DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC ġ S.L.123.63 1
SUBSIDIARY LEGISLATION 123.63
DOUBLE TAXATION RELIEF ON TAXES ON 
INCOME WITH THE PORTUGUESE REPUBLIC 
ORDER
6th March, 2002
LEGAL NOTICE 105 of 2002, as amended by Legal Notice 250 of 2002.
Title.
Taxes on Income with the Portuguese Republic Order.
Arrangements to 
have effect.
Amended by:
L.N.250 of 2002.
2. It is hereby declared -
( a ) that the arrangements specified in the Convention set
out in the Schedule to this order have been made with
the Portuguese Republic with a view to affording relief
from double taxation in relation to the following taxes
imposed by the laws of the Portuguese Republic:
(i) the personal income tax (Imposto sobre o
Rendimento das Pessoas Singulares - IRS);
(ii) the corporate income tax (Imposto sobre o
Rendimento das Pessoas Colectivas - IRC); and
(iii) the local surtax on corporate income tax
(Derrama);
( b )  that it is expedient that those arrangements should
have effect;
( c ) that the Convention has entered into force on the 5th
April, 2002.
2 ġ S.L.123.63
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC
SCHEDULE
CONVENTION BETWEEN MALTA
AND THE PORTUGUESE REPUBLIC
FOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME
The Government of Malta and the Government of the Portuguese Republic,
desiring to conclude a Convention for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to Taxes on Income, have agreed as
follows:
CHAPTER I
SCOPE OF THE CONVENTION
Article 1
PERSONAL SCOPE
This Convention shall apply to persons who are residents of one or both of
the Contracting States.
Article 2
TAXES COVERED
1. This Convention shall apply to taxes on income imposed on behalf of a
Contracting State or its political or administrative subdivisions or local authorities,
irrespective of the manner in which they are levied.
2. There shall be regarded as taxes on income all taxes imposed on total
income or on elements of income, including taxes on gains from the alienation of
movable or immovable property, taxes on the total amounts of wages or salaries paid
by enterprises as well as taxes on capital appreciation.
3. The existing taxes to which the Convention shall apply are in particular:
( a ) in the case of  Portugal:
(i) the personal income tax (Imposto sobre o Rendimento das Pessoas
Singulares - IRS);
(ii) the corporate income tax (Imposto sobre o Rendimento das
Pessoas Colectivas - IRC); and
(iii) the local surtax on corporate income tax (Derrama);
(hereinafter referred to as "Portuguese tax");
( b ) in the case of Malta:
the income tax;
(hereinafter referred to as "Malta tax").
4. The Convention shall apply also to any identical or substantially similar
taxes which are imposed after the date of signature of the Convention in addition to,
or in place of, the existing taxes.  The competent authorities of the Contracting
States shall notify each other of substantial changes which have been made in their
respective taxation laws.
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC ġ S.L.123.63 3
CHAPTER II
DEFINITIONS
Article 3
GENERAL DEFINITIONS
1. For the purposes of this Convention, unless the context otherwise requires:
( a ) the term "Portugal" means the territory of the Portuguese Republic
situated in the European Continent, the archipelagos of Azores and
Madeira, the respective territorial sea and any other zone in which, in
accordance with the laws of Portugal and international law, the
Portuguese Republic has its jurisdiction or sovreign rights with respect
to the exploration and exploitation of the natural resources of the sea
bed and subsoil, and of the superjacent waters;
( b ) the term "Malta" means the Republic of Malta and, when used in a
geographical sense, means the Island of Malta, the Island of Gozo and
the other islands of the Maltese archipelago, including the territorial
waters thereof, and any area outside the territorial waters of Malta
which has been or may hereafter be designated, in accordance with
international law and under the law of Malta concerning the continental
shelf, as an area within which the rights of Malta with respect to the
seabed and subsoil and their natural resources may be exercised;
( c ) the terms "a Contracting State" and "the other Contracting State" mean
Portugal or Malta, as the context requires;
( d ) the term "person" includes an individual, a company and any other body
of persons;
( e ) the term "company" means any body corporate, or any entity which is
treated as a body corporate for tax purposes;
( f ) the terms "enterprise of a Contracting State" and "enterprise of the other
Contracting State" mean respectively an enterprise carried on by a
resident of a Contracting State and an enterprise carried on by a resident
of the other Contracting State;
( g ) the term "international traffic" means any transport by a ship or aircraft
operated by an enterprise of a Contracting State, except when the ship
or aircraft is operated solely between places in the other Contracting
State;
( h ) the term "competent authority" means :
(i) in Portugal: the Minister of Finance, the Director General of
Taxation (Director-General dos Impostos) or their authorised
representative;
(ii) in Malta: the Minister responsible for finance or his authorised
representative;
( i ) the term "national" means:
(i) any individual possessing the nationality of a Contracting State;
(ii) any legal person, partnership or association deriving its status as
such from the laws in force in a Contracting State.
2. As regards the application of the Convention by a Contracting State, any
term not defined therein shall, unless the context otherwise requires, have the
meaning which it has at that time under the laws of that State for the purposes of the
4 ġ S.L.123.63
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC
taxes to which the Convention applies, any meaning under the applicable tax laws of
that State prevailing over a meaning given to the term under other laws of that State.
Article 4
RESIDENT
1. For the purposes of this Convention, the term "resident of a Contracting
State" means any person who, under the laws of that State, is liable to tax therein by
reason of his domicile, residence, place of management or any other criterion of a
similar nature and also includes that State and any political or administrative
subdivision or local authority thereof. This term, however, does not include any
person who is liable to tax in that State in respect only of income from sources in
that State.
2. Where by reason of the provisions of paragraph 1 an individual is a resident
of both Contracting States, then his status shall be determined as follows:
( a ) he shall be deemed to be a resident only of the State in which he has a
permanent home available to him; if he has a permanent home available
to him in both States, he shall be deemed to be a resident only of the
State with which his personal and economic relations are closer (centre
of vital interests);
( b ) if the State in which he has his centre of vital interests cannot be
determined, or if he has not a permanent home available to him in either
State, he shall be deemed to be a resident only of the State in which he
has an habitual abode;
( c ) if he has an habitual abode in both States or in neither of them, he shall
be deemed to be a resident only of the State of which he is a national;
( d ) if he is a national of both States or of neither of them, the competent
authorities of the Contracting States shall settle the question by mutual
agreement.
3. Where by reason of the provisions of paragraph 1 a person other than an
individual is a resident of both Contracting States, then it shall be deemed to be a
resident only of the State in which its place of effective management is situated.
Article 5
PERMANENT ESTABLISHMENT
1. For the purposes of this Convention, the term "permanent establishment"
means a fixed place of business through which the business of an enterprise is
wholly or partly carried on.
2. The term "permanent establishment" includes especially:
( a ) a place of management;
( b ) a branch;
( c ) an office;
( d ) a factory;
( e ) a workshop;
( f ) a mine, an oil or gas well, a quarry or any other place of extraction of
natural resources including an offshore drilling site.
3. The term "permanent establishment" likewise encompasses:
( a ) a building site, a construction, assembly or installation project or
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC ġ S.L.123.63 5
supervisory activities in connection therewith, but only where such site,
project or activities continue for a period of more than nine months;
( b ) the furnishing of services, including consultancy services, by an
enterprise through employees or other personnel engaged by the
enterprise for such purpose, but only where activities of that nature
continue (for the same or a connected project) within a Contracting
State for a period or periods aggregating more than nine months within
any twelve month period.
4. Notwithstanding the preceding provisions of this Article, the term
"permanent establishment" shall be deemed not to include:
( a ) the use of facilities solely for the purpose of storage, display or delivery
of goods or merchandise belonging to the enterprise;
( b ) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display or delivery;
( c ) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;
( d ) the maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise, or of collecting information, for the
enterprise;
( e ) the maintenance of a fixed place of  business solely for the purpose of
carrying on, for the enterprise, any other activity of a preparatory or
auxiliary character;
( f ) the maintenance of a fixed place of business solely for any combination
of activities mentioned in sub-paragraphs ( a ) to ( e ), provided that the
overall activity of the fixed place of business resulting from this
combination is of a preparatory or auxiliary character.
5. Notwithstanding the provisions of paragraphs 1 and 2, where a person -
other than an agent of an independent status to whom paragraph 6 applies - is acting
on behalf of an enterprise and has, and habitually exercises, in a Contracting State an
authority to conclude contracts in the name of the enterprise, that enterprise shall be
deemed to have a permanent establishment in that State in respect of any activities
which that person undertakes for the enterprise, unless the activities of such person
are limited to those mentioned in paragraph 4 which, if exercised through a fixed
place of business, would not make this fixed place of business a permanent
establishment under the provisions of that paragraph.
6. An enterprise of a Contracting State shall not be deemed to have a
permanent establishment in the other Contracting State merely because it carries on
business in that other State through a broker, general commission agent or any other
agent of an independent status, provided that such persons are acting in the ordinary
course of their business.
7. The fact that a company which is a resident of a Contracting State controls
or is controlled by a company which is a resident of the other Contacting State, or
which carries on business in that other State (whether through a permanent
establishment or otherwise), shall not of itself constitute either company a
permanent establishment of the other.
6 ġ S.L.123.63
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC
CHAPTER III
TAXATION OF INCOME
Article 6
INCOME FROM IMMOVABLE PROPERTY
1. Income derived by a resident of a Contracting State from immovable
property (including income from agriculture or forestry) situated in the other
Contracting State may be taxed in that other State.
2. The term "immovable property" shall have the meaning which it has under
the law of the Contracting State in which the property in question is situated. The
term shall in any case include property accessory to immovable property, livestock
and equipment used in agriculture and forestry, rights to which the provisions of
general law respecting landed property apply, usufruct of immovable property and
rights to variable or fixed payments as consideration for the working of, or the right
to work, or to explore for, mineral deposits, sources and other natural resources;
ships, boats and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 shall apply to income derived from the direct
use, letting, or use in any other form of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from
immovable property of an enterprise and to income from immovable property used
for the performance of independent personal services.
5. The foregoing provisions shall also apply to income from movable property,
or income derived from services connected with the use or the right to use the
immovable property, which, under the taxation law of the Contracting State in which
the property is situated, is assimilated to income from immovable property.
Article 7
BUSINESS PROFITS
1. The profits of an enterprise of a Contracting State shall be taxable only in
that State unless the enterprise carries on business in the other Contracting State
through a permanent establishment situated therein.  If the enterprise carries on
business as aforesaid, the profits of the enterprise may be taxed in the other
Contracting State but only so much of them as is attributable to that permanent
establishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a
Contracting State carries on business in the other Contracting State through a
permanent establishment situated therein, there shall in each Contracting State be
attributed to that permanent establishment the profits which it might be expected to
make if it were a distinct and separate enterprise engaged in the same or similar
activities under the same or similar conditions and dealing wholly independently
with the enterprise of which it is a permanent establishment or with other associated
enterprises with which it deals.
3. In determining the profits of a permanent establishment, there shall be
allowed as deductions expenses which are incurred for the purposes of the
permanent establishment, including executive and general administrative expenses
so incurred, whether in the State in which the permanent establishment is situated or
elsewhere.
4. Insofar as it has been customary in a Contracting State to determine the
profits to be attributed to a permanent establishment on the basis of an
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC ġ S.L.123.63 7
apportionment of the total profits of the enterprise to its various parts, nothing in
paragraph 2 shall preclude that Contracting State from determining the profits to be
taxed by such an apportionment as may be customary; the method of apportionment
adopted shall, however, be such that the result shall be in accordance with the
principles contained in this Article. 
5. No profits shall be attributed to a permanent establishment by reason of the
mere purchase by that permanent establishment of goods or merchandise for the
enterprise.
6. For the purposes of the preceding paragraphs, the profits to be attributed to
the permanent establishment shall be determined by the same method year by year
unless there is good and sufficient reason to the contrary.
7. Where profits include items of income which are dealt with separately in
other Articles of this Convention, then the provisions of those Articles shall not be
affected by the provisions of this Article.
Article 8
SHIPPING AND AIR TRANSPORT
1. Profits of an enterprise of a Contracting State from the operation of ships or
aircraft in international traffic shall be taxable only in that State.
2. The provisions of paragraph 1 shall also apply to profits derived from the
participation in a pool, a joint business or an international operating agency.
3. Whenever companies from different countries have agreed to carry on an air
transportation business together in the form of a consortium or a similar form of
association, the provisions of paragraph 1 shall apply to such part of the profits of
the consortium or association as corresponds to the participation held in that
consortium or association by a company that is a resident of a Contracting State.
Article 9
ASSOCIATED ENTERPRISES
1. Where
( a ) an enterprise of a Contracting State participates directly or indirectly in
the management, control or capital of an enterprise of the other
Contracting State, or
( b ) the same persons participate directly or indirectly in the management,
control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State,
and in either case conditions are made or imposed between the two enterprises in
their commercial or financial relations which differ from those which would be made
between independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those conditions,
have not so accrued, may be included in the profits of that enterprise and taxed
accordingly.
2. Where a Contracting State includes in the profits of an enterprise of that
State - and taxes accordingly - profits on which an enterprise of the other
Contracting State has been charged to tax in that other State and the profits so
included are profits which would have accrued to the enterprise of the first-
mentioned State if the conditions made between the two enterprises had been those
which would have been made between independent enterprises, then that other State
shall make an appropriate adjustment to the amount of the tax charged therein on
8 ġ S.L.123.63
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC
those profits. In determining such adjustment, due regard shall be had to the other
provisions of this Convention and the competent authorities of the Contracting
States shall if necessary consult each other.
Article 10
DIVIDENDS
1. Dividends paid by a company which is a resident of a Contracting State to a
resident of the other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of
which the company paying the dividends is a resident and according to the laws of
that State, but:
( a ) where the dividends are paid by a company which is a resident of
Portugal to a resident of Malta who is the beneficial owner thereof, the
Portuguese tax so charged shall not exceed:
(i) 15 per cent of the gross amount of the dividends; or
(ii) 10 per cent of the gross amount of the dividends if the beneficial
owner is a company that, for  an uninterrupted period of two years
prior to the payment of the dividend, owns directly at least 25 per
cent of the capital stock (capital social) of the company paying
the dividends;
( b ) where the dividends are paid by a company which is a resident of Malta
to a resident of Portugal who is the beneficial owner thereof, Malta tax
on the gross amount of the dividends shall not exceed that chargeable on
the profits out of which the dividends are paid.
The competent authorities of the Contracting States shall by mutual
agreement settle the mode of application of these limitations.
This paragraph shall not affect the taxation of the company in respect of the
profits out of which the dividends are paid.
3. The term "dividends" as used in this Article means income from shares,
"jouissance" shares or "jouissance" rights, mining shares, founders’ shares or other
rights, not being debt-claims, participating in profits, as well as income which is
subjected to the same taxation treatment as income from shares by the laws of the
State of which the company making the distribution is a resident.
4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner
of the dividends, being a resident of a Contracting State, carries on business in the
other Contracting State of which the company paying the dividends is a resident,
through a permanent establishment situated therein, or performs in that other State
independent personal services from a fixed base situated therein, and the holding in
respect of which the dividends are paid is effectively connected with such permanent
establishment or fixed base. In such case the provisions of Article 7 or Article 14, as
the case may be, shall apply.
5. 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 ġ S.L.123.63 9
other State.
Article 11
INTEREST
1. Interest arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
2. 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.
3. 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.
4. 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.
5. 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.  In such case the provisions of Article 7 or Article 14, as the case may be,
shall apply.
6. 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.
7. 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
1. Royalties arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
10 ġ S.L.123.63
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC
2. 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.
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 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.
4. 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. In such case the provisions of Article 7 or 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 ġ 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:
( 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
( 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 twelve-
month 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:
( 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;
( b ) the remuneration is paid by, or on behalf of, an employer who is not a
resident of the other State; and
( c ) the remuneration is not borne by a permanent establishment or a fixed
base which the employer has in the other State.
12 ġ 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. ( 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.
( 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:
(i) is a national of that State;  or
(ii) 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 ġ S.L.123.63 13
2. ( 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.
( 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.  In such case the provisions of
Article 7 or 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:
( 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
( 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 ġ S.L.123.63
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC
2. 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 first-
mentioned 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 ġ 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 first-
mentioned 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:
( a ) to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Contracting State;
16 ġ S.L.123.63
DOUBLE TAXATION RELIEF ON TAXES ON INCOME
WITH THE PORTUGUESE REPUBLIC
( 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;
( 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:
( a ) a law of either one of the Contracting States which has been identified
in an Exchange of Notes between the Contracting States; or
( 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:
( a ) in Portugal:
(i) 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;
(ii) 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;
( 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 ġ S.L.123.63 17
its entry into force.  In such event, the Convention shall cease to have effect:
( a ) in Portugal:
(i) 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;
(ii) 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;
( 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 For the Government of the Portuguese Republic
Joe Borg Jaime Gama
Minister of Foreign Affairs 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( 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( 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 ġ 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
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;
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 (2)( a )(i) or (ii), as applicable, computed with reference to the net amount
of the dividends.  The relief against the tax chargeable in Portugal shall be limited to
the Portuguese tax on the amount so grossed up.  
4. Ad Article 23
The provisions of paragraph 3 do not hinder the application of any provision
of the tax law of a Contracting State concerning the deduction of interest which is in
force at the date of signature of this Convention (there being included any future
modification of the provisions that do not change the general nature).
5. The provisions of this Convention shall not be interpreted as limiting in any
way the exemptions, deductions, credits or other reliefs that are or will be granted:
( a ) by the law of a Contracting State for the purpose of the assessment of
the taxes levied by that State; or
( b ) by any other Agreement signed by any of the Contracting States.
IN WITNESS WHEREOF, the undersigned, duly authorised thereto by their
respective Governments, have signed this Protocol.
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 For the Government of the Portuguese Republic
Joe Borg Jaime Gama
Minister of Foreign Affairs Minister of Foreign Affairs
