Tax optimisation or tax planning enables businesses to minimise their tax leakage lawfully and rationally. Malta Holding Companies allows for this. Malta has many tax laws that make the island very pro-business and attractive to investors for a Holding Company Jurisdiction. 

Advantages of Malta Holding Companies

Numerous advantages outside of the tax benefits make Malta an attractive Holding Company Jurisdiction.

  1. Robust and modern legal and tax framework
  2. Malta is a member state of the European Union
  3. Strategic location for business operations
  4. Beneficial EU tax directives between other EU subsidiary companies 
  5. Large tax treaty network in place with over 70 double taxation agreements in place
  6. English is the national language of Malta making it easier to communicate with local authorities and organisations

Tax Advantages for Malta Holding Companies

Tax planning opportunities arise when looking into establishing a Malta Holding Company. Typically, these tax advantages benefit large
corporations who are looking at structuring their business more efficiently. However, this can extend to SME’s also who plan on expanding operations or structuring their business to reduce tax leakage.

Malta Participation Exemption
Malta Participation Exemption when a Maltese company holds shares in another entity qualifying as a Participating Holding can be exempt from Malta tax on dividends received, and potential capital gains arising on the sale of shares. 

Participating Holding is found when a Maltese company holds equity shares in another entity, and the Maltese company satisfies the below criteria:

  1. Holds directly at least 5% of the equity shares of another entity such as a company, body of persons or CIS. The 5% must confer the right to at least two out of the following three equity rights:
    1. the voting rights,
    2. the dividend rights
    3. the rights to assets on a winding-up of the equity shares; or
  2. Is an equity shareholder in another entity and is entitled to either sit on the Board or appoint a person to sit on the Board of the other entity; or
  3. Is an equity shareholder investing at least €1,164,000 (or the equivalent sum in a foreign currency) for an uninterrupted period of not less than 183 days in another entity; or
  4. Is an equity shareholder and is entitled to, at its option, call for and acquire the entire balance of the equity shares not held by it; or
  5. Is an equity shareholder and is entitled to the first refusal in the event of proposed disposal, redemption or cancellation of all the equity shares; or
  6. Is holding shares for the furtherance of its own business, and the holding is not held as trading stock for trade.

No Withholding Tax on Dividends Distributed
No Malta tax is generally withheld on the payment of dividends by a Maltese registered company to its shareholders, regardless of whether the shareholders are a resident or a non-resident in Malta.

No Capital Gains Tax on the Disposal fo Shares
Capital gains received by a non-resident shareholder upon disposal of shares in the Malta Company are usually exempt from Malta tax.

No Tax Upon Acquiring Shares in Subsidiaries
Acquiring shares in a subsidiary would not generate any Malta tax regardless as to whether the shares are obtained via a rights issue or a share transfer.

EU Directives
As Malta is a member of the EU, you can benefit from EU directives put in place.

  • EU Parent-Subsidiary Directive – Dividends paid to a Maltese company by an EU subsidiary are not subject to a withholding tax. Moreover, this prevents the double taxation of parent companies on the profits derived from their subsidiaries
  • EU Interest and Royalties Directive – Interest and royalties paid to Maltese company by an EU associated company are not subject to withholding tax.
  • EU Mergers Directive – The Directive facilitates mergers between companies established in EU countries.

Intellectual Property (IP) and Royalty Structures
Setting up an IP and royalty structure in Malta maximises any potential future earnings. Any income earnt through the use of your intellectual property can benefit from Malta’s tax refund system as well as the participation exemption scheme. 

Thin Capitalisation
The Maltese tax regime does not contain thin capitalisation rules.

Establishing a Malta Holding Company

When forming a Malta Company, there is no difference between a Holding Company and a Trading Company. However, the difference lies in the articles of the Malta company. Nevertheless, a group Holding Company may be organised for various reasons, including:

  1. Consolidating existing subsidiaries under one company. By consolidating companies, you can improve the efficiency of management, reporting and fiscal responsibilities.
  2. Distributing capital and funds to the subsidiaries within the group structure becomes more efficient
  3. Using a Malta Holding Company as a way to acquire new businesses and expand business operations in new markets under one company.

Malta Holding Companies as an Alternative to Offshore Company Formation

With jurisdictions and governments increasing their need for due-diligence and transparency for Directors, Shareholder and UBO’s, offshore companies have been put under pressure. Financial institutions and governments may see an offshore company as high risk or as a negative. Therefore, Malta is an excellent alternative as a Holding Company Jurisdiction due to the fantastic tax incentives; however, Malta remains compliant with EU principals and directives as well as the OECD.

Contact Us for Malta Holding Company Formation

Creating a Malta Holding Company can be a very simple and straightforward process. As Malta Company Formation agents, we can assist you through the whole process. Contact us for a free no-obligation consultation, and we will talk you through the process of setting up a Malta Holding Companies as well as all the tax, compliance & legal advice.

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