When it comes to holding company formation, there are many factors to consider. Where should you incorporate it? What type of entity should you use? What are the tax implications? But one of the most critical questions is: what jurisdiction will be most advantageous for your business? If you are looking for a European location with a favourable tax regime and a pro-business environment, you should consider Malta.
Endevio is a licensed Corporate Services Provider based in Malta. We can assist in the formation of your holding company in Malta. Read below to find out the benefits that await you.
- What is a Malta Holding Company?
- Benefits of Holding Company Formation in Malta
- Malta’s Beneficial Tax Laws for Holding Companies
- The Process and Costs of Malta Holding Company Formation
What is a Malta Holding Company?
A Malta Holding Company can control the policies and management of another company by owning sufficient voting shares. The purpose of a holding company is solely to own another company or company. It does not have any additional business.
Benefits of Holding Company Formation in Malta
Holding companies in Malta profit from several benefits, including:
- Low incorporation costs
- Low maintenance costs
- Favourable net tax rates
- No withholding tax on payment of dividends, interest or royalties
- No exit taxes
- No payroll-based tax or trade tax
- No wealth taxes
- More than 80 double taxation treaties signed
- No controlled foreign company legislation or transfer of pricing rules
- No thin capitalisation rules
Aside from the above benefits, companies in Malta that carry out international activities are relieved from duty on documents. Effectively, this means that increases in share capital and transfer of shares are relieved from tax.
If the company’s assets do not contain immovable properties in Malta, capital gains (obtained by non-residents on such capital increases and the transfer of shares) are not subject to tax in Malta.
Malta’s Beneficial Tax Laws for Holding Companies
Malta’s favourable tax regime is the most highlighted benefit for those who want to incorporate their holding company in the country.
A holding company based in Malta is subject to the standard corporation tax of 35 per cent (35%) of the company’s income tax.
Any income tax paid by a Maltese holding company will be completely charged or credited to the shareholder receiving the dividends of the business because Malta has a full imputation system for corporation tax. Malta’s full imputation system allows the shareholder to benefit from the full alleviation of double taxation of company profits.
Depending on the company’s source of income, the shareholder would be qualified for a refund of any tax paid by the company of 5/7ths, 6/7ths, or 7/7ths. This often results in an effective net tax rate of 10%, 5%, or 0% that applies to the shareholder.
This refund may be reduced if double taxation relief is claimed on the income. Usually, it is refunded within three weeks after the date on which the refund becomes due.
Income which originates from a participating holding (amongst others, where the parent company):
- Holds at least 10% of the equity in the subsidiary; or
- Invests a minimum of €1.5 million in the subsidiary and holds that investment for more than 183 days or from the disposal of such holding will meet the criteria for a participation exemption (whereby the latter is used to exempt dividends and gains derived from such holdings from paying tax)
Any income, therefore, which derives from a participating holding and qualifies for a participation exemption need not be declared in the company’s income tax return.
However, tax may be paid on income derived from a participating holding and qualifies for a participation exemption. Then a tax refund of 100% is claimed.
The Process and Costs of Malta Holding Company Formation
In Malta, a holding company can be incorporated efficiently after receiving all the necessary documents. The minimum share capital of a Malta holding company is €1,165, which can be paid up to 20%.
The Registry fee is €245, based on the minimum share capital. The company can be set up with one or more shareholders but requires at least one director and one company secretary.
Every holding company registration is renewed annually based on the minimum share capital. The registration fee is €100.