Ireland And Malta Reach An Agreement To Prevent 'Single Malt' Structure

; posted on
November 30th, 2018

Ireland's Department of Finance has announced the signing of a competent authority agreement between the Revenue Commissioners and the Maltese tax authority to prevent ‘Single Malt’ structures. This Agreement will ensure that the Treaty does not enable that aggressive structure.

Single Malt Structure

The structure, which is often used by U.S. MNEs to reduce tax liability, involves placing intellectual property in an Irish-incorporated company that is considered resident in Malta based on its place of effective management, and then channeling payments for related sales through another Irish-incorporated company that pays deductible license fees to the company resident in Malta.

The structure is possible based on the provisions of Article 4 (Resident) of the 2008 Ireland-Malta tax treaty, which includes that where a company is considered resident in both Contracting States, then it will be deemed only to be resident of the State in which its place of effective management is situated.

The Agreement

To prevent the use of the single malt structure, the competent authority agreement provides that the treatment of such companies as only resident in one State will not apply where:

  • There is no double taxation to be avoided; and
  • It is reasonable to conclude that an opportunity for double non-taxation would otherwise arise.

Based on the agreement, an Irish-incorporated company resident in Malta in the Single Malt structure would be treated as resident in Ireland and the relevant payments to it will come within the charge to Irish corporation tax.

Entering Into Force

The agreement will have effect for taxable periods beginning on or after the expiration of a period of six months from the later of the dates on which the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) enters into force for Ireland and Malta.

Source: Ireland Ministry Of Finance


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