Difference Between a Holding Company, Trust, and Foundation

2026 Update: Key Differences, Regulatory Requirements & Strategic Uses

Malta continues to be one of the EU’s most attractive jurisdictions for corporate structuring, wealth planning, and asset protection. As of 2026, the regulatory landscape has evolved significantly due to updates from the Malta Financial Services Authority (MFSA), the EU Anti‑Money Laundering Regulation (AMLR), and global tax reforms such as the OECD Pillar II.

For individuals and businesses evaluating whether to establish a holding company, personal holding company, trust, or foundation in Malta, understanding the distinctions between these structures is essential. Each vehicle offers unique advantages in terms of tax efficiency, succession planning, asset protection, and regulatory compliance.

Here we provide a technical, up‑to‑date comparison of these structures under Malta’s 2026 legal and fiscal framework.

Holding Companies in Malta

A holding company is a corporate entity established primarily to own, manage, and administer assets, rather than to conduct trading activities. A holding company is a type of business that holds assets for a variety of reasons and can include capital appreciation, succession planning or tax planning. The type of asset classes a holding company holds can vary, and some examples would include a portfolio of investments, real estate, intellectual property rights and shares in other companies. If the holding company is holding shares in other companies, this can be small percentage holdings known as small holding investments (under 20%), associates for shares held that give significant influence in voting (usually 20% or more) or subsidiaries (over 50% and thus direct control over any decision-making).  Malta’s holding company regime remains one of the most competitive in the EU due to its participation exemption, robust tax refund system, and flexible corporate governance rules.

What a Maltese Holding Company Can Hold

Typical asset classes include:

• Equity in subsidiaries, associates, or portfolio companies
• Intellectual property (IP) rights
• Real estate (local or foreign)
• Financial instruments and investment portfolios
• High‑value movable assets

Types of Shareholdings

• Portfolio / passive holdings (<20%)
• Associates (20%–50%) – significant influence
• Subsidiaries (>50%) – full control

Taxation of Holding Companies

Malta offers:

Participation Exemption (0% tax)

Applies to dividends and capital gains from qualifying holdings if conditions are met (e.g., minimum holding, anti‑abuse tests, subject‑to‑tax test).

Refund System (5% effective tax)

If participation exemption does not apply, shareholders may claim a 6/7 refund, reducing the effective tax rate to 5%.

Substance Requirements (2026 MFSA Guidance)

To benefit from Malta’s tax regime, holding companies must demonstrate genuine economic activity, including:

• Local director(s) with decision‑making powers
• Registered office and corporate records in Malta
• Board minutes held in Malta
• Local service providers (audit, accounting, compliance)
• In some cases, employees or outsourced management functions

Personal Holding Companies in Malta

A personal holding company (PHC) is a holding company owned by an individual, small group of individuals or family for the purpose of managing private wealth. The company’s main purpose is to hold assets for the benefit of its owners. This includes investments, property, and other assets. A personal holding company usually, if set up correctly, could have taxation and fiscal benefits and can also help with succession planning. It is usually a straightforward regulatory process to move shares from an old owner to the new owner and can be actioned in a matter of days. As an example, if the holding company held real estate property, you can change the ownership of that property indirectly through the transfer of shares in a matter of days compared to a matter of months to change the ownership of the real estate directly.

Key Use Cases

• Succession planning
• Asset consolidation
• Tax‑efficient ownership of real estate or investments
• Privacy and asset protection
• Facilitating rapid transfer of ownership via share transfers

Advantages of Personal Holding Companies in Malta

• Fast transfer of ownership (shares can be transferred in days)
• Reduced administrative burden compared to direct ownership
• Potential tax efficiencies when structured correctly
• Ideal for family wealth planning

Considerations for PHCs in Malta

• Personal Holding Companies in Malta (PHCs) must comply with EU AMLR and UBO Register transparency rules
• Enhanced due diligence for high‑value assets
• CRS/FATCA reporting obligations for cross‑border asset holdings

Trusts in Malta (Common Law Structure)

A trust is a fiduciary arrangement that allows the grantor (the settlor) to give a second party (the trustee) the right to hold assets for the benefit of a third party (the beneficiary). A trust can be used to determine how a person’s money or assets should be managed and distributed while that person is alive, or after their death. As a result, they are used commonly and successfully for succession and estate planning to move assets in a controlled manner (as per the settlor’s wishes) to the heirs.

Trust law derives from English Common Law and is popular in the United Kingdom and some jurisdictions such as Malta, which has legislation for trusts (common law) and foundations (civil law).

A trust can be tax-efficient if set up correctly and planned well, can protect assets from creditors, and can dictate the terms of an inheritance for beneficiaries. They are also commonly used for charitable purposes.

Malta is unique in the EU in recognising both common-law trusts and civil-law foundations.

Key Roles

• Settlor – creates the trust
• Trustee – licensed fiduciary (MFSA‑regulated)
• Beneficiaries – individuals or entities benefiting from the trust
• Protector (optional) – oversight role

Use Cases of Trusts in Malta

• Succession and estate planning
• Asset protection
• Charitable purposes
• Wealth preservation
• Holding shares in family businesses

Taxation of Trusts in Malta

• Trusts with Maltese‑resident beneficiaries are taxed transparently
• Trusts with non‑resident beneficiaries may be exempt from Maltese tax
• Distributions may be tax‑neutral if structured correctly

Regulatory Requirements

• Trustees must be MFSA‑licensed
• Trusts must comply with CRS, FATCA, and AMLR
• Mandatory record‑keeping and reporting obligations

Foundations in Malta (Civil Law Structure)

A foundation is a separate legal entity that holds assets for a specific purpose or for the benefit of beneficiaries. They are a similar concept to trusts but are based on civil law, which is used mainly in continental Europe as opposed to common law, which is used primarily in the United Kingdom.

In Malta, foundations can be used for a variety of purposes, including holding and managing assets, distributing income to beneficiaries, and providing support for charitable causes. Foundations are subject to Maltese law and must be registered with the Malta Financial Services Authority (MFSA).

While it may seem that there are many similarities between holding companies, trusts, and foundations, there are notable differences. Unlike a trust, a foundation owns the assets in its own name.

Types of Foundations

• Private foundations – family wealth, succession, asset holding
• Purpose foundations – charitable, philanthropic, or corporate purposes

Key Features

• Registered with the MFSA
• Has a legal personality
• Governed by a statute and founding deed
• Managed by an administrator (licensed if acting professionally)

Use Cases

• Succession planning
• Asset protection
• Holding intellectual property
• Charitable activities
• Corporate structuring (e.g., orphan SPVs)

Taxation

• Foundations may opt to be taxed as companies or trusts
• Tax neutrality possible for non‑resident beneficiaries
• Subject to AMLR, CRS, FATCA, and MFSA oversight

Technical Comparison Table (2026)

Which Structure Should You Choose in 2026?

Choose a Holding Company if you need:

• Corporate structuring
• Participation exemption
• EU‑compliant tax planning
• IP or investment holding

Choose a Personal Holding Company if you need:

• Private wealth management
• Fast transfer of ownership
• Real estate structuring

Choose a Trust if you need:

• Common‑law succession planning
• Confidentiality
• Strong asset protection

Choose a Foundation if you need:

• Civil‑law structure
• Long‑term family governance
• Charitable or purpose‑driven planning

Professional Guidance Is Essential

Given the complexity of 2026 MFSA rules, EU AMLR, OECD tax reforms, and cross‑border reporting obligations, as always, choosing the right structure requires professional legal and tax advice when considering if one of these legal vehicles is right for your own personal circumstances.

Contact us for a free consultation, and we will discuss any queries you may have. Enquire with our expert team directly by filling out our short contact form below, and we will get back to you within 24 hours.

*This article is for information purposes only and should not be construed as legal or tax advice.