TAXATION OF IHCs

1. Taxation system

2. Tax Computation

3. Procedure for Refund

4. Cases of Full Refunds

5. 'Participating Holdings'

6. Advanced Revenue Rulings

7. Other taxes

Taxation system

Tax computation

The following example illustrates the tax workings relating to IHCs:

FULL Refund

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.

Procedure for Refund

On the distribution of dividends to non-resident shareholders or to Malta companies which are 100% owned by non-residents, a refund equivalent to 2/3 of the tax paid by the IHC becomes due.
These refunds are paid by the Inland Revenue Department to the non-resident shareholders within 14 days from the date of the request made to the Department.

Advance Revenue Rulings

International trading and holding companies may request an advance ruling on their taxable status. Such a ruling guarantees the tax position of the company for a minimum period of five years and may be renewed for a further period of five years. Any changes in the tax legislation during these periods will not become operative before the lapse of two years from the coming into force of the new law.

Other taxes

No withholding taxes, stamp duties or exchange control restrictions apply on distribution of the profits or dividends to the shareholders and there are no taxes or restrictions on the exportation of the dividends from IHC. This means that funds finding their way to Malta may be remitted anywhere around the world.

International Holding Companies   Corporate Requirements

See also:

Double taxation treaties

International Trading Companies

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