Malta as a holding company jurisdiction

Malta as a holding
company jurisdiction
Malta is considered to be an ideal location
for the establishing holding companies
for the purpose of holding shares in one
or more entities, whether located in or
outside the EU.
With the introduction of the participation exemption way back in 2007 such ideal location for holding companies
has further enhances itself. This is coupled with Malta’s domestic tax system, namely Malta’s imputation tax
system (which applies to both residents and non-residents of Malta) together with an extensive double tax
treaty network that continue to position Malta as an excellent gateway to and from the EU.
TAXATION
Malta does not impose any withholding tax on the payment of dividends, interest and royalties irrespective of
the recipient’s tax residence and status. Malta offers three main types of double taxation relief so as to ensure
that any double taxation suffered on income received from foreign sources is mitigated. Apart from the relief
which can be availed of upon the application of any of the double taxation treaties which Malta has in force, Malta
also offers relief for double taxation on a unilateral basis and allows a flat rate foreign tax credit on foreign source
income and capital gains.
PARTICIPATION EXEMPTION
Holding companies registered in Malta that are in receipt of dividend income or capital gains from a ‘participating
holding’ or from income arising from the disposal of that same holding, may apply for a participating exemption
and consequently the dividend income and the capital gain will not be subject to income tax in Malta.
The participation exemption provides that a shareholding in a non-resident company qualifies as a participating
holding if the Maltese resident company holds equity shares in a non-resident company or a qualifying body of
persons and it:
1. has at least 10% of the equity shares in the non-resident company; or
2. is an equity shareholder in a nonresident company and the equity shareholder company is entitled to the
option to call for and acquire the entire balance of the equity shares of the nonresident company and is
entitled to the Right to first refusal to purchase such shares; or
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Nexia International is a leading worldwide network of independent accounting and consulting firms, providing a comprehensive portfolio of audit, accountancy, tax and advisory services. Nexia International is the trading name of Nexia International Limited, a company registered in the Isle of Man. Company registration number: 53513C. Registered office: 1st floor, Sixty Circular Road, Douglas,
Isle of Man, IM1 1SA. The trademarks NEXIA INTERNATIONAL, NEXIA and the NEXIA logo are owned by Nexia International Limited. Nexia International and its member firms are not part of a worldwide partnership. Member firms of Nexia International are independently owned and operated. Nexia International does not accept any responsibility for the commission of any act, or omission to act
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3. is an equity shareholder in a nonresident company and is entitled to sit on the Board or appoint a person to sit
on the Board of that company as a director; or
4. is an equity shareholder in a non-resident company which invests a minimum sum of €1,164,000 and such
investment is held for an uninterrupted period of 183 days; or
5. holds the shares in the non-resident company for the furtherance of its own business and the holding is not
held as trading stock for the purpose of a trade.
Dividends derived from a participating holding in an EU resident company are in all cases exempt from
tax in Malta. Dividends received from a participating holding in a non-EU resident company are exempt from
Malta tax provided that at least one of the following additional criteria are satisfied:
1. the non-resident company it is subject to foreign tax of a minimum of 15%;
2. the said non-resident company does not derive more than 50% of its income from passive interest and
royalties; and
3. the shares in the non-resident company is not a portfolio investment; and the non-resident company or its
passive interest or royalties have been subject to tax at a rate which is not less than 5%.
Further conditions are to be satisfied in cases where the Parent-Subsidiary Directive for the elimination of
withholding taxes has been applied. Where the participation exemption does not apply or where the company
does not opt for income or gains to be exempt, Malta holding companies would be subject to tax on income less
any applicable deductible expenses at the corporate income tax rate of 35%. Upon receipt of a dividend, the
shareholders would be eligible to claim a refund of all or part of the tax paid, depending on the type and source of
income received.
The shareholder of the Malta company would be eligible to receive refunds as follows:
1. 100% of the Malta tax paid where the investment qualifies as a participating holding and in the case of
dividend income, where such participating holding falls within the above conditions;
2. 5/7ths of the Malta tax paid, where the income received by the company is passive interest or royalties or
income or capital gains from a participating holding which does not fall within the conditions (1) to (3) as
detailed above;
3. 2/3rds of the tax payable in Malta, where income has benefitted from double taxation relief; and
4. 6/7ths of the Malta tax in all other cases.
Malta has a trustee regime and thus shares in Maltese companies may be held by licensed trustees in a
fiduciary capacity for and on behalf of subscribers.
DOUBLE TAXATION TREATY NETWORK
Malta has a number of double taxation agreements most of which are based on the OECD Model Convention.
Hereunder is a list of countries with whom Malta has a double taxation treaty in force, Together with the rates,
where applicable, of the maximum withholding taxes imposed by the treaty.
Since its accession to the EU, Malta has adopted the EU Parent-Subsidiary Directive as well as the Interest and
Royalties Directive, and thus, the rates below may be even eliminated by the application of these directives
between EU member states.
OTHER FEATURES OF THE MALTESE TAX SYSTEM
There are a number of other provisions that make the Taxation System in Malta an attractive one:
• no thin capitalisation rules
• flexible transfer pricing rules
• no withholding taxes on remittances of dividends, interest and royalties to non-residents
• advance rulings on international transactions
• share capital, accounting and tax can be denominated in a foreign currency
• possibility of migration of companies to and from Malta
• no capital duties - low registration fees
• relative ease of incorporation for non-regulated entities
• low registration and maintenance costs
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COUNTRY
DIVIDENDS
Rate for minor
shareholding
Rate for major
shareholding
Required % to
qualify for major
shareholding
INTEREST
ROYALTIES
Rate
Rate
Rate for minor
shareholding
%
%
%
%
%
Albania
15
5
25
5
5
Australia
15
15
N/A
15
Austria
15
15
N/A
Bahrain
0
0
Barbados
15
Belgium (**)
COUNTRY
DIVIDENDS
INTEREST
ROYALTIES
Rate for major
shareholding
Required % to
qualify for major
shareholding
Rate
Rate
%
%
%
%
%
Liechtenstein
0
0
N/A
0
0
10
Lithuania
5
15
25
10
10
5
10
Luxembourg
15
5
25
0
10
N/A
0
0
Malaysia
0
0
N/A
15
15
5
5
5
5
Mauritius (**)
0
0
N/A
0
0
15
15
N/A
10
10
Mexico
0
0
N/A
5 or 10
10
Bulgaria
0
0
N/A
-
10
Moldova
5
5
N/A
5
5
Canada
15
15
N/A
15
10
Montenegro
5
10
25
10
5
China
5
5
25
10
7
Morocco
10
6.5
25
10
10
Croatia
5
5
N/A
0
0
Netherlands
15
5
25
10
10
Cyprus
15
15
N/A
10
10
Norway
15
15
N/A
10
10
Czech Republic
5
5
N/A
0
5
Pakistan
-
15
20
10
10
Denmark
15
0
25
0
0
Poland
15
5
20
10
10
Egypt
10
10
N/A
10
12
Portugal
15
10
25
10
10
Estonia
15
5
25
10
10
Qatar
0
0
N/A
0
0
Finland
15
5
10
10
10
Romania
5
5
N/A
5
5
Russia
10
5
25 and €100,000
5
5
France
0
15
10
5
10
San Marino
10
5
25
0
0
Georgia
0
0
N/A
0
0
Saudi Arabia
5
5
N/A
0
5 or 7
Germany
15
5
10
0
0
Serbia
5
10
25
10
5 or 10
Greece
10
5
25
8
8
Singapore
0
0
N/A
7 or 10
10
Guernsey
0
0
N/A
0
0
Slovakia
5
5
N/A
0
5
Hong Kong
0
0
N/A
0
3
Slovenia
15
5
25
5
5
Hungary
15
5
25
10
10
South Africa
10
5
10
10
10
5
0
25
0
0
Iceland
15
5
10
0
5
Spain
India
10
10
N/A
10
10
Sweden
15
0
10
0
0
Ireland
5
15
10
0
5
Switzerland
15
0
10
0 or 10
0
Isle of Man
0
0
N/A
0
0
Syria
0
0
N/A
10
18
Israel
15
0
10
5
0
Tunisia
10
10
N/A
12
12
Italy
15
15
N/A
10
10
Turkey
15
10
25
10
10
Jersey
0
0
N/A
0
0
U.K.
0
0
N/A
10
10
Jordan
10
10
N/A
0
0
UAE
0
0
N/A
10
10
Korea
15
5
25
10
0
Ukraine (*)
15
5
20
10
10
Kuwait
0
0
N/A
0
10
Urugay
15
5
25
10
5 or 10
Latvia
10
5
25
10
10
USA
15
5
10
10 or 15
10
Lebanon
5
5
N/A
0
5
Libya
15
5
10
5
5
(*) Denotes that treaty is signed but not yet in force
(**) A new treaty / Protocol has been signed but not yet in force
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WHY NEXIA BT?
Established by Brian Tonna, managing partner, Nexia BT is a corporate and private client advisory, audit,
accounting and tax firm. Our clients are local and international blue chip companies, financial and other
institutions, SMEs, high-net-worth-individuals, the public sector and high-end organisations.
As a reputable organisation of over 20 years standing, and forming part of a worldwide network
of independent business advisors, consultants, auditors and accounting firms present in over 120
countries, we are optimally positioned to offer global expertise. Along these years, we have built client
loyalty around a credible reputation for delivering results whilst working to the highest professional
standards.
Nexia BT’s strength lies in the technically competent staff with experience across a varied range of
industry sectors. We deliver solutions to our clients through a high calibre customised service reflected
in the professional work approach and ethics of our staff and driven by our ethos ’Closer to you’. With
the backing of this business approach, we confidently present you Nexia BT as your trustworthy,
dependable and reliable partner in Malta.
CONTACTS
For further information please contact:
Karl Cini
Partner
The Penthouse, Suite 2
Capital Business Centre
Entrance C, Triq taz-Zwejt
San Gwann SGN 3000
Malta EU
[email protected]
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The material has been prepared by professionals in the firm of Nexia BT. It is intended as a general guide only, and its application to specific situations will depend on the
particular circumstances involved. Accordingly, we recommend the readers seek appropriate professional advice regarding any particular problems that they encounter.
The information should not be relied upon as a substitute for such advice. While all reasonable attempts have been made to ensure that the information contained herein
is accurate, Nexia BT accepts no responsibility for any errors or omissions it may contain, whether caused by negligence or otherwise, or for any losses, however caused,
sustained by any person that relies upon it.
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© 2015 Nexia International Limited. All rights reserved.
Nexia International is a leading worldwide network of independent accounting and consulting firms, providing a comprehensive portfolio of audit, accountancy, tax and advisory services. Nexia International is the trading name of Nexia International Limited, a company registered in the Isle of Man. Company registration number: 53513C. Registered office: 1st floor, Sixty Circular Road, Douglas,
Isle of Man, IM1 1SA. The trademarks NEXIA INTERNATIONAL, NEXIA and the NEXIA logo are owned by Nexia International Limited. Nexia International and its member firms are not part of a worldwide partnership. Member firms of Nexia International are independently owned and operated. Nexia International does not accept any responsibility for the commission of any act, or omission to
act by, or the liabilities of, any of its members.