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 Malta Company:
- holds 10% or more of the shares of the foreign company; or
- is entitled at its option to purchase or has the first right of refusal on a disposal of the balance of the equity shares of the foreign company; or
- is entitled to be represented on the Board of Directors of the foreign company; or
- holds a shareholding exceeding EUR1,165,000 or equivalent
for an uninterrupted period of 183 days; or
- holds equity shares in the foreign company for the furtherance of the business of the Maltese company (not trading stock).
At the option of the taxpayer, dividends and capital gains derived from a PH are exempt from Malta tax.
Light anti-abuse provisions apply if the PH is acquired after 1/1/2007:- the foreign subsidiary must:
- be resident or incorporated in an EU country or territory; OR
- be subject to any foreign tax of at least 15%; OR
- not have more than 50% of its income derived from passive interest or royalties;
Where none of the conditions set out above are satisfied then both of the following two conditions must be satisfied for the income to be eligible for the participation exemption:
- 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 fifty per cent 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 have been subject to any foreign tax at a rate which is not less than 5%.