Mur Lura
U.S.-Malta Income Tax Treaty
PR2202
19/12/1996
19/12/1996
| Regarding the Press Statement issued by the US Authorities in | connection with the 25.5 percent deduction on social security benefits (copy attached), the Ministry of Foreign Affairs and the Environment would like to point out that since the formal notification to the Maltese Government, dated 15 November 1995 of the unilateral decision taken by the American Authorities, frequent and strong representations were made and explanations advanced on the provisions which the American Authorities felt were of concern; nonetheless, the U.S. Authorities have refused to reconsider their decision. |
| The Maltese Government is still continuing with these efforts with | a view to mitigating as far as possible any adverse consequences of this unilateral decision on specific sectors of the Maltese economy and on vulnerable individuals. It is hoped that these efforts will lead to a reconsideration by the US Government of its decision so that negotiations may be initiated in the expectation that a mutually satisfactory agreement will be reached. |
US Press Statement of December 19/12/96 follows.
TEXT OF U.S. PRESS STATEMENT:
U.S. SOCIAL SECURITY BENEFITS BECOME SUBJECT TO TAX
| On November 16, 1995, the Government of the United States | informed the Government of Malta of its intention to terminate the U.S.-Malta Income Tax Treaty as of January 1, 1997; due to changes in Maltese Law that caused the treaty to become inconsistent with U.S. tax treaty policy. As a result, the United States may now tax social security benefits paid to Maltese residents. |
| Unlike some other countries, the United States permits certain | foreigners who live outside the United States to receive U.S. social security benefits. Accordingly, payments of U.S. social security benefits to Maltese residents will continue following termination of the U.S.-Malta tax treaty. However, following the termination of the treaty, such payments to Maltese residents (other than U.S. citizens or residents) will be subject to a 25.5.% U.S. withholding tax. |
| At the time the U.S.-Malta tax treaty was negotiated, the United | States did not tax social security benefits. However, under current U.S. Law, social security recipients generally are subject to tax. While the current U.S.-Malta tax treaty reflected the old U.S. law exempting social security benefits from tax, new U.S. tax treaties generally permit the United States to tax social security benefits paid to foreigners. |
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