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Maltese International Holding Companies

Net tax liability: 0%

An International Holding Company (IHC) is a company resident in Malta formed with the objective of holding overseas investments and to distribute that income to non-residents. Non-resident shareholders of IHCs qualify for a full refund of the Maltese tax paid by the company on profits and gains arising from “participating holdings” when such profits are distributed.

Participating Holding

For a Maltese resident company to hold a “participating holding” in a company incorporated abroad, it must hold at least 10% of the equity shares in the non-resident company. In the case of a shareholding of less than 10%, such holding may still qualify as a “participating holding” if:

the holding company enjoys the option to purchase, or the right of first refusal on a disposal of, the balance of the equity shares of the overseas company,
it is entitled to be represented on the board of the overseas company;
the shareholding exceeds Lm500,000 (or the equivalent in foreign currency);
the shares are held in the overseas company for the furtherance of the business of the Maltese company.

Taxation

While IHCs are subject to the normal corporate tax rate of 35%, the extensive network of double taxation agreements, together with the full imputation system of taxation and provisions for tax refunds contained in the legislation make Malta a very tax efficient jurisdiction for non-resident shareholders.

Non-resident shareholders qualify for a full refund of the Malta tax paid by a company on profits and gains arising from “participating holdings” when such profits are distributed.

Procedure for Refund

On the distribution of dividends to non-resident shareholders or to Maltese companies which are 100% owned by non-residents, a refund of the tax paid by the IHC becomes due.

Where the overseas investment is considered a “qualifying participation”, a 100% refund of the tax paid by the IHC takes place.

Where the overseas investment is not a qualifying participation, 2/3% refund of the tax paid by the IHC takes place.

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