S.L. 123.44 Art. 2Taxes covered and commencement. (1056) The United States conclude an derived by and aircraft. basis of similar The the the United incorporated In case of meets one of (1) (2) The 872(b) and income who are which are In case of meets one of (1) (2) or For the treated as an to be satisfied Internal sha

It is hereby declared that -

(a) the Agreement specified in the Exchange of Notes Verbales reproduced in the Schedule to this Order has been made with the United States of America with a view to affording relief from double taxation in relation to the taxation of income derived from the international operation of ships and aircraft; and

(b) the Agreement has entered into force on the 11th March, 1997 and is effective in respect of income derived on or after the 1st January, 1997. SCHEDULE

Embassy of Malta presents its compliments to the Department of State of the of America and has the honour to propose, that the two governments agreement to exempt from income tax, on a reciprocal basis, income residents of the other country from the international operation of ships The following proposed terms of agreement have been drafted on the agreements the United States has with other governments: Government of Malta agrees to exempt from tax gross income derived from international operations of ships or aircraft by individuals who are residents of States (other than citizens of Malta) and corporations which are in the United States. a U.S. corporation, the exemption shall apply only if the corporation the following conditions: the corporation’s stock is primarily and regularly traded on an established securities market in the U.S., another country which grants a reciprocal exemption to Maltese corporations or Malta, or more than fifty (50) per cent of the value of the corporation’s stock is owned directly or indirectly by individuals who are residents of the United States or of another foreign country which grants an equivalent exemption to Maltese corporations or by a corporation organized in a country which grants an equivalent exemption to Maltese corporations and whose stock is primarily and regularly traded on an established securities market in that country, another country which grants an equivalent exemption to Maltese corporations, or Malta.

Government of the United States of America, in accordance with articles 883(A) of the Internal Revenue Code, agrees to exempt from tax gross derived from the international operation of ships or aircraft by individuals residents of Malta (other than United States citizens) and corporations incorporated in Malta.

a Maltese corporation, the exemption shall apply only if the corporation the following conditions:

the corporation’s stock is primarily and regularly traded on an established securities market in Malta. another country which grants a reciprocal exemption to U.S. corporations or the United States, or more than fifty (50) percent of the value of the corporation’s stock is owned directly or indirectly by individuals who are residents of Malta of another foreign country which grants an equivalent exemption to U.S. corporations or by a corporations organized in a country which grants an equivalent exempion to U.S. corporations and whose stock is primarily and regularly traded on an established securities market in that country, another country which grants an equivalent exemption to U.S. corporations, or the United States. purposes of exemption from the U.S. tax, the Government of Malta will be individual resident of Malta, and sub-paragraph (2) shall be considered if the corporation is a "controlled foreign corporation" under the Revenue Code, so however, that U.S. shareholders of such corporations as residents of Malta. In this agreement -

(a) the terms "contracting state" and "other contracting state" mean United States of America, the governments of which have concluded

(b) gross income includes all income derived from the international ships or aircraft, including:

(1) income from the rental on full (time or voyage) basis of ships used in international transport;

(2) income from the rental on a bareboat basis of ships or international transport;

(3) income from the rental of containers and related equipment international transport that is incidental to income international operation of ships and aircraft; and

(4) gains from the sale or other alienation of ships or aircraft international transport derived by a person primarily engaged international operation of ships or aircraft.

In the application of this agreement by a contracting state, any term this agreement shall, unless the context otherwise requires, have the it has under the laws of that state relating to the taxes to which applies. The Government of Malta proposes that, if the foregoing is acceptable Government of the United States, this note and the Department’s note constitute an agreement. The agreement shall enter into force on Department’s note in reply and shall have effect in respect of income after 1 January, 1997. This agreement shall continue in force until the Government of either state gives written notice of termination of the agreement to the other State through the diplomatic channel.

The Embassy of Malta takes this opportunity to renew to the Department of the United States of America the assurance of its highest consideration.

26 December, 1996 Embassy Washington. Department of State refers the Embassy of Malta to the Embassy’s note 1065 26, 1996, regarding the reciprocal exemption from income tax of from the international operation of ships and aircraft.

Department of State confirms that the proposals contained in the Embassy’s acceptable to the Government of the United States of America. Therefore, the Embassy’s note of December 26, 1996, constitute an agreement enter into force on the date of this note in reply and shall be effective in income derived on or after January 1, 1997. This agreement shall continue the Government of either contracting state gives written notice of the agreement to the other contracting state through the diplomatic of State,

1997.