A Company incorporated in Malta may take the form of a Holding Company, which is a company with the object of holding shares in other companies or also of holding any other assets including movable and immovable property, cash and intellectual property both in and outside Malta.
Income received by a Maltese company from a Participating Holding which qualifies as a participation exemption is exempt from Malta tax. Whether or not the company qualifies as a participation exemption depends on the following criteria, relating to the foreign subsidiary:
- It is resident or incorporated in a country or territory which forms part of the EU; or
- It is subject to foreign tax of at least 15%; or
- It does not have more than 50% of its income derived from passive interest or royalties.
If none of the above conditions are satisfied, both of the following two conditions must be satisfied in order for the income from the participating holding to be exempt from Malta tax:
- The equity holding by the company registered in Malta in the body of persons not resident in Malta is not a portfolio investment, and for this purpose the holding of shares by a company registered in Malta in a body of persons not resident in Malta which derives more than 50% of its income from portfolio investments shall be deemed to be a portfolio investment; and
- The body of persons not resident in Malta or its passive interest or royalties has been subject to any foreign tax at a rate of not less than 5%.
