In IRS News Release 2021-253 issued 21 December 2021, the IRS announced that, on 3 December 2021, the competent authorities of the United States and Malta entered into a competent authority agreement (the ‘CA agreement’) related to the definition of the term ‘pension fund’ in the US-Malta Treaty.1 The agreement is intended to address certain planning used by some US citizens and residents involving the establishment of pensions under Maltese law.
The takeaway: US taxpayers relying on Articles 17(1) and 18 of the US-Malta Treaty for exemption from US federal income tax on distributions from certain Maltese pension arrangements, or more broadly relying on other provisions of the Treaty to claim other treaty benefits based on qualification as a pension may need to re-assess the application of the Treaty.