What is a Participating Holding (PH)?
A participation in another company shall constitute a participating holding when:
1. A Maltese company holds directly at least 10% of the equity of a company entitling it to at least 10% of any two of the following:
• Right to vote;
• Profits available for distribution
• Assets available for distribution on a winding up
2. A Maltese company is a shareholder in a company and has the option to acquire all the remaining shares in that company
3. A Maltese company is a shareholder in a company and is entitled to first refusal in the event of proposed disposal, redemption or cancellation of the remaining shares in that company
4. A Maltese company is a shareholder in a company and is entitled to sit or to appoint a person to sit on the Board of that company as director
5. A Maltese company holds an investment amounting to a least EUR 1,164,000 for an uninterrupted period of not less than 183 days.
6. A Maltese company holds shares in a company for the furtherance of the business of the Maltese company and the holding is not held for trading purposes
Participations in specific types of partnerships may also constitute a participating holding.
Anti-abuse provisions vis-à-vis participation exemption
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.
