Holding Companies may be incorporated in Malta for the purpose of holding shares in other companies, holding of assets such as immovable property, moveable property, intellectual property, cash, etc. Upon distribution of income generated from the aforementioned assets, Maltese Holding Companies can benefit from a number of advantages such as the participation exemption regime and as Malta is a member of the European Union, Maltese Holding Companies can also benefit from the EU directives.
Malta an ideal jurisdiction for Holding Companies
Malta is a very popular jurisdiction for holding companies mainly due to its beneficial tax regime. Apart other from the other advantages as listed below, Malta does not have Thin Capitalisation Rules, does not levy any withholding tax on dividend distributions payable to non-resident shareholders and provided that certain conditions are met, it does not levy withholding taxes on payments of interest and royalties to non-resident persons thus enabling professional people to use Malta for their international tax planning. In addition to its tax benefits, companies can also benefit from Malta’s low registration costs.
Taxation of Maltese Holding Companies
Like all Maltese companies, Maltese holding companies are taxed on a worldwide basis at the corporate tax rate of 35% however if certain conditions are satisfied, such tax rate may be reduced to 0% by benefiting from the Participating Holding or the Participation Exemption.
Participation Holding and Participation Exemption
A Maltese Holding Company (MHC) receiving income and gains from its participating holding (PH) will not pay any tax on such income and gains (subject to some anti-abuse provisions). Alternatively income and gains received by a MHC from its PH may be taxed at the corporate tax rate of 35% however the shareholders of the MHC may claim a full refund once the MHC distributes such income to its shareholders (subject to some anti-abuse provisions).