Malawi - Dividend

Article 10. Dividends

1.   Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2.   However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a)   10 per cent of the gross amount of the dividends in case the company paying the dividends is a resident of Malawi;

b)  15 per cent of the gross amount of the dividends in case the company paying the dividends is a resident of the Netherlands.

3.   Notwithstanding the provisions of paragraph 2, the Contracting State of which the company is a resident shall levy a tax on dividends paid by that company not exceeding 5 per cent, if the beneficial owner of the dividends is a company (other than a partnership) which is a resident of the other Contracting State and holds directly at least 10 per cent of the capital of the company paying the dividends.

4.   Notwithstanding the provisions of paragraphs 2 and 3, the Contracting State of which the company paying the dividends is a resident shall not levy a tax on dividends paid by that company if the beneficial owner of the dividends is a pension fund.

5.   The competent authorities of the Contracting States may by mutual agreement settle the mode of application of paragraphs 2, 3 and 4.

6.   The provisions of paragraph 2, 3 and 4 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

7.   The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

8.   The provisions of paragraphs 1, 2, 3 and 4 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State, of which the company paying the dividends is a resident, through a permanent establishment situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

9.   Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

10. No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares or other rights in respect of which the dividend is paid, or with the establishment, acquisition or maintenance of the company that is the beneficial owner of the dividends and the conduct of its operations, to take advantage of this Article. The competent authority of the Contracting State which has to grant the benefits shall consult with the competent authority of the other Contracting State before denying the benefits under this paragraph.

Protocol:

VIII. Ad Article 10

The determination of the main purpose referred to in paragraph 10 of Article 10 shall be based on all facts and circumstances including:

a)   the nature and volume of the activities of the company in its country of residence in relation to the nature and volume of the dividends;

b)  both the historical and the current ownership of the company; and

c)   the business reasons for the company residing in its country of residence including the extent to which the company that beneficially owns the dividends would be entitled to treaty benefits comparable to those afforded by this Agreement if it had been a resident of the country of residence of the majority of its shareholders.

IX. Ad Article 10 and 13

1.   Notwithstanding the provisions of paragraphs 1, 2, and 9 of Article 10, dividends paid by a company which under the laws of the Netherlands is a resident of that State, to an individual who is a resident of Malawi and who upon ceasing to be a resident of the Netherlands is taxed on the appreciation of capital as meant in paragraph 2 of this provision, may also be taxed in the Netherlands in accordance with the laws of the Netherlands, but only insofar as the assessment on the appreciation of capital is still outstanding.

2.   Where an individual has been a resident of the Netherlands and has become a resident of Malawi, paragraph 5 of Article 13, shall not prevent the Netherlands from taxing under its domestic law the capital appreciation of shares, profit sharing certificates, call options and usufruct on shares and profit sharing certificates, in and debt-claims on a company for the period of residency of that individual in the Netherlands. In such case, the appreciation of capital taxed in the Netherlands shall not be included in the tax base when determining the appreciation of capital by Malawi.

X. Ad Articles 10, 11 and 12

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of five years after the expiration of the calendar year in which the tax has been levied.

XI. Ad Articles 10 and 13

It is understood that benefits received in connection with the (partial) liquidation of a company or a purchase of own shares by a company is treated:

a)   in the case of the Netherlands as income from shares and not as capital gains; and

b)  in the case of Malawi as capital gains.