The Protocol amending the Double Taxation Agreement between Malta and Romania, originally signed to align with the OECD BEPS Multilateral Instrument (MLI) and update provisions on anti-abuse, permanent establishment, and dispute resolution, has been granted force of law through Legal Notice 251 of 2026. Published on 18 September 2026, the Notice stipulates that the Protocol is deemed to have entered into force retroactively from 22 May 2026. The amending Protocol incorporates the Principal Purpose Test (PPT), updates the definition of permanent establishment to include agency and commissionaire arrangements, and introduces a Mutual Agreement Procedure (MAP) with arbitration option. The changes apply to taxes withheld at source on or after 1 January 2027 for dividend, interest, and royalty articles, while other provisions apply from the 2027 tax year for both contracting states.
Key Takeaways
- Retroactive effective date: The 22 May 2026 retroactivity means that transactions and structures implemented since that date must be reassessed under the new treaty provisions, particularly regarding limitation on benefits and PPT compliance.
- Enhanced anti-abuse framework: The inclusion of the PPT and the simplified limitation on benefits clause will require multinational enterprises with Malta-Romania cross-border operations to document commercial rationale and substance for treaty benefit claims.
- Arbitration mechanism: The new MAP arbitration clause provides a binding resolution path for double taxation disputes unresolved after two years, reducing uncertainty for taxpayers facing competent authority delays.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement