The definition of a Maltese company has no difference between a holding company and a trading company as such. This is also the case from a tax perspective. However, the main reasons for establishing a holding company in Malta is for operations and tax planning reasons.
When a company grows and perhaps branches out among different trading companies, a holding company can greatly improve the management, reporting and fiscal efficiencies by consolidating the subsidiaries. It is also great to use for additional acquisitions and to expand business operations into new markets. The third main reason for establishing a holding company in Malta is to raise capital and the distribution of the capital among its subsidiaries.
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Malta As A Holding Company Jurisdiction
Due to Malta’s effective tax regime, a holding company in Malta can greatly improve your international tax planning. The holding company entitles its owners to a tax refund, no tax on dividends and no tax on capital gains.
Malta does not operate with a specific holding company regime. As mentioned earlier on in this article, the benefits are typically available to Maltese companies as well in respect to their holding activities. But a holding company can also provide additional services such a treasury/financing functions etc. which adds flexibility and value to a Maltese holding company structure.
Tax Considerations For Holding Companies
There are numerous benefits to establishing a holding company in Malta. Any acquisitions of shares in its subsidiaries, whether by rights issue or transfers, there is no tax to be paid. The same applies to dividends and capital gains derived from a Maltese company subsidiary. However, the holding company must be a ‘qualifying’ holding company to benefit from this. This means it must have a right to vote, a right to profits distribution and/or a right to assets available in the event of the company being liquidated.
Further qualifying criteria must be satisfied to qualify for the holding company tax benefits. These are mainly related to the amount or value of shares held in the subsidiary and the rights these shares give the holding company.
For more information on setting up a holding company and the qualifying criteria please get in touch with one of our experts.
Furthermore, there is generally no tax withheld on the payments of dividends from a Maltese company to residents and non-residents. There is also no tax on capital gains upon the disposal of shares in a Maltese company for non-residents.
Pure Holding Companies Are VAT Exempt
Pure holding companies fall outside the scope of Maltese VAT. But VAT may be applicable on Intra-Community Acquisitions of Services subject to the reverse charge rules.
Malta’s full imputation and refundable tax credit system, together with the flat rate foreign tax credit, any non-exempt income or gains derived from a Maltese company will be subject to an overall effective tax rate of 0% to 6.25%.