In the world of international business and tax planning, Malta has emerged as a popular choice for multinational companies looking to optimise their tax structures through an efficient holding structure. One of the key reasons for this is the Malta Participating Holding regime. This feature of Maltese tax law offers significant advantages to holding companies, making it a popular choice for businesses worldwide.
What is a Malta Participating Holding?
A Malta Participating Holding refers to a shareholding in a non-resident company that meets certain criteria that allow it to qualify for Malta's Participation Exemption regime. There are several conditions that should be satisfied but one of the most popular is that the Maltese company holds at least 5% of the equity shares of another entity such as a company, body of persons or CIS directly. Alternatively, if the shareholding is less than 5%, it may still qualify if the Maltese company satisfies one of the remaining conditions. One of the conditions that is used frequently is that a Maltese company holds an investment of a minimum value of €1,164,000 and that is held for an uninterrupted period of at least 183 days. There are other options that may qualify the holding of shares as a Malta participating holding and this focuses on the right to appoint a director or options to purchase the remaining shares.
Tax Benefits of Malta Participating Holding
Malta's participation exemption exempts 100% of the tax on both dividends (subject to satisfying the anti-abuse conditions) from a participating holding and capital gains from the disposal of the shares. The purpose of this exemption is to promote Malta as a desirable location for holding company structures and Malta is often used as a tax-efficient jurisdiction of choice for this purpose.
Any dividends outbounds from a Malta holding company to another EU country are exempt from any withholding taxes in Malta. Receiving dividends from one EU country to another EU country can be tax efficient with general guidelines making clear the treatment of dividends and usually stating that any tax suffered in one jurisdiction should either be credited against the tax in the receiving jurisdiction or exempted in its entirety. However, naturally, this should be confirmed with accountants and tax advisors in the respective jurisdictions to ensure no surprises.
Malta's double taxation agreements with more than 80 countries and the adoption of all EU directives are also advantageous to Maltese holding companies and provide further tax efficiencies.
Eligible Investments for Malta Participating Holding
Moreover, qualifying Participating Holdings can include shares in companies, limited partnerships, and collective investment vehicles to name a few. The Malta participating holding can hold shares or equity holdings in either EU companies or Non-EU companies but it is worth noting that there are more stringent anti-abuse rules in place for dividends received from non-EU equity holdings.
Conclusion
In conclusion, the Malta Participating Holding regime offers a highly attractive tax planning opportunity for companies. Its flexibility, combined with the significant tax advantages it offers, makes it a popular choice for multinational companies looking to optimise their tax structures, the Malta Participating Holding could be the key to unlocking significant tax savings.
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