You’ll find a lot of talk online about how Malta is the best place in Europe to set up a company, mainly due to its attractive tax regime, including an effective corporate tax rate of just 5% on profits.
But the truth is, it’s a bit more complex than it seems. There are various ways to structure a business in Malta, each with its own specific purpose. In this overview, we’ll walk you through some of the most commonly used structures that international clients rely on to make the most of Malta’s strong legal, commercial, and tax systems.
This is a general guide, not a comprehensive list, of some of the tax-efficient structures available in Malta, but it gives you an idea of what’s possible. Keep in mind that some of these setups can be quite complex, so we recommend discussing your specific needs in a meeting with our Managing and Tax Director, Peter Griffiths.
Mr Griffiths is an expert in international tax. He holds a Master of Arts in Financial Services and has over 20 years of experience in the field. His expertise covers:
- advisory on a series of international tax structures involving companies, trusts, foundations and foreign expatriates relocating to or from Malta
- tax and estate planning advisory to HNWI
- setting up and tax advisory on various international cross border structures, including analysis and estate planning implications
- company formation and tax advisory services to international trading companies and international holding companies;
- mergers and corporate divisions in Malta
- VAT leasing structures for superyachts and other privately-owned vessels
- Mr Griffiths is also licensed by the MFSA to act as an administrator of Private Foundations
Our firm, Griffiths + Associates, is a proud member of PrimeGlobal, one of the world’s top five associations of independent accounting and advisory firms. And Mr Griffiths is the Council member of PrimeGlobal Southern European Region and also the Chair of the EMEA Council.
I. Standalone Maltese Company
“Standalone Maltese Company” is a general descriptive term and not a legal classification. It usually refers to a company incorporated in Malta that operates independently, i.e., not part of a group (no subsidiaries or parent companies). This company can engage in various types of activities: trading, investment, holding, etc.
A Standalone Maltese Company with a foreign, non-resident shareholder benefits from Malta’s competitive tax regime:
- Corporate Income Tax: 35% on worldwide income.
Malta operates a full imputation system – this means tax paid by the company is attributed to the shareholder upon distribution of dividends, preventing double taxation.
- Tax Refund Mechanism (for non-resident shareholders)
When non-resident shareholders receive a dividend from a Maltese company, they may claim a partial refund of the Maltese tax paid by the company.
Refund is available only upon distribution of dividends.
The direct shareholder must be a non-resident of Malta and not have a permanent establishment in Malta or a Maltese company/entity owned and controlled by the same non-resident person.
Common refund scenarios
- Withholding Tax: no withholding tax on outbound dividends, interest, or royalties paid to non-residents.
- Participation Exemption (for Holding Companies): if the company holds qualifying shares in another entity (usually >5% or meets other conditions), dividends and capital gains from that holding may be exempt from Maltese tax.
Conditions include: holding at least 5% of the equity, not a portfolio investment, subject to tax in source country.
The most common setups are a standalone Maltese trading company with a foreign/non-resident shareholder and a standalone Maltese holding company. While both share the same legal form – a private limited liability company (Ltd) under the Companies Act (Cap. 386) – they differ in purpose and activity. Let’s take a closer look at the distinction between the two.
A Standalone Maltese Trading Company with a Foreign/Non-resident Shareholder
A Standalone Maltese Trading Company with a Foreign/Non-resident Shareholder is a company established in Malta that operates independently, is not part of a corporate group, and conducts active commercial or service-based activities. It is owned by a shareholder who is not a tax resident of Malta.
STRUCTURE: Standalone Maltese Trading Company with a Foreign/Non-resident Shareholder
Standalone Maltese Holding Company (Hold Co)
Standalone Maltese Holding Company (Hold Co), this is a specific type of standalone Maltese company. It is also incorporated in Malta and operates independently (not part of a group). However, it is specifically structured to hold shares in other companies, own assets, or manage investments, rather than engage in commercial trading activities.
In the event that a standalone Maltese holding company is set up, the foreign/non-resident shareholder of the latter may benefit from a full participation exemption on dividends and capital gains derived from qualifying holdings, resulting in an effective tax rate of 0%. In cases where the participation exemption does not apply, the shareholder may still claim a tax refund of 5/7ths of the tax paid by the Maltese company on passive income, resulting in an effective tax rate of 10% or a 6/7ths tax refund in any other case resulting in an effective tax rate of 5%.
STRUCTURE: Standalone Maltese Holding Company
Tax Structuring Options
In Summary:
- All standalone holding companies are companies, but not all standalone companies are holding companies. The main distinction lies in the purpose or function: a “Hold Co” is for ownership and investment, while a general “company” could have a variety of business purposes.
- Both structures are popular for international tax planning due to Malta’s no dividend WHT and refund/exemption system. However, HoldCo is more favourable for tax-efficient holding of international investments, especially when the participation exemption applies.
- Trading company benefits from refund mechanisms and full deductibility of business expenses.
- Both benefit from no withholding tax and access to Malta’s tax treaties.
- Substance requirements are tightening, especially for holding companies.
Here’s a comparison table focused on the tax differences between a Standalone Maltese Holding Company and a Standalone Maltese Trading/Operating Company, assuming both are limited liability companies (Ltd) and are not part of a group structure.
© By Olga Saliba
