DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA [ S.L.123.48 SUBSIDIARY LEGISLATION 123.48 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA ORDER 22nd Augu

Article 7or Article 14, as the case may be, shall apply.

1. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State. Article 11 INTEREST
2. Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State.
3. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.
4. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base.

Article 7or Article 14, as the case may be, shall apply.

1. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA [ S.L.123.48 9 Article 12 ROYALTIES
2. Royalties arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if such resident is the beneficial owner of the royalties.
3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematographic films, films or tapes or other means for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience (know-how).
4. The provisions of paragraph 1 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base.

Article 7or Article 14, as the case may be, shall apply.

4. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. Article 13 CAPITAL GAINS 1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State. 2. Gains from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of immovable property, may be taxed in the Contracting State in which the assets or the principal assets of the company are situated. 3. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State. 4. Gains from the alienation of ships or aircraft operated in international traffic by an enterprise of a Contracting State, or movable property pertaining to the operation of such ships or aircraft shall be taxable only in that State. 5. Gains from the alienation of any property other than that referred to in 10 [ S.L.123.48 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA paragraphs 1 to 4 shall be taxable only in the Contracting State of which the alienator is a resident. Article 14 INDEPENDENT PERSONAL SERVICES 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State except in one of the following circumstances, when such income may also be taxed in the other Contracting State: (

1. a)if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. In that case only so much of the income may be taxed in that other State as is attributable to that fixed base; (
2. b)if his stay in the other Contracting State is for a period or periods exceeding in the aggregate 183 days in any 12-month period commencing or ending in the calendar year concerned. In that case only so much of the income may be taxed in that other State as is derived from his activities performed in that other State. 2. The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. Article 15 DEPENDENT PERSONAL SERVICES 1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (
3. a)the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any 12-month period commencing or ending in the calendar year concerned, and (
4. b)the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and (
5. c)the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State. 3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State may be taxed in that State. DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA [ S.L.123.48 11 Article 16 DIRECTORS’ FEES Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. Article 17 ARTISTES AND SPORTSMEN 1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsman, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State. 2. Where income in respect of personal activities exercised by an entertainer or a sportsman in his capacity as such accrues not to the entertainer or sportsman himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsman are exercised. Article 18 PENSIONS Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State. Article 19 GOVERNMENT SERVICE 1. (
6. a)Remuneration, other than a pension, paid by a Contracting State or a local authority thereof to an individual in respect of services rendered to that State or local authority shall be taxable only in that State. (
7. b)However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who: (
8. i)(
9. ii)is a national of that State; or did not become a resident of that State solely for the purpose of rendering the services. 2. (
10. a)Any pension paid by, or out of funds created by, a Contracting State or a local authority thereof to an individual in respect of services rendered to that State or local authority shall be taxable only in that State. (
11. b)However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State. 3. The provisions of Articles 15, 16 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a local authority thereof. 12 [ S.L.123.48 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA Article 20 STUDENTS AND BUSINESS APPRENTICES A student or business apprentice who is present in a Contracting State solely for the purpose of his education or training and who is, or immediately before being so present was, a resident of the other Contracting State shall be exempt from tax in the first-mentioned State on payments received from outside that first-mentioned State for the purposes of his maintenance, education or training. Article 21 OTHER INCOME 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State. 2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base.

Article 7or Article 14, as the case may be, shall apply.

Article 22 AVOIDANCE OF DOUBLE TAXATION 1. In the case of a resident of Croatia, double taxation shall be avoided as follows: Where a resident of Croatia derives income which, in accordance with the provisions of this Agreement, may be taxed in Malta, Croatia shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in Malta. Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, which is attributable to the income which may be taxed in Malta. 2. In the case of a resident of Malta, double taxation shall be avoided as follows: (

1. a)subject to the provisions of the law of Malta regarding the allowance of a credit against Malta tax in respect of foreign tax, where, in accordance with the provisions of this Agreement, there is included in a Malta assessment income from sources within Croatia, the Croatian tax on such income shall be allowed as a credit against the relative Malta tax payable thereon; (
2. b)where a company which is a resident of Croatia pays a dividend to a resident of Malta, the Croatian tax payable by the company paying the dividend in respect of the profits out of which such dividend is paid shall be allowed as a credit against the Malta tax payable in respect of that dividend. 3. Where in accordance with any provision of the Agreement income derived DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA [ S.L.123.48 13 by a resident of a Contracting State is exempt from tax in that State, such State may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. Article 23 NON-DISCRIMINATION 1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States. 2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. 3. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents. 4. Except where the provisions of paragraph 1 of Article 9, paragraph 4 of Article 11, or paragraph 4 of Article 12 apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. 5. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the firstmentioned State are or may be subjected. 6. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description which are the subject of this Agreement. Article 24 MUTUAL AGREEMENT PROCEDURE 1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is resident or, if his case comes under paragraph 1 of Article 23, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement. 2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the 14 [ S.L.123.48 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States. Article 25 EXCHANGE OF INFORMATION 1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement or of the domestic laws of the Contracting States concerning taxes covered by the Agreement insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Agreement. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. 2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation: (
3. a)to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State; (
4. b)to supply information which is not obtainable under the laws or in the normal course of the administration of that or the other Contracting State; (
5. c)to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public). Article 26 MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements. DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA [ S.L.123.48 15 Article 27 ENTRY INTO FORCE 1. The Contracting States shall notify each other, through diplomatic channels, that the internal legal procedures necessary for the entry into force of this Agreement have been complied with. 2. This Agreement shall enter into force thirty days after the date of receipt of the later of the notifications referred to in paragraph 1 and its provisions shall have effect: (
6. a)in the case of Croatia, in respect of taxes on income derived during the taxable years beginning on or after the first day of January immediately following the date on which the Agreement enters into force; (
7. b)in the case of Malta, in respect of taxes on income derived during any calendar year or accounting period, as the case may be, beginning on or after the first day of January immediately following the date on which the Agreement enters into force. Article 28 DENUNCIATION This Agreement shall remain in force indefinitely but either of the Contracting States may, on or before the 30th day of June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give written notice of denunciation to the other Contracting State through diplomatic channels. In such event this Agreement shall cease to have effect: (
8. a)in the case of Croatia, in respect of taxes on income derived during the taxable years beginning on or after the first day of January immediately following the date on which the notice of denunciation is given; (
9. b)in the case of Malta, in respect of taxes on income derived during any calendar year or accounting period, as the case may be, beginning on or after the first day of January immediately following the date on which the notice of denunciation is given. IN WITNESS WHEREOF the undersigned, being duly authorised thereto, have signed this Agreement. DONE at Rome, on the 21st day of October, 1998, in duplicate in the Croatian and English languages, both texts being equally authentic. Henry G. De Gabriele For the Republic of Malta Dr Davorin Rudolf For the Republic of Croatia 16 [ S.L.123.48 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE REPUBLIC OF CROATIA PROTOCOL At the moment of signing the Agreement between the Republic of Croatia and Malta for the Avoidance of Double Taxation with respect to Taxes on Income, the undersigned have agreed that the following provisions shall form an integral part of the Agreement. Concerning Article 10, it is understood that dividends are not subject to Croatian tax. Should there be any change in this system or in the full imputation system presently applied in Malta regarding the taxation of company profits in Malta and the subsequent distribution of such profits to the company’s shareholders, the Contracting States shall consult each other to reconsider the provisions of that Article. IN WITNESS WHEREOF, the undersigned, being duly authorised thereto, have signed this Protocol. Done at Rome on the 21st day of October 1998 in duplicate in the Croatian and English languages, both texts being equally authentic. Henry G. De Gabriele For the Republic of Malta Dr Davorin Rudolf For the Republic of Croatia