A Convention for the Avoidance of Double Taxation has been signed by Malta and Israel. The Convention fixes maximum withholding tax rates chargeable in the source State on interest payments at 5% and on dividends derived from portfolio investments at 15%. No tax would be chargeable in the source state on dividends receivable from direct investments (>10%) or on royalty receipts. Of course, Malta does not withhold any tax on outbound interest, dividends or royalties in terms of domestic tax laws.
The Convention also contains OECD Model style provisions for the exchange of information between the competent authorities of the two States. As such, whilst the Convention is intended and expected to strengthen economic relations between the two countries once it is in force (it is understood that 68 limited liability companies are currently registered in Malta and owned, directly or indirectly, by persons resident in Israel), the Convention should also assist in detecting abusive tax evasion in both Malta and Israel.