TIEA) that it has negotiated with Spain has been signed.
“The conclusion of negotiations with Spain and the anticipated reclassification of the Cayman Islands under Spanish tax law represent significant progress in the Cayman Islands international tax transparency programme,” said Cayman Islands Premier and Minister of Finance McKeeva Bush. “Spain is also an EU member state and a G-20 country and therefore, Cayman’s agreement fulfils the objectives of our negotiation strategy, which is focused on concluding TIEAs with nations in these two groups.”

The Cayman Islands currently has signed 20 bilateral arrangements for the provision of tax information. In addition to Spain, the Cayman Islands currently has seven agreements awaiting signature – Italy, Japan, India, Greece, Indonesia, South Africa, South Korea – and is in further negotiations with other countries.

Spain’s efforts to clamp down on fiscal fraud yielded a record 10 billion euro last year. The unexpected yield was 23% higher than in 2009 and equaled about 1% of Spain’s annual gross domestic product, according to preliminary figures released in January by the government. The Spanish tax agency had anticipated that tax fraud receipts would remain flat.

Juan Manuel López Carbajo, head of the Spanish tax agency, said that 2010 “wasn’t a miracle year but the result of several years of better strategic planning and better use of technology and information sharing.” He cited the creation in 2006 of a special department to monitor whether large taxpayers were trying to keep money offshore, in particular companies with over 100 million euro in annual revenues that operate across borders.

Spain is also benefiting from international efforts to force Switzerland and other banking centres to relax secrecy laws, as well as tapping into account information sold by bank employees. It recouped about 300 million euro from a list of undeclared HSBC accounts initially handed over to France by one of the bank’s former information technology specialists.

24 February 2011, Switzerland signed tax treaties with Singapore and Malta. Further to provisions on withholding taxes, both treaties incorporate the new rule on interpretation in the case of administrative assistance that was recommended in mid-February by the Swiss Federal Council. These provisions allow a foreign country’s tax authorities to demand information on a suspected individual’s bank accounts even if they do not know the name of his bank, or even his own name.
The Singapore treaty sets a 5% withholding tax on cross-border dividend payments to non-portfolio shareholders holding at least 10% of a company. Interest payments will also be subject to the 5% levy.

The Malta treaty exempts non-portfolio shareholders from withholding taxes on all cross-border dividend or interest payments. But this is subject to two conditions: first that the shareholding is held for a year or more, and second that it is not an “artificially arranged” device.

The Federal Council has submitted the signed agreements to the Swiss parliament for approval. The treaties will come into force on 1 January in the year following ratification by both parties.

13 January 2011, HM Revenue & Customs reported that the number of UK “non-domiciled” residents had declined from 139,000 to 123,000 in the year prior after the launch of the £30,000 remittance basis charge in April 2008.
McGrigors, the law firm that secured the figures under a Freedom of Information request, said the 11.5% decline was the first for five years and was likely to have been repeated in 2010 as more long-term non-doms became liable to the change.

The UK coalition government has pledged a review to assess whether non-doms were making “a fair contribution to reducing the deficit” and a Treasury spokesman said last night that the review was “ongoing” and a further announcement would be made at the appropriate time.

About 5,400 people paid the £30,000 non-dom levy for the 2008/09 tax year, more than the 4,000 predicted by the Treasury prior to the tax’s introduction. This collected around £162 million, with £350 million forecast for 2009/10. The Treasury has estimated that non-doms pay around £4 billion in income tax each year, on top of the tax they pay on capital gains on UK assets, stamp duty and value added tax on spending, which brings the estimated total to £7 billion.

3 March 2011, the Uruguayan government approved and sent to the parliament draft laws to ratify Uruguay’s pending tax treaties and protocols with Switzerland and Liechtenstein. Both were signed in Bern on 18 October last year and will enter into force after the exchange of ratification instruments, with their provisions applying as of January of the following year.
Under both treaties dividends are taxable at a maximum withholding tax rate of 5% if the beneficial owner is a person that holds directly at least 25% of the dividend payer’s capital. In other cases, dividends are subject to a maximum rate of 15%. Interest and royalties are taxable at a maximum withholding tax rate of 10%.

Representatives from Uruguay and Malta also signed a tax treaty in Rome on 11 March. The treaty, which is the first tax agreement signed between the two nations, will enter into force after the exchange of the ratification instruments.