Last week, the United States and Malta signed a competent\nauthority arrangement (CAA) confirming their understanding of the meaning of\npension fund for purposes of the United States\u2013Malta income tax treaty\n(Treaty). The competent authorities have entered into this agreement after\nbecoming aware that U.S. taxpayers with no connection to Malta were\nmisconstruing the pension provisions of the Treaty to avoid income tax on the\nearnings of, and distributions from, personal retirement schemes established in\nMalta. The agreement is intended to\naddress certain aggressive planning used by some US citizens and residents\ninvolving Maltese pensions.<\/p>\n\n\n\n
The CAA<\/a> confirms the U.S. and Malta competent authorities’\nunderstanding that (except in the case of a qualified rollover from a pension\nfund in the same country) a fund, scheme or arrangement is not operated\nprincipally to provide pension or retirement benefits if it allows participants\nto contribute property other than cash, or does not limit contributions by\nreference to income earned from employment and self-employment activities.\nBecause Maltese personal retirement schemes contain these features, they are\nnot properly treated as a pension fund for Treaty purposes and distributions\nfrom these schemes are not pensions or other similar remuneration.<\/p>\n\n\n\n