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The four floors of Malta’s Brussels embassy building which the government says it intends to lease commercially might end up not being leased at all if it transpires that the building, or those floors, will not be tax exempt.
Asked yesterday whether the floors to be rented would be subjected to Belgian taxes - as opposed to the embassy part of the building that would enjoy diplomatic tax immunity - Prime Minister Lawrence Gonzi said: “God forbid … It’s something we have to verify through legal consultation, but definitely, should that happen, we have to make our calculations, we would have to check whether the rent that we can earn is enough to cover the loss of tax exemptions. It does not appear to be the case, because we’ve looked at other cases.”
So far, Gonzi has always defended the Brussels Lm9 million property purchase, arguing that four floors of the building will be leased to commercial entities to make up for the cost of the building. Should the floors intended for commercial purposes be subjected to Belgian tax laws, the government might end up scrapping the idea of renting them as that might prove to be too costly.
The hullabaloo about Malta’s Brussels embassy will take a further twist if it is established that Malta stands to lose tax exemptions on the purchase of its now infamous Lm9 million embassy in Rue Archimede.
Prime Minister Lawrence is on record defending the high cost of the purchase of the Brussels property and saying that four floors of the building will be rented out to third parties to offset part of the cost of the property, which means that the building will not be used exclusively for the purposes of the consular post.
Replying to questions put to him by MaltaToday, Gonzi revised his view on the matter somewhat saying: “There are definitely three floors which shall be rented out. A decision on the fourth floor will be taken once the plans for the refurbishment and space allocation are finalised. Similar refurbished properties in the same area fetch circa Euro 400 per square metre. Each floor represents approximately 490 square metres.”
Should the Prime Minister’s intentions be confirmed the tax exemptions usually allowed to embassies could be lost, if not on the entire building, then at least on the part that is used commercially.
According to the Vienna Convention on Diplomatic Relations embassies or so-called consular premises are defined as “buildings or parts of buildings and the land ancillary to thereto, irrespective of ownership, used exclusively for the purposes of the consular post.”
In article 32 of the Convention, it is stated that “Consular premises and the residence of the career head of consular post of which the sending State or any person acting on its behalf is the owner or lessee shall be exempt from all national, regional or municipal dues and taxes whatsoever, other than such as represent payment for specific services rendered.”
MaltaToday asked the Prime Minister whether he had calculated that factor into the equation when he decided that four floors could be rented and Lawrence Gonzi said he would have to check with his legal experts. “God forbid … It’s something we have to verify through legal consultation, but definitely, should that happen, we have to make our calculations, we would have to check whether the rent that we can earn is enough to cover the loss of tax exemptions.
It does not appear to be the case, because we’ve looked at other cases,” the Prime Minister said.
MaltaToday spoke to a prominent lawyer who preferred not to be named, but said “The Convention is quite clear Malta will not be able to claim tax exemptions on four of the nine stories.”
On those stories all national, regional, or municipal taxes will have to be paid.
julian@newsworksltd.com
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