Malta holding company formation
General overview
A Malta holding company is a company resident in Malta formed with the object of holding shares in other companies as well as any other asset including real estate, cash, movable valuables, shares and securities, and intellectual property whether in or outside Malta. Malta holding companies can be used to distribute income generated by such assets in a tax-efficient manner to shareholders.
Malta does not operate a specific holding company regime. Accordingly, a Maltese Holding’ Company is a regular company having, as its sole object, the acquisition of participations in other companies. Still, the benefits typically available under such regimes are equally available to Maltese companies in respect of their holding activities.
Malta holding companies can be set up in order to hold shares and securities and business assets in any form such as real estate, fixed assets, aircraft, investments, bank accounts and intellectual property as well as personal assets including any luxury items such as yachts, residential property, works of art. Although there is no specific holding company regime, the domestic tax treatment afforded to the different types of income received by such companies as well as the participation exemption regime introduced in 2007 make the setting up of Malta holding companies a very attractive option and an excellent conduit to and from the EU.
Malta company formation
- The minimum share capital for incorporation of a Maltese company is €46,588 for a public limited company and €1.165 for a private limited company.
- 25% of the issued share capital of a public company must be paid up whilst 20% of the issued share capital of a private company must be paid up.
- A Malta company is typically incorporated within 2-3 days.
Taxation of Malta holding companies
Malta operates a full imputation system. As such, dividends distributed by a Maltese company carry a credit in favour of recipient shareholder/s which is equal to the amount of underlying tax paid by the Malta Company on the profits out of which the dividend was distributed.
Income
The taxable income of a Maltese company is based on the financial statements of the company (subject to applicable adjustments). Expenses wholly and exclusively incurred in the production of chargeable income are deductible.
Participation exemption
Malta holding companies hold directly at least 10 percent of the equity shares of a company whose capital is wholly or partly divided into shares, which holding confers an entitlement to at least ten percent of any two of the following (“equity holding rights”) (a) right to vote; (b) profits available for distribution; and (c) assets available for distribution on a winding up; or
a company is an equity shareholder in a company 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; or
a company is an equity shareholder in a company 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; or
a company is an equity shareholder in a company and is entitled to either sit on the Board or appoint a person to sit on the Board of that company as a director; or
The participation exemption may also apply to holdings in other entities such as a Maltese limited partnership, whose capital is not divided into shares, a non-resident body of persons which has similar characteristics, as well as a collective investment vehicle where the liability of the investors is limited provided the criteria for the application of the exemption are satisfied.
Capital gains derived from the disposal of such participating holdings may be exempt from tax in Malta at the option of the Malta Company. Where Malta holding companies receive dividend income from a participating holding such income may be exempt from tax in Malta also at the option of the company provided that the company in which the participating holding is held falls within one of the following safe harbours:
- It is resident or incorporated in the EU;
- It is subject to any foreign tax at a rate of at least 15%; or
- Less than 50% of its income is derived from passive interest or royalties.
Where a participating holding does not fall within one of the safe harbours above, the income derived therefrom may nevertheless be exempt from tax in Malta if both the conditions below are satisfied:
- The equity shares held in the non-resident company do not represent a portfolio investment; and
- The non-resident company or its passive interest or royalties have been subject to tax at a rate which is not less than 5%.
Taxation of the Malta holding companies
Where the participation exemption does not apply or where the company does not opt for income or gains to be exempt, Malta holding companies would be subject to tax on income less deductible expenses at the corporate income tax rate of 35%.
Upon receipt of a dividend, the shareholders would be eligible to claim a refund of all or part of the tax paid, depending on the type and source of income received.
The shareholder of the Malta company would be eligible to receive refunds as follows:
100% of the Malta tax paid where the investment qualifies as a participating holding and in the case of dividend income, where such participating holding falls within the safe harbours or satisfies the anti-abuse provisions as detailed above.
5/7ths of the Malta tax paid, where the income received by the company is passive interest or royalties or income or capital gains from a participating holding which does not fall within the safe harbours or satisfy the anti-abuse provisions.
2/3rds of the tax payable in Malta, where income has benefitted from double taxation relief.
6/7ths of the Malta tax in all other cases.
Withholding tax on dividends
Dividend payments made by Malta holding companies to non-residents are paid free of Malta withholding tax.
Disposal of shares in Malta holding companies
Taxation
- Capital Duty: 0%
- Net Worth Tax: 0%
- Corporate Income Tax: 35%
- Double Tax Treaties 59
- Dividends Exemption: 100%
- Holding Requirements: 10%
- Capital Gains Exemption: Yes
- Holding Requirements: 10%
- Tax Credit: Yes
- Relief of Losses: Carry forward indefinitely
- CFC Rules: No
- Debt-to-equity Ratio: No
Withholding Taxes
- Dividends: 0%
- Interest: 0%
- Royalties: 0%
- Liquidation: Nil
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