S.L. 123.19 Art. 2Arrangements to have effect. The and deepen the between the income have (1) This Contracting (2) As (a) in (b) in (3) Where resident of State with interests). (4) If the determined, question by (5) Where individual is resident of the situated. (1) The (a) in (b) in similar taxes in the place of shal

It is hereby declared:

(a) that the arrangements specified in the Agreement set out in the Schedule to this Order have been made with the Government of the Republic of Bulgaria with a view to affording relief from double taxation in relation to the following taxes imposed by the laws of the Republic of Bulgaria:

(i) tax on total income;

(ii) tax on income of single males and females, widows, widowers, divorced persons and families without children;

(iii) tax on profits;

(b) that it is expedient that those arrangements should have effect. SCHEDULE

AGREEMENT BETWEEN THE REPUBLIC OF MALTA AND THE REPUBLIC OF BULGARIA FOR AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME

Republic of Malta and the Republic of Bulgaria led by the desire to encourage economic relations and the economic cooperation of mutual benefit two countries, for avoidance of double taxation with respect to taxes on agreed as follows:

ARTICLE 1

Personal Scope agreement shall apply to persons who are residents of one or both of the States. residents of a Contracting State shall be deemed:

the case of the Republic of Malta, any person who under the laws of Malta is liable to tax therein by reason of his residence, registration or any other criterion of a similar nature; the case of the Republic of Bulgaria, individuals who are nationals of the Republic of Bulgaria as well as legal persons who have their headquarters in the Republic of Bulgaria or are registered therein.

by reason of the provisions of paragraph (2) an individual is a both Contracting States, then he shall be deemed to be a resident of the which his personal and economic relations are closer (centre of vital

State in which a person has his centre of vital interests cannot be the competent authorities of the Contracting States shall settle the mutual agreement.

by reason of the provisions of paragraph (2) a person other than an a resident of both Contracting States, then it shall be deemed to be a Contracting State in which its place of effective management is

ARTICLE 2

Taxes Covered by the Agreement present Agreement applies to the following taxes:

Malta: the income tax (hereinafter referred to as "Malta tax"); the Republic of Bulgaria:

(i) tax on total income;

(ii) tax on income of single males and females, widows, widowers, divorced persons and families without children;

(iii) tax on profits.

(2) The Agreement shall apply to all identical or substantially which are imposed after the signing of the Agreement in addition to or the existing taxes. The competent authorities of the Contracting States each other of any significant changes which have been made in their taxation laws. Should there be a dispute as to whether there has been change in the taxation laws requiring incorporation in the Agreement competent authorities shall discuss further in order to arrive at an agreement.

ARTICLE 3

General Definitions

In the context of this Agreement -

(1) (a) the term "Malta" means the Republic of Malta; and

(b) when used in a geographical sense, the term "Malta" means of Malta, the Island of Gozo and the other islands archipelago, including the territorial waters thereof outside the territorial sea of Malta which, in accordance international law, has been or may hereafter be designated, law of Malta concerning the Continental Shelf, as an area the rights of Malta with respect to the sea-bed and subsoil natural resources may be exercised.

(2) The term Republic of Bulgaria means the sovereign territory bowels of the earth, territorial sea and maritime zones outside the territorial which the Republic of Bulgaria in accordance with its legislation international law exercises sovereign rights.

(3) The term "international transport" means any transport resident other than an individual of the Contracting State, except when is operated solely between places in the other Contracting State.

(4) The term person -

(a) in the case of Malta means an individual, an enterprise entity which is treated as a body corporate for tax purposes other body of persons;

(b) in the case of Bulgaria includes a physical or juridical person any other entity which is treated as a juridical person for

(5) The term "national" means:

(a) in respect of Malta, any citizen of Malta and any partnership or association deriving its status as such from force in Malta;

(b) in respect of the Republic of Bulgaria any person who receives of citizenship according to Bulgarian legislation.

(6) The term "competent authority" means -

(a) in the case of the Republic of Malta: the Minister responsible for finance or his authorised representative.

(b) in the case of the Republic of Bulgaria: the Minister of Finance or his authorised representative.

(7) Upon the application of this Agreement any term not otherwise unless the context otherwise requires, shall have the meaning which it legislation of the Contracting State where the taxation is performed.

ARTICLE 4

Business Profits business profits of a resident of one Contracting State are taxable by the Contracting State only when the business is carried on through a "place of situated therein. In this case only so much of the profits may be taxed in Contracting State as is attributable to that place of business. a resident of one Contracting State carried on business in the other State through a "place of business" organised therein, there shall be profits under paragraph (3) which he might be expected to make if he same or similar activity under the same or similar condition as a enterprise dealing wholly independently in its relations with the enterprise a place of business.

determining the profits of a place of business, there shall be allowed as expenses which are incurred for the purposes of exercising its activity executive and general administrative expenses so incurred whether in the the place of business is situated or elsewhere. profits shall be attributed to the place of business by reason of the mere that place of business of goods or merchandise for the enterprise. provisions of this Article will not affect the provisions for taxation the other Articles of this Agreement. provisions of this Article will also apply to a resident of the one State who carries on his business in the other Contracting State together with the other person, particularly with a person from the Contracting State. Contracting State may tax profits from the business of insurance in with the provisions of its law regarding the taxation of such profits and of such provisions shall not be affected by the provisions of this

ARTICLE 5

Place of Business the purpose of this Agreement, the term "place of business" means a business, where a resident of the one Contracting State carries on his other Contracting State separately or together with other persons, partly. term "place of business" includes especially:

branch; workshop or department; office including any commercial, touristic, transport, design or any other office; mine, an oil or gas well, a quarry or any other place of extraction of natural resources; construction or installation project or supervisory activities in connection therewith, where such project or activity continues for more than 18 months;

(f) the furnishing of services, including consultancy services, enterprise through employees or other personnel, where activities nature continue (for the same or a connected project) within for a period or periods aggregating more than six months twelve month period.

(3) (a) (i) The participation of a resident of the Republic of Malta in for joint business activity, joint management and distribution of the losses from it and formed according to Decree No. 535 - 80 of the State the Republic of Bulgaria, is to be considered as a place of business in

(ii) The participation of a resident of the Republic of Bulgaria in partnership set up in accordance with Maltese legislation shall be considered place of business in Malta.

(b) The participation of a resident of a Contracting State in a company other Contracting State shall, notwithstanding the provisions of sub-paragraph this paragraph, be regulated by Article 9 of this Agreement where distributed by such a company to a resident of the first-mentioned Contracting

(4) Notwithstanding the preceding provisions of this Article, the business" shall be deemed not to include:

(a) a permanent place solely for the purpose of purchasing goods;

(b) the maintenance of materials or goods belonging to solely for the purpose of storage, display or delivery and operations connected with it;

(c) the maintenance of a stock of goods belonging to the enterprise for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place solely for the purpose information for the enterprise;

(e) the maintenance of a stock of goods exposed by the enterprise or an exhibition which is to be sold after the conclusion;

(f) the maintenance of a permanent place solely for the activity which has a preparatory or auxiliary character enterprise;

(g) the maintenance of a permanent place solely for the purpose on any combination of the activities mentioned above under

(a) to paragraph (e) on the condition that the total combination has a preparatory or auxiliary character.

(5) Notwithstanding the provisions of paragraphs (1) and (2), where other than an agent of an independent status to whom paragraph (6) acting on behalf of an enterprise and has, and habitually exercises, in State an authority to conclude contracts in the name of the enterprise, shall be deemed to have a place of business in that State in respect of which that person undertakes for the enterprise, unless the activities of are limited to those mentioned in paragraph (4) which, if exercised through place of business, would not make this fixed place of business a place under the provisions of that paragraph.

(6) An enterprise that is a resident of one of the Contracting States deemed to have a place of business in the other Contracting State merely carries on business in that other State through a broker, general commission agent of independent status, provided that such persons are acting in the course of their business.

ARTICLE 6

International Transport from the operation of ships, aircraft or road vehicles in international be taxable only in the Contracting State in which the owner of the a resident. from the operation of boats engaged in inland waterways transport taxable only in the Contracting State in which the place of effective of the enterprise is situated.

place of effective management of an inland waterways transport aboard a ship or boat, then it shall be deemed to be situated in the State in which the home harbour of the ship or boat is situated, or if such harbour, in the Contracting State of which the operator of the ship or resident.

provisions of paragraphs (1) and (2) shall also apply to profits from the in a pool, a joint business or an international operating agency.

ARTICLE 7

Salaries and Wages Salaries, wages and other similar remunerations derived by a resident of a State in respect of an employment shall be taxable only in that State employment is exercised in the other Contracting State. If the employment such remuneration as is derived therefrom may be taxed in that other

Salaries, wages and other similar remunerations paid to a resident of a State by that State or by an enterprise resident in that State in respect of assignment in the other Contracting State shall be taxable only in the mentioned State unless they are borne by a fixed place of business situated in State. provisions of paragraph (2) shall also apply to salaries, wages and other remunerations paid to specialists and workers in respect of a temporary under a contract between Maltese physical or juridical persons and juridical persons in the fulfilment of an agreed programme in the field of technical exploration, scientific exchange and other similar activities. Notwithstanding the preceding provisions of this Article, remuneration respect of an employment exercised aboard a ship, aircraft or road vehicle international transport may be taxed in the Contracting State in which the enterprise is a resident. provisions of the above mentioned paragraphs do not refer to the of students and trainees which are subject to Article 13 of the

ARTICLE 8

Pensions Pensions and other similar remunerations which a resident of a Contracting derives from sources in the other Contracting State shall be subject to in that other State.

ARTICLE 9

Dividends

(1) Dividends derived from a juridical person, who is a resident of State by a resident of the other Contracting State are taxable only in that

(2) Notwithstanding the provisions of paragraph (1) where the paid by a company which is a resident of Malta to a resident of the Bulgaria who is the beneficial owner thereof, Malta tax may be imposed amount of such dividends, but the tax so charged shall not exceed the

(a) 30 per cent of the gross amount of the dividends; or

(b) the tax chargeable on the profits out of which the dividends accordance with the Aids to Industries Ordinance.

(3) The term "dividends" means income from shares or other according to the national legislation of the Contracting State has been the income from shares.

(4) The provisions of paragraphs (1) and (2) shall not apply if owner of the dividends, being a resident of a Contracting State, carries in the other Contracting State of which the company paying the resident, through a place of business situated therein, or exercises in a liberal profession or another independent activity from a fixed therein, and the holding in respect of which the dividends are paid connected with such place of business or fixed base. In such a case the Article 4 or Article 12, as the case may be, shall apply.

(5) Where a company which is a resident of a Contracting State or income from the other Contracting State, that other State may not on the dividends paid by the company except insofar as such dividends resident of that other State or insofar as the holding in respect of which are paid is effectively connected with a place of business or a fixed base that other State, nor subject the company’s undistributed profits company’s undistributed profits, even if the dividends paid or the profits consist wholly or partly of profits or income arising in such other

ARTICLE 10

Interest

(1) Interest arising in a Contracting State and paid to a resident Contracting State may be taxed in the other State.

(2) Paragraph (1) shall not apply when a resident of a Contracting on business in the other Contracting State, in which the interest arises, place of business situated therein, and the debt-claim in respect of which is paid is effectively connected with such place of business. In such provisions of Article 4 shall apply. ARTICLE 11

Income from Royalties and Licenses Income from royalties and licenses arising in a Contracting State which are resident of the other Contracting State may be taxed in that other State. However such income may also be taxed in the Contracting State where it according to its national legislation, but the tax must not exceed ten per cent amount of the royalties or licenses. term "income from royalties and licenses" means payments received of or the right to use: copyright of scientific, literary and artistic work; any patents (certificate of inventions) and innovations; industrial designs; trade marks; machine programmes; matrix of records and other articles for reproduction of sound; gramophone records, tapes and cinematographic films; and industrial experience and know-how. provisions of this Article shall also apply to the income from:

the use or the right to use industrial, commercial or scientific equipment, as well as of technical services connected therewith; the reproduction of sound or video recording or gramophone records, tapes, films or other similar objects. Royalties shall be deemed to arise in a Contracting State when the payer is itself, a political subdivision, a local authority or a resident of that State. however, the person paying the royalties, whether he is a resident of a State or not, has in a Contracting State a place of business or fixed base with which the obligation to pay the royalties was incurred, and such borne by such place of business or fixed base, then such royalties shall arise in the State in which the place of business or fixed base is

ARTICLE 12

Fees derived by a resident of a Contracting State as a result of exercising a profession or another independent activity in the other Contracting State are first-mentioned State, unless the person has a fixed base available to other Contracting State for the purpose of performing his activities. If he base, the income may be taxed in that other State but only so much of attributable to that fixed base. term "liberal profession" includes particularly independent scientific, artistic, educational or teaching activity as well as independent activity of dentists, lawyers, engineers, architects and certified public accountants. Notwithstanding the provisions of Article 7 and paragraph (1) of this derived by a resident of a Contracting State as an entertainer (such as theatre, motion picture, radio or television artist), or as a musician, or from his personal activities as such exercised in the other Contracting taxed in that other Contracting State.

ARTICLE 13

Students or any other Trainees

(1) Payments received by a student or any other trainee, who is Contracting State and stays in the other Contracting State solely for his education or training, shall not be taxed in that State, provided payments arise from sources outside that State.

(2) The provision of the preceding paragraph applies also to payments student or the trainee, who is a resident of a Contracting State, receives Contracting State for performing any work in that other State, if it is his education or qualification or if that payment is necessary to supplement of living.

ARTICLE 14

Income from Immovable Property

(1) Income derived by a resident of a Contracting State from property situated in the other Contracting State is to be taxed in that other

(2) The term "immovable property" shall have the meaning it has of the Contracting State in which the property in question is situated.

ARTICLE 15

Gains from Sale of Property

(1) Gains derived by a resident of a Contracting State from sale property which is situated in the other Contracting State shall be taxable other State.

(2) Gains derived from sale of movable property forming part of a place of business which a resident of a Contracting State has Contracting State, including such gains derived from the sale of business, shall be taxable only in that other State.

(3) Gains from the sale of ships, aircraft or road vehicles international transport and from a movable property serving for exploitation ships, aircraft or road vehicles shall be taxable only in the Contracting the owner of the transport enterprise is considered a resident.

(4) Gains from sale of any property other than that mentioned in

(2) and (3) of this Article may be taxed in the Contracting State of which a resident.

ARTICLE 16

Income Not Expressly Mentioned Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles, shall be taxable only in that State. ARTICLE 17

Elimination of Double Taxation case of Bulgaria, double taxation shall be eliminated as follows:

Where a resident of the Republic of Bulgaria derives income from Malta, not being income from dividends, paid by a resident of Malta to a resident of the Republic of Bulgaria, and if this income has been taxed Malta, then the Republic of Bulgaria shall exempt it from taxation. Notwithstanding the provisions of paragraph (1), this income may be taken into account in calculating the percentage of taxation on the remaining income of such resident. The tax paid in respect of the income from royalties and licenses according to Article 11, paragraph (2) shall be deducted from the tax levied in the Republic of Bulgaria. For the purposes of paragraph (1), where, by reason of special incentive measures designed to promote economic development in Malta, Malta tax has been wholly relieved or reduced for a limited period of time then the amount of tax paid in Malta shall be deemed to be the amount that would have been payable had no such relief been given or no such reduction allowed. case of Malta, double taxation shall be eliminated as follows: Subject to the provisions of the law of Malta regarding the allowance of credit against Malta tax in respect of foreign tax where, in accordance with the provisions of this Agreement, there is included in a Malta assessment income from sources within the Republic of Bulgaria, the Bulgarian tax on such income shall be allowed as a credit against the relative Malta tax payable thereon. Taxes paid by residents of Malta in respect of profits from their participation in partnership for joint business activity, joint management and distribution of the profits and losses from it and formed according to Decree No. 535 - 80 of the State Council of the Republic of Bulgaria, shall be deducted against the respective Malta tax an amount that would have been payable had not such reliefs been given with this Decree. Where the Agreement 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 so much of the income as is remitted to or received in the other State.

ARTICLE 18

Non-discrimination Nationals of a Contracting State or juridical persons under Article 1 of the shall not be subjected in the other Contracting State to any taxation or requirement connected therewith which is other or more burdensome than the connected requirements to which nationals of that other State in the same circumstances are or may be subjected. This provision shall, notwithstanding the provisions of Article l, also apply to persons who are not residents of the Contracting States.

(2) A place of business situated in one Contracting State and resident of the other Contracting State shall not be subjected in the first-mentioned State to any taxation which is other or more burdensome than the taxation are subjected places of business situated in the first-mentioned State by persons who are residents of either State. This provision shall not obliging a Contracting State to grant to residents of the other Contracting personal allowances, reliefs and reductions for taxation purposes on account status or family responsibilities or any other personal circumstances to its own residents.

(3) Notwithstanding the provisions of Article 2, this Article covers every kind and description.

ARTICLE 19

Diplomatic Agents and Consular Officials

This Agreement shall not affect the fiscal privileges of members of consular missions under the general rules of international law provisions of special agreements.

ARTICLE 20

Exchange of Information

(1) The competent authorities of the Contracting States shall information as is necessary for carrying out the present Agreement concerning covered by this Agreement insofar as the taxation thereunder is not contrary Agreement and to the domestic laws of the Contracting States. Any materials received by a Contracting State shall be treated as secret manner as information obtained under the domestic laws of that State used only for the purposes of this Agreement.

(2) Paragraph (1) shall not be construed so as to impose on either State the obligation:

(a) to carry out administrative measures at variance with administrative practice prevailing in either Contracting State;

(b) to supply information which is not obtainable under the normal course of the administration of either Contracting

(c) to supply information which would disclose any trade, industrial or professional secret or process, or information disclosure of which would be contrary to public policy (ordre

ARTICLE 21

Mutual Agreement Procedure

(1) Where a resident of a Contracting State considers that the actions both of the Contracting States result or will result for him in taxation accordance with the present Agreement, he may, irrespective of provided by the domestic law of those States, present his case to authority of the Contracting State of which he is a resident. If authority is itself unable to arrive at a satisfactory solution, it will case by an agreement with the other Contracting State, with a view to the taxation not in accordance with this Agreement. Any agreement shall implemented notwithstanding any time limits in the domestic law of the States. competent authorities of the Contracting States shall endeavour to mutual agreement any difficulties or doubts arising as to the or application of the Agreement. They may also consult together for of double taxation in cases not provided for in the Agreement.

competent authorities of the Contracting States may communicate with the purpose of reaching an agreement in the sense of the preceding

ARTICLE 22

Entry into Force

Agreement shall be ratified; the ratification instruments will be soon as possible at Valletta.

Agreement shall enter into force on the first date of the third month month in which the ratification instruments have been exchanged and shall have effect in respect of all taxes levied on income or gains December 31 of the calendar year in which the ratification instruments exchanged.

ARTICLE 23

Termination Agreement shall remain in force until denounced by one of the Contracting Contracting State may denounce this Agreement through diplomatic giving notice of termination not later than six months before the end of year beginning after the expiration of three years from the date of its force. In such event, this Agreement will be applied for the last time in taxes levied on income or gains arising during the calendar year in which given.

Sofia on the 23rd day of July, 1986, in two copies in the English and languages both texts being equally authentic.

WISTIN ABELA B. BELCHEV For the Republic For the Republic of Malta of Bulgaria