DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC [ S.L.123.63 SUBSIDIARY LEGISLATION 123.63 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC ORDER 6th March

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 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC [ S.L.123.63 9 other State. Article 11 INTEREST
2. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
3. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State the tax so charged shall not exceed 10 percent of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.
4. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if it is derived by the other Contracting State or an administrative sub-division or a local authority thereof or an entity wholly owned and controlled by that State or an administrative sub-division or local authority.
5. 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.
6. The provisions of paragraphs 1 and 2 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. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
2. 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 Convention. Article 12 ROYALTIES
3. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 10 [ S.L.123.63 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC
4. However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 10 percent of the gross amount of the royalties. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.
5. 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 cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.
6. The provisions of paragraphs 1 and 2 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.

5. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that Contracting State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 6. 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 law of each Contracting State, due regard being had to the other provisions of this Convention. 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 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC [ S.L.123.63 11 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 paragraphs 1, 2, 3 and 4, shall be taxable only in the Contracting State of which the alienator is a resident. 6. With respect to gains derived by an air transport consortium or a similar form of association formed by companies from different countries, the provisions of paragraph 4 shall apply only to such part of the gains as corresponds to the participation held in that consortium or association by a company that is a resident of a Contracting State. 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. However, such income may be taxed in the other Contracting State in the following circumstances: (

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 as is attributable to that fixed base may be taxed in that other Contracting State; or (
2. b)if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelvemonth period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from the activity exercised in the other Contracting State may be taxed 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 twelve-month period commencing or ending in the fiscal year concerned; (
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. 12 [ S.L.123.63 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC 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. 4. Where a resident of a Contracting State derives remuneration in respect of an employment exercised aboard an aircraft operated in international traffic by an air transport consortium or a similar form of association formed by companies from different countries including a company that is a resident of that State, such remuneration shall be taxable only in that State. 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 ENTERTAINERS AND SPORTSPERSONS 1. Notwithstanding the provisions of Articles 7, 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 sportsperson, 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 sportsperson in his capacity as such accrues not to the entertainer or sportsperson 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 sportsperson are exercised. Article 18 PENSIONS AND SOCIAL SECURITY PAYMENTS 1. 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. 2. Notwithstanding the provisions of paragraph 1, pensions and other payments under the social security legislation of a Contracting State may be taxable only in that State. Article 19 GOVERNMENT SERVICE 1. (
6. a)Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political or administrative sub-division or a local authority thereof in respect of services rendered to that State or subdivisdion or authority shall be taxable only in that State. (
7. b)However, such salaries, wages and other similar 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. DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC 2. [ S.L.123.63 13 (
10. a)Any pension paid by, or out of funds created by, a Contracting State or a political or administrative subdivision or local authority thereof to an individual in respect of services rendered to that State or subdivision or 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 salaries, wages and other similar remuneration, and to pensions, in respect of services rendered in connection with a business carried on by a Contracting State or a political or administrative subdivision or a local authority thereof. 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 Convention 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.

CHAPTER IV ELIMINATION OF DOUBLE TAXATION Article 22 ELIMINATION OF DOUBLE TAXATION 1. In the case of Portugal double taxation shall be eliminated as follows: (

1. a)where a resident of Portugal derives income which, in accordance with the provisions of this Convention, may be taxed in Malta, the Portuguese Republic 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; and (
2. b)where in accordance with any provision of the Convention income derived by a resident of Portugal is exempt from tax in this State, Portugal may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. 14 2. [ S.L.123.63 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC In the case of Malta, double taxation shall be eliminated as follows: 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 Convention, there is included in a Malta assessment income from sources within Portugal the Portuguese tax on such income shall be allowed as a credit against the relative Malta tax payable thereon. 3. For the purpose of allowance as a credit the tax payable in Portugal or Malta, as the context requires, shall be deemed to include the tax which is otherwise payable in a Contracting State but has been reduced or waived temporarily by that State under its legal provisions for tax incentives relating to economic development. The provisions of this paragraph shall apply for the first seven years during which this Convention is applicable. This period may be extended by mutual agreement between the competent authorities. The competent authorities shall also consult each other with a view to identifying the tax incentives applicable in both Contracting States which may qualify for the purpose of this paragraph. 4. Where the Convention provides that income arising in a Contracting State shall be relieved from tax in that State, either in full or in part, and, under the law in force in the other Contracting State, such income is subject to tax by reference to the amount thereof which is remitted to or received in that other State and not by reference to the full amount thereof, then the relief to be allowed in the firstmentioned State shall apply only to such portion of the income as is remitted to or received in the other State. CHAPTER V SPECIAL PROVISIONS 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 of 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. 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. 3. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, or paragraph 6 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. 4. Enterprises of a Contracting State, the capital of which is wholly or partly DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC [ S.L.123.63 15 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. 5. The provisions of this Article shall apply to taxes of every kind and description which are the subject of this Convention. 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 Convention, 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 a 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 Convention. 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 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 Convention. 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 Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention. 4. The competent authorities of the Contracting States may communicate with each other directly, including through a joint commission consisting of themselves or their representatives, for the purpose of reaching an agreement in the sense of the preceding paragraphs. 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 Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention. 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) concerned with 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 Convention. 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; 16 [ S.L.123.63 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC (
4. b)to supply information which is not obtainable under the laws or in the normal course of the administration of that or of 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 Convention 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. Article 27 LIMITATION OF RELIEF The provisions of this Convention shall not apply to persons entitled to any special tax benefit under: (
6. a)a law of either one of the Contracting States which has been identified in an Exchange of Notes between the Contracting States; or (
7. b)any substantially similar law subsequently enacted. CHAPTER VI FINAL PROVISIONS Article 28 ENTRY INTO FORCE 1. The Contracting States shall notify each other that the constitutional requirements for the entry into force of this Convention have been complied with. 2. This Convention shall enter into force thirty days after the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect: (
8. a)in Portugal: (
9. i)(
10. ii)in respect of taxes withheld at source, the fact giving rise to them appearing on or after the first day of January of the year next following the year in which this Convention enters into force; in respect of other taxes as to income arising in any fiscal year beginning on or after the first day of January in the year next following the year in which this Convention enters into force; (
11. b)in Malta, in respect of taxes which are levied for any year of assessment beginning on or after the first day of January in the second calendar year immediately following the year in which the Convention enters into force. Article 29 TERMINATION This Convention shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiration of a period of five years from the date of DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC [ S.L.123.63 17 its entry into force. In such event, the Convention shall cease to have effect: (
12. a)in Portugal: (
13. i)(
14. ii)in respect of taxes withheld at source, the fact giving rise to them appearing on or after the first day of January next following the date on which the period specified in the said notice of termination expires; in respect of other taxes as to income arising in the fiscal year beginning on or after the first day of January next following the date on which the period specified in the said notice of termination expires; (
15. b)in Malta, in respect of taxes which are levied for any year of assessment beginning on or after the first day of January of the second calendar year next following the date in which the period specified in the said notice of termination expires. IN WITNESS WHEREOF, the undersigned, duly authorised thereto by their respective Governments, have signed this Convention. DONE at Lisbon, this 26th day of January, 2001 in duplicate in the English and Portuguese languages, both texts being equally authentic. For the Government of Malta Joe Borg Minister of Foreign Affairs For the Government of the Portuguese Republic Jaime Gama Minister of Foreign Affairs PROTOCOL At the moment of the signature of the Convention between the Portuguese Republic and Malta for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, both parties have agreed upon the following provisions, which form an integral part of the Convention: 1. Ad Article 10 Under the Malta law in force, income tax paid by a company, as is referable to that part of its profits which is distributed by way of dividends, is assimilated with the personal income tax of the shareholder in receipt of such a dividend. In the shareholder’s hands, the dividend is charged to tax after being grossed up with the tax paid by the company on the profits out of which such dividend is paid and the relevant amount of tax, so assimilated, is set off against the shareholder’s tax liability on his income from all sources liable to tax. With reference to Article 10, it is understood that paragraph 2(
16. b)thereof shall be applicable only so long as the above system continues in force. If this will be changed the rate of tax referred to in paragraph 2(
17. a)shall apply in Malta in relation to the dividends paid by a company which is a resident of Malta to a resident of Portugal. 2. Ad Article 14 In relation to income referred to in paragraph 1, it may be taxed in the other Contracting State if the remuneration for the services performed in that other State is derived from residents of the first mentioned State and exceeds the equivalent of 18 [ S.L.123.63 DOUBLE TAXATION RELIEF ON TAXES ON INCOME WITH THE PORTUGUESE REPUBLIC 30000 euros during the fiscal year. 3. Ad Article 22
18. a)It is understood that under legislation currently in force, Portugal does not extend relief for underlying tax in respect of tax paid by a company on profits out of which dividends are paid to non-residents. Should Portugal extend relief for underlying tax under its domestic tax provisions to non-residents, the competent authorities shall consult each other with a view to extending such relief for underlying tax to dividends paid by a company resident in Malta to a company resident in Portugal. Such consultations shall be held not later than six months from the date of entry into force of the legislation;
19. b)In the case of dividends paid by a company resident in Malta to a resident of Portugal, the net dividend shall be grossed up in Portugal with the rates laid down in Article 10