Maltese Pension Plans Under the Malta/US Income Tax Treaty

By Gregory Dean, US Tax Advisor | US Tax and Financial | W: www.ustaxfs.com

Over the past decade, pension plans have been established and licensed in Malta with particular consideration given to US taxpayers. A number of these plans were designed to accept “rollovers” from foreign pensions plans owned by US persons - most notably from UK pension plans - combining the tax deferral benefits of a Qualifying Recognised Overseas Pension Scheme (QROPS) for UK tax purposes and the perceived US tax deferral benefits of a Malta pension.

dent of a Contracting State’ includes … a pension fund established in that State … notwithstanding that all or part of its income or gains may be exempt from tax under the domestic law of that State.” It further provides that a pension fund established in Malta must be “a licensed fund” which is “operated principally … to administer or provide pension or retirement benefits.”

The catalyst for these plans is the Malta/US Income Tax Treaty (effective in 2011) which addresses double tax and primary taxation rights of the two Contracting States. The definition of a “pension fund” in this Treaty is broader than in most other US treaties, with it simply stating that “the term ‘resi-

The Treaty adds that “Pensions and other similar remuneration beneficially owned by a resident of a Contracting State shall be taxable only in that State,” and adds that “Notwithstanding … the amount of any such pension or remuneration arising in a Contracting State that, when received, would be exempt from taxation in that State if the beneficial owner were a resident thereof shall be exempt from taxation in the Contracting State of which the beneficial owner is a resident.” This tax treatment is further confirmed in