An International Holding Company is a viable option for organisations and investors whom have businesses situated in many different countries and jurisdictions and want to centralise management and control as well as consolidate all subsidiary companies within one group. This can also allow for greater efficiencies on fiscal and management reporting obligations.

​

A holding company can be used to hold many different types of business investments and these can range from shares of companies, real estate, intellectual property, aircraft, maritime vessels and other business investments.

 

A holding company can also be used for holding personal investments such as a portfolio of investments, luxury yachts and real estate to name a few.

​

In summary, a holding company can hold property and protect it, give greater control over a group organisation, allow for many tax planning opportunities and allow for effective succession planning.

​

​

International Holding Company in Malta

​

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.

​

A Malta Company is a very effective international tax-planning vehicle. Malta holding companies are onshore holding companies taxed on a worldwide basis at the normal corporate tax rate of 35% reduced to an effective tax rate of 0% in the hands of shareholders, and with the possibility of confidential beneficial ownership.

​

Malta is a popular choice to set up an international holding company as it could offer many tax planning opportunities owing to the attractive tax system the country has in place. This could mean the company is eligible to a tax refund, no taxation in Malta on dividends and no taxation in Malta on Capital Gains.

​

The Malta Tax System also has a full participation exemption regime and income and gains derived by Malta companies from qualifying participating holdings may be exempt from taxation in Malta subject to satisfying certain conditions and passing the anti-abuse provisions in place for dividend distributions.

Malta has in place more than 70 double taxation treaties with countries all over the world and this allows for many tax planning opportunities for business across multiple jurisdictions.

​

Alongside the fiscal and taxation benefits, Malta is a popular choice for setting up an international holding company for the following reasons:

​

• Member State of the European Union;

• Regulated and efficient legal and tax framework;

• Multi Lingual Workforce;

• Legislation in Maltese and English;

• Malta company formation and ongoing administration costs are relatively low.

 

 

Tax Exemption on Foreign Gains & Profits

​

Shareholders of Malta holding companies qualify for a full refund of the Maltese tax paid by the company on profits and gains arising from “participating holdings” when such profits are distributed. From 1st January 2008, Malta holding companies also qualify for an outright participation exemption subject to light anti-abuse provisions introduced from that date.

​

Therefore, capital gains realised by a Malta company pursuant to a disposal of its shares in a subsidiary would be exempt from Malta tax to the extent that the Malta company’s investment in the subsidiary would represent a 'participating holding'. A Malta company would have a 'participating holding' in a subsidiary company if the following conditions are satisfied:
 

1. The subsidiary does not own, directly or indirectly, immovable property situated in Malta (or rights over such property); and

2. The shares held by the Malta company in the subsidiary carry at least two of the following rights:

   • a right to votes; and/or

   • a right to profits available for distribution; and/or

   • a right to assets available for distribution in the event of a winding up; and

3. At least one of the following 6 additional qualifying criteria are met:

   • The Malta company holds more than 10% of the shares in the subsidiary; or

   • The Malta company holds shares in the subsidiary having an acquisition value of at least €1,164,000 and for an uninterrupted period of at least 183 days; or

   • The Malta company is entitled, at its option, call for and acquire the balance of shares in the subsidiary; or

   • The Malta company is entitled to first refusal in the event of the proposed disposal, redemption or cancellation of the shares in the subsidiary; or

   • The Malta company is entitled to sit on the board or to appoint a person to sit on the board of the subsidiary as a director; or

   • The Malta company holds shares in the subsidiary for the furtherance of its own business and not as trading stock.

 

Dividend income accruing to a Malta company from a non-resident subsidiary would be exempt from Malta tax to the extent that the Malta company's investment in the distributing subsidiary would represent a participating holding (satisfying the above rules) and, additionally, provided that:

​

• the distributing subsidiary is resident or incorporated in an EU country or territory; or

• the distributing subsidiary is subject to foreign tax at a rate of at least 15%; or

• no more than 50% of the distributing subsidiary's income is derived from passive interest or royalties; or

• the Malta company's holding in the distributing subsidiary is not a portfolio investment and the said subsidiary is subject to any foreign tax at a rate which is not less than 5%.

​

Anti-Abuse Provisions

​

Income from a ‘participating holding‘ will not be subject to a participation exemption unless the participation is held in a body corporate which satisfies at least one of the following conditions:

​

1.  It is resident or incorporated in a country or territory which forms part of the European Union; 
2.  It is subject to any foreign tax of at least fifteen per cent (15%); 
3.  It does not have more than fifty per cent (50%) of its income derived from passive interest or royalties.

​

Dividends and capital gains from a ‘participating holding‘

​

Instead of claiming a participation exemption, the holding company may opt to pay tax at the normal corporate income tax rate of 35%. When such profits are distributed, shareholders may claim a full- refund of the Malta tax paid on those profits.

​

When the participation in the non-resident company does not constitute a ‘participating holding‘, income is subject to tax at the normal corporate income tax rate of 35%. Tax leakage is significantly reduced in Malta since the payment of a dividend by the holding company entitles the shareholder to claim one of the following refunds of tax:

​

• 6/7ths of the Malta tax;   or
• 2/3rds of the tax paid in Malta

​

Similarly any other trading income derived by a holding company qualifies for a 6/7th or 2/3rds tax refund. The operation of the tax refund system reduces the effective tax rate suffered in Malta from 0% to 5%.

​

​