A
special tax regime is being introduced with respect to "participating holdings"
held by a Maltese company in an overseas company. For this purpose,
a participating holding means:
-
a holding of 10% or
more of the shares of an overseas company.
If
the Maltese corporate shareholder owns less than 10% of the shares in the
overseas company, its shareholding is still eligible as a participating
holding provided it satisfies any of the following conditions:
-
the Maltese corporate
shareholder 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 overseas
company; or
-
the Maltese corporate
shareholder is entitled to be represented on a seat on the Board of the
overseas company; or
-
the value of the shareholding
exceeds Lm500,000 (or, equivalent in foreign currency); or
-
the shares are held
in the overseas company for the furtherance of the business of the Maltese
company (e.g. a strategic stake in a business with which it has a large
contract). An advance revenue ruling is available from the Commissioner
of Inland Revenue to determine whether this condition has been met (see
Section 3.9).
Income
received by a Maltese company from its participating holdings is allocated
to its foreign Income Account (see Section 3.1) and is taxed in the normal
way (which will include the ability to claim the flat-rate foreign tax
credit).
However,
when profits derived by a Maltese company from its participating holdings
are subsequently distributed to a non-resident shareholder (or to a Maltese
company which is 100% owned by non-residents) there will be a full repayment
of the Malta tax suffered on the income or gain, as opposed to the two-thirds
repayment in normal circumstances (see Section 3.2). |
Malta
as a Tax Friendly Jurisdiction
