A shareholding in a non-resident company qualifies as a participating holding if the Maltese company holds equity shares in a non-resident company or a qualifying body of persons. In addition, it also needs to meet any of the following requirements:
- holds directly at least 5% of the equity shares of the non-resident company; or
- is an equity shareholder in the non-resident company; is able to purchase the balance of the equity shares of the non-resident company or has the right of first refusal to purchase such shares; or
- is an equity shareholder in the non-resident company and entitled to be represented on the Board of directors; or
- is an equity shareholder which invests a minimum of €1,164,000 in a company not resident in Malta. In this case, it should hold such an investment for a minimum uninterrupted period of 183 days; or
- holds the shares in the non-resident company for the promotion of its own business of the Malta company but not held as trading stock for the purpose of trade.
Benefits of a Participating Holding
A shareholder of a Maltese company can claim a full refund of the tax paid on the dividends and capital gains received from a participating holding. The holding in the non-resident company simply has to satisfy at least one of the following anti-abuse provisions:
- be resident or incorporated in the EU;
- be subject to foreign tax of a minimum of 15%;
- not derive more than 50% of its income from passive interest or royalties.
You can read more in dept about the tax advantages of a participating holding in our Participating Exemption article.
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