Malta is fast becoming the jurisdiction of choice for an increasing number of multinational groups seeking an efficient holding structure. Malta applies a 100% participation exemption regime. The participation regime applies to dividends and capital gains derived from a participating holding or from the transfer of part or all of such participating holding.
A participating holding is found where a company resident in Malta holds equity shares in another entity and the former:
While it is most common for a participating holding to be held in a company, Malta’s participation exemption is also extended to holdings in other entities, such as a partnership or European Economic Interest Grouping irrespective of whether such entity elects to be treated as a company for tax purposes in Malta, or a collective investment vehicle that provides for limited liability of investors, provided the above conditions for the application of the participation exemption are satisfied.
With respect to dividends, the participation exemption is applicable if the entity in which the participating holding is held:
However, this additional requirements do not apply in the case of gains derived from the transfer of a participating holding. Such gains are therefore exempt with no further prerequisites.
Furthermore, the exemption also extends to income attributable to a permanent establishment (“PE”) (including a branch) of a Maltese company where the PE is situated outside Malta, and gains derived from the transfer of such permanent establishment. The exemption applies irrespective of whether such PE belongs exclusively or partly to the Maltese company and also applies where the PE is operated through an entity or relationship, other than a company, in which the Maltese company has an interest.
The profits or gains to which the exemption applies are calculated on an arm’s length basis, i.e. as if the permanent establishment is an independent enterprise operating in similar conditions.
Any gains or profits derived by non-residents on a disposal of shares or securities in a company resident in Malta are exempt from tax in Malta, provided that the company does not have, directly or indirectly, any rights over immovable property situated in Malta, and the beneficial owner of the gain or profit is not resident in Malta and not owned and controlled by, directly or indirectly, nor acts on behalf of an individual/s ordinarily resident and domiciled in Malta.
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