Malta’s Participation Exemption

The participation exemption regime grants a 100% exemption from Maltese tax to companies registered in Malta on certain dividends received from a participating holding (subject to the below anti-abuse provision) and capital gains from the disposal of a participating holding.

What are the requirements for participating holding?

• Shareholder owns at least 5% of the equity shares (2/3 of voting rights, dividend rights or right to assets on a winding-up of the equity shares); or
• has the option to acquire the remaining balance of the equity shares; or
• has an investment amounting to at least €1,164,700 which is kept for an uninterrupted period of at least 183 days; or
• has an entitlement for first refusal in the event of a proposed disposal, redemption or cancellation of the remaining balance of the equity shares;
• has an entitlement to sit on the Board; or
• holds shares for the furtherance of its business and not for the purpose of trading.

Anti-abuse provision applicable for foreign dividends

• the participating holding is resident or incorporated in an EU member state; or
• the participating holding is subject to tax at a rate of at least 15%; or
• the participating holding has 50% or less of its income derived from passive interest or royalties; or
• if none of the above have been satisfied:
  • the investment in the participating holding must not be held as a portfolio investment; and
  • the passive interest or royalties derived by the participating holding would have been subject to tax at a rate of at least 5%.