Malta is one of the most attractive destinations for holding companies in Europe, due to the participation exemption established by the Maltese Government in 2007. Even though Malta does not have a dedicated legislation for the incorporation of holding companies, the country does have a unique taxation system, which is why it becomes the perfect location to open a holding company. Holding companies in Malta may operate in and outside of the EU.
Benefits of a holding company
One of the best reasons to open a holding company in Malta is the because of the great flexibility that this type of company offers. Maltese companies can be used for holding real estate assets, holding securities and shares or for holding intellectual property rights.
A holding company may be registered in Malta as a private or public limited liability company, as established by the Maltese Commercial Code. The minimum share capital required to register a holding company in Malta depends on the type of company. To open a private company, the minimum required share capital is 1,165 euros and for a public company, approximately 46,000 euros.
Registering a holding company is a relatively quick process that usually doesn’t take more than two or three days.
Participation exemption for holding companies in Malta
According to the Maltese taxation system, the incomes on capital gains resulted from qualifying participation holdings may benefit from tax exemptions. Participating holding companies qualify for tax exemptions in Malta if they own at least 10% of the equity shares of a company and if the holdings offer the rights to vote, to distribute profits and to distribute assets in the case of company dissolution.
Additionally to these requirements, the participating holdings must meet at least one of the following conditions:
- The Maltese holding company owns at least 10% of the shares in a subsidiary company;
- The shares have a minimum acquisition value of 1,164,000 euros, for at least 183 days;
- The Maltese holding company has the right to acquire the balance of shares in a subsidiary company;
- The holding company has the right to first refusal in case of cancellation or redemption of shares;
- The Maltese holing company has the option available to appoint a director in a subsidiary company;
- The holding company’s shares are used for business purposes, not as trading stock.
Tax treatment of holding companies in Malta
Any income or gains derived by a company in Malta from a participating holding or from the transfer of such holdings are exempt from tax.
Dividends and capital gains derived from shares held under a participating holding are exempt from tax, at the option of the taxpayer.
In the case of dividends derived from a participating holding acquired after January 1st 2001, the exemption applies only if the person or persons in which the participating is held satisfies at least one of the following conditions:
- It is resident or incorporated in a EU country;
- It is a subject to any foreign tax of at least 15% ;
- It does not have more than 50% of its income derived from passive interest of royalties.
If none of the above conditions is satisfied, there are still certain conditions under dividends are exempt from tax. Where the income or gain relates to a holding that does not qualify as a participating holding, the application of the refund system would result in a tax leakage of 5% for the company and its shareholders.