【From CFTInet, Beijing 09/01/2000】　CORPORATE TAXES WITHHOLDING TAXES Domestic corporations paying certain types of income are required to deduct tax as follows. RECIPIENT DIVIDENDS (1) INTEREST ROYALTIES % % % Resident corporations 35 35 (2) Nil Resident individuals 35 25 (2) Nil Nonresident corporations: Nontreaty 35 Nil (3) Nil (3) Nonresident individuals: Nontreaty 35 Nil (3) Nil (3) Nonresident corporations and individuals: Treaty (4) Nil (3) Nil (3) Australia 35 Austria 32.5 Belgium 35 Bulgaria 30 Canada 35 China, P.R 35 Cyprus 35 Czech Republic 35 Denmark 35 Finland 35 France 35 Germany 35 Hungary 35 India 35 Italy 35 Korea, Rep. of 35 Libya 15 Luxembourg 35 Netherlands 35 Norway 35 Pakistan 35 Poland 35 Romania 30 South Africa 35 Sweden 35 United Kingdom 35 Notes: The numbers in parentheses refer to the notes below. 1. Malta makes no distinction between portfolio and substantial holdings. No additional withholding tax is imposed on distributions other than the tax charged on the company in respect of distributed profits. Under Malta's full imputation system of taxation of dividends the corporate tax is assimilated with the personal income tax of the shareholder in respect of the dividend. In the shareholder's hands the dividend is charged to tax gross, and the relevant amount of corporate tax is set off against the shareholder's tax liability on income from all taxable sources. 2.Deduction is required only where the interest is debenture interest or interest on any other loan advanced to a corporation for capital purposes. Tax deductions are in effect prepayments of the submission of returns. Any resulting overpayment is refunded. 3..Interest and royalty income derived by nonresidents is exempt from tax in Malta as long as certain conditions are complied with (e.g., they are not effectively connected to a permanent establishment of the recipient situated in Malta). 4.Under its treaties Malta retains the right to tax dividends at a rate not exceeding that paid by the company in question on the profits out of which the dividends are distributed. This rate is currently 35%. In a number of treaties the rate of deduction and of tax is reduced to 15% in the case of companies enjoying certain tax incentives. See also Note 1 with regard to Malta's full-imputation system of taxation of dividends. TAX ADMINISTRATION Returns/A return of the income earned during the previous year must be filed for every year of assessment. The year of assessment is a calendar year, but the accounts during the basis year may, with Revenue permission, be made up to a day prior to December 31. Companies are assessed and pay tax in the currency in which their share capital is denominated. Payment of tax/Tax that is outstanding following an assessment is to be paid income lump sum during the month following that in which the assessment is raised. During the year, however, installments are to be paid every four months on the basis of the last assessment received, while on the submission of returns and tax computations any balance outstanding between the tax as computed and as paid by installments is to be paid in one lump sum by no later than the end of June in each year. Tax on profits allocated to the Foreign Income Account becomes payable at the earlier of the date of distribution of those profits and 18 months after the end of the relative accounting period. CORPORATION TAX CALCULATION LOCAL FOREIGN INCOME Lm Lm Lm Lm Net profit before tax as shown in the accounts for fiscal year 1998 800,000 200,00 Add back amounts not allowable for tax purposes or that require adjustments: Depreciation 200,000 10,000 Donations 5,000 ---- Increase in provision for bad or doubtful debts 5,000 ---- Structural alterations of a capital nature 65,000 ---- Contributions to unapproved pension scheme 5,000 280,000 ---- 10,000 1,080,000 210,000 Less: Initial allowances 125,000 ---- Wear-and-tear allowance 118,000 20,000 Balancing allowance 2,000 245,000 ---- 20,000 835,000 190,000 Add-Flat-rate foreign tax credit (25% of 30000) ---- 7,500 Taxable income 835,000 197,500 Tax thereon at 35% 292,250 69,125 Less: Double taxation treaty relief (Note 1) ---- 12,000 Unilateral tax relief (Note 2) ---- 10,000 Flat-rate foreign tax credit (25%) (Note 3) ---- 7,500 Tax deducted at source from dividend received (Note 4) 35,000 (35,000) ---- (29,500) Net tax payable (Note 5) 257,250 39,625 Notes: 1. Double taxation treaty relief is in respect of gross royalty income of Lm120000 taxed at 10% in a foreign country. 2. Unilateral tax relief is in respect of income of Lm40000 taxed abroad at 25%. 3. The flat-rate foreign tax credit is computed on income before payments or other deductions of Lm30000 allocated to the Foreign Income Account, in respect of which double taxation treaty relief and unilateral tax relief are not claimed. 4. Tax has been deducted at source at 35% from dividends included gross at Lm100000 in the net profits. 5. The net tax payable is Lm296,875, being the total of payable on local income and the tax payable on foreign income. 6. Exchange rate of the Maltese lira at December 31, 1998: US$1=Lm0.3766.