Malta’s tax regime allows holding company owners to tax refunds depending on the source of income and not pay tax on dividends and capital gains in certain cases, making it a highly valuable tax planning vehicle.
According to Maltese law, the difference between a holding company and a trading company lies mainly with the activities of the respective company. Maltese holding companies are allowed to operate both within and outside the European Union.
If the holding company satisfies the criteria according to law as a participating holding, there is generally no tax withheld on the payment of any dividends from a Maltese holding company for a non-resident ultimate beneficial owner. Resident but not domiciled beneficial owners may also qualify for this refund if the shareholder of the Malta holding company is not Maltese resident.
There are two ways of setting up holding companies in Malta, depending if the company will have a private or public status and the process is simple and straightforward.
The first way is to register a private limited liability company with a minimum share capital of EUR 1,200, which may be 20% paid up.
The second way to do so is by registering a public limited company with a minimum shareholding of EUR46,000.
The Memorandum and Articles of Association and supporting documentation is presented to the Malta Registry of Companies, which is a department of the Malta Financial Services Authority, where it is vetted and upon satisfaction, approved even within 48 hours.
A Maltese holding company is generally not subjected to Maltese Value Added Tax as stipulated by European Union membership regulations as it does not carry out trading activities.
However, VAT may be applied in cases where reverse charge rules are applicable on Intra-Community Acquisitions of Services.
A holding company will then need to register for a tax number and an employment licence (PE number) if it intends to employ employees.
In addition to the tax incentives, when a company experiences growth and enters different markets, holding companies can help in the consolidation of subsidiary companies through an effective management and reporting role.