Director’s fees are considered as income arising where the company is resident and effectively managed and controlled. This means that if non-resident directors are earning director’s fees from a company resident in Malta, and which is effectively managed and controlled in Malta, such income will be considered to be arising in Malta, and hence should be taxed in Malta.
This position is the same as that given by the OECD Model Tax Convention commentary, which states that the relative services are considered to be performed in the state of residence of the company.
Director’s fees is also clarified as referring to fees and similar payments received in the person’s capacity as a member of the board of directors and does not include remuneration in respect of other services rendered to the company (eg. employment, advisory, etc).
Therefore any remuneration which falls under the definition of directors’ fees as defined above is taxable in the state of residence (i.e. the place of effective management) of the company. Other remuneration paid to a person, who is also a director, in respect of other services rendered to the company (eg. employment, advisory, etc) would not be taxable in Malta if the said person is neither resident nor domiciled in Malta, nor performing the services in Malta, nor has a Permanent Establishment (PE) in Malta.