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.
Advantageous Tax Treatment
Malta operates the full imputation system of taxation and any tax paid by the company is imputed to the shareholder in the event of a dividend distribution.
Although Holding Companies are initially taxed at the normal corporate tax rate of 35%, the law allows a refund to the non-resident shareholders as described below.
A non-resident shareholder in receipt of a dividend from a Holding Company is entitled to a refund of tax paid by the company in respect of the distributed profits, as follows:
- Dividends paid by a company out of its Foreign Income Account entitle its non-resident shareholders to a refund of two-thirds (2/3) of the tax paid by the company on the distributed profits. The Foreign Income Account would include all income and capital gains derived from overseas assets and profits derived from an overseas branch, agency, or permanent establishment; or
- In those cases where the company distributes dividends out of profits derived from a ‘participating holding’ the non-resident shareholder is entitled to a full 100% refund of the tax paid by the company on the distributed profit.
A ‘participating holding’ means:
- Holdings of 10% or more of the shares in an overseas company;
- Holdings of less than 10% of shares in an overseas company provided that the company:
- Is entitled at its option to acquire the balance of the shares of overseas company, to the threshold required by law (at least 10% of the shares in the overseas company);
- Holds the right of first refusal on a disposal/redemption/cancellation of shares of the overseas company;
- Is entitled to sit on the board of the overseas company;
- The value of the shareholding exceeds €1,164,000 or equivalent in foreign currency;
- Holds a strategic stake in the overseas company, which will enable it to further its business objectives.
- When the above conditions are satisfied, the net effective tax payable upon a distribution of profits derived from the worldwide income is 0.
Any tax payable by the company with respect to profits derived from international activities is not payable before the earlier of (i) the date of distribution of such profits, or (ii) 18 months after the end of the relevant accounting period of the company.
All requirements applicable to the formation and registration of Maltese companies apply to Holding Companies. This also includes the nominee shareholding/directorship possibility.
Contact us for more information as. We will happily guide you through the Malta company formation process and also advise you on the solutions that would best suit your needs.