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Malta’s Participation Exemption regime even more competitive
Recent changes to Malta’s “participation holding” concept have improved the competitiveness of the Maltese (already quite flexible and comprehensive) participation exemption regime.
In practice, the equity holding test still requires that at least one of 6 conditions are satisfied (the conditions are outlined here) but the shareholding percentage in the subsidiary has been reduced to 5% (formerly 10%) which holding entitles to at least 5% of any two of the following rights:
- right to vote;
- profits available for distribution;
- assets available for distribution on a winding up.
Another relevant change is that, where one does not have an equity holding in a ‘company’ (as defined), one may now consider 2 new classes of entities in which a Maltese resident company has a holding for the purposes of this definition, namely:
Class A – Maltese entities:
- The partnership en nom collectif;
- The partnership en nom commandite, whether or not its capital is divided into shares (one exception – for partnerships with shares set up prior to 2015 whose share capital is divided into shares);
- A registered civil partnership set up in terms of the Civil Code;
- A European Economic Interest Grouping – EEIG;
in all cases, provided the entity in question has elected to be taxed as a ‘company’ in terms of Article 27 of the Income Tax Management Act.
Class B – non- Maltese entities:
Any ‘body of persons’ (as defined) constituted, incorporated or registered outside Malta AND of a nature similar to a Maltese limited liability company;
Any ‘body of persons’ (as defined) constituted, incorporated or registered outside Malta AND of a nature similar to:
- A Maltese limited liability company
- A partnership en nom collectif;
- A partnership en nom commandite, whether or not its capital is divided into shares (one exception – for partnerships with shares set up prior to 2015);
- A registered civil partnership set up in terms of the Civil Code;
- A European Economic Interest Grouping – EEIG;
in all cases, provided the entity in question has elected to be taxed as a ‘company’ in terms of Article 27 of the Income Tax Management Act.
Thanks to its legal, operational and tax environment, Malta is one of the European Union’s most competitive jurisdictions for the development of international activities. Learn more about its advantages here.