This treaty affords double taxation relief in relation to (i) the federal income tax and (ii) the business flat rate tax, as imposed by the laws of the United Mexican States and income tax, as imposed by the laws of Malta.
The main features of this treaty are as follows:
– Dividends no tax is imposed – 0% withholding tax.
– Interest which arises in one of the Contracting States and paid to a resident of the other may be taxed in that other state. However it may also be taxed in the Contracting State in which it arises and according to the laws of that State.
If the beneficial owner of the interest is a resident of the other Contracting State, the tax charged shall not exceed:
a) 5% of the gross amount of the interest from loans granted by a bank;
b) 10% of the gross amount of the interest in all other cases.
– Royalties are dealt with in the same way as interest, however if the beneficial owner of the interest is a resident of the other Contracting State, the tax charged shall not exceed:
10% gross amount of the royalties.
This Double Taxation Convention with Mexico which is the second, after Uruguay, signals the intent to strengthen economic relations with Latin American Countries, and the aim of concluding other similar agreements with countries of the same region.