The Double Taxation Relief (Taxes on Income) (The Kingdom of Saudi Arabia) Order, 2013 entered into force on 1st December 2012. The Convention was signed by Deputy Prime Minister and Minister of Foreign Affairs Dr. Tonio Borg met his counterpart, Prince Saud bin Faisal bin Abdul-Aziz Al Saud in Riyadh on 2nd January 2012. The tax treaty had been approved by Saudi Arabia’s Cabinet on September 17, 2012. 15th January 2013 saw its publication in Malta’s Government Gazette.
Largely based on the OECD Model Convention on Income and Capital, the Tax Treaty. However certain specific criteria are also established, namely:
(1) that a building site, a construction, assembly or installation project, or supervisory activities, in connection therewith qualify as a Permanent Establishment if such activity has a duration of more than 6 months
(2) that in the case of dividends, these may also be taxed in the residence state of the recipient, however, where these are paid by a company which is resident of the Kingdom of Saudi to a resident of Malta, who is the beneficial owner thereof, the tax rate on dividends charged in Saudi by such company shall not exceed 5% of the gross amount of the dividends
(3) the withholding tax rate on royalties is also 5% (if they are paid for the use of, or the right to use, industrial, commercial or scientific equipment) and at 7% (in all other cases) and secondary jurisdiction to tax is granted to the residence state of the recipient
(4) that there is no withholding tax applicable on ‘income from debt claims’ (customarily referred to as interest in other tax treaties) and the treaty allocates exclusive jurisdiction to the residence state of the recipient.
