Malta Company Formation

Malta Holding Companies

Malta Holding Company:-

Changes to Maltese company Law in 2007 have introduced new and improved amendments to the Maltese Holding Company regime. At a glance, the new measures applied to a Maltese company that holds shares or holds assets in its portfolio are the following:

The introduction of a Participation Exemption on dividends received from a Maltese company qualifying as a participating holding or from gains on the disposal of such holding. A more beneficial definition of a participating holding for a Malta company, to include investments held as trading stock. New Anti-Avoidance provision specifically targeting participating dividends a Malta company receives from low tax jurisdictions Lower effective tax rates for non-participating holding income received by the Maltese Holding Company.

The New Participation Exemption Regime

Companies registered or continued in Malta after 1st January 2007 can benefit from these new provisions relating to the Participation Exemption. Such exemption means that the foreign dividends received by the Maltese company by a qualifying holding or gains from the disposal of such holding would be exempt from tax and withholding tax in Malta.

In order for a company to be able to enjoy the participation exemption, any one of the following is to be satisfied:

  1. a company holds directly at least ten per cent of the equity shares of a company not resident in Malta whose capital is wholly or partly divided into shares;
  2. a company is an equity shareholder in a company not resident in Malta and the equity shareholder company is entitled at its option to call for and acquire the entire balance of the equity shares not held by that equity shareholder company to the extent permitted by the law of the country in which the equity shares are held;
  3. a company is an equity shareholder in a company not resident in Malta and the equity shareholder company is entitled to first refusal in the event of the proposed disposal, redemption or cancellation of all of the equity shares of that company not held by that equity shareholder company;
  4. a company is an equity shareholder in a company not resident in Malta and is entitled to either sit on the Board or appoint a person to sit on the Board of that company as a director;
  5. a company is an equity shareholder which invests a minimum sum of five hundred thousand liri (or the equivalent sum in a foreign currency) in a company not resident in Malta and that the investment in the company not resident in Malta is held for an uninterrupted period of not less than 183 days;
  6. a company is an equity shareholder in a company not resident in Malta and where the holding of such shares is for the furtherance of its own business and the holding is not held as trading stock for the purpose of trade.

Anti-Abuse Provisions

Income from a Maltese ‘participating holding‘ shall not be subject to a participation exemption unless the participation is held in a body corporate which satisfies at least one of the following conditions:

(1) It is resident or incorporated in a country or territory which forms part of the European Union;
(2) It is subject to any foreign tax of at least fifteen per cent (15%);
(3) It does not have more than fifty per cent (50%) of its income derived from passive interest
or royalties;

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