Malta Clarifies Taxation of Directors' Fees

Malta's tax authority released a guidance note clarifying the tax treatment of fees received by non-resident directors from the companies resident in Malta.

According to that note, directors' fees are considered as income derived from the country where the company is resident (i.e. from the jurisdiction in which the company is managed and controlled). The tax authority states that this position is consistent with the relevant OECD's Model Tax Convention commentary: "director’s fees" should be interpreted as fees and similar payments received in a person’s capacity as a member of a board of directors and does not include remuneration in respect of other services rendered to the company (such as employment, advisory services etc.)

Therefore any remuneration falling under the definition of directors' fees mentioned above is taxable in the state of residence (i.e. the place of effective management) of the company. Other remuneration paid to a person, who is also a director, in respect of other services rendered to the company is not taxable in Malta if this person is neither resident nor domiciled in Malta, nor performing the services in Malta, nor is deemed to have permanent establishment in Malta.