Dividends received from participating holdings must satisfy one of the following conditions:
1. PH is resident or incorporated in a country which forms part of the EU
2. PH is subject to any foreign tax of at least 15%
3. PH does not have more than 50% of its income derived from passive interest or royalties
If none of the above conditions are satisfied then both conditions must be satisfied:
1. The equity holding by the MHC in the body of persons not resident in Malta is not a portfolio investment and for this purpose the holding of shares by the MHC in a body of persons not resident in Malta which derives more than 50% of its income from portfolio investments shall be deemed to be a portfolio investment, and
2. the body of persons not resident in Malta or its passive interest or royalties have been subject to any foreign tax of at least 5%
This exemption shall also apply to gains or profits resulting from the transfer of PH in companies resident in Malta.