Setting Up a Holding Company in Malta: A Guide
How to set up a holding company in Malta: the participation exemption, refunds and withholding tax, incorporation steps, substance and ongoing compliance.
Setting Up a Holding Company in Malta: A Director’s Guide to Structure, Tax and Compliance
By the EGM Assurance Editorial Team · Last reviewed October 2026 · 14 min read
A Maltese holding company is a private limited company whose business is to own shares in other companies. Founders and groups use one to sit above operating subsidiaries in Malta or abroad, to collect dividends and sale proceeds in one place, and to reinvest or distribute them from a single, well-regulated EU jurisdiction. The attraction is a combination of three things: a participation exemption that removes Malta tax from qualifying dividends and capital gains, no withholding tax on what the holding company pays out, and a company law framework that is quick and inexpensive to set up and run.
None of this is automatic. The participation exemption has conditions, Malta’s anti-abuse rules bite on passive and low-taxed income, and a holding company that is managed from somewhere else may not be Maltese for tax purposes at all. This guide explains what a Malta holding company is used for, how the participation exemption and the refund system work, what else the regime offers, how to incorporate step by step, the substance you need to maintain, and the ongoing compliance. It reflects the position at October 2026 under the Income Tax Act (Cap. 123), the Companies Act (Cap. 386) and the Duty on Documents and Transfers Act (Cap. 364). If you are new to Maltese company formation generally, our step-by-step guide to setting up a company in Malta covers the incorporation process in more detail.
One point before the detail: a holding company is a tax-efficient structure only when it holds the right kind of investments in the right way. Whether a particular group benefits depends on where the subsidiaries are, what they earn, who the ultimate shareholders are and what their home country does with the income. Model the whole chain, not just the Maltese layer.
1. What a Maltese holding company is used for
The typical uses fall into four groups:
Holding foreign operating subsidiaries. An investor with businesses in several countries consolidates ownership under one Maltese company, which receives dividends from each subsidiary and can reinvest them in another without a tax charge in Malta.
Holding a Maltese trading company. A two-tier structure, with a Maltese holding company above a Maltese operating company, lets the group manage distributions and tax refunds at the holding level and keep the operating company’s balance sheet clean.
Preparing for a sale. Gains on the disposal of a qualifying shareholding are exempt in the hands of the holding company, so proceeds can be collected and redeployed without a Maltese tax leakage.
Family and succession planning. A holding company lets a family hold shares in the business through one vehicle, with the shareholders’ agreement and the Articles setting the rules for transfers between generations.
What a Maltese holding company is not well suited to is passive portfolio investment in listed shares or bonds, or holding income-producing property outside a trading structure. The participation exemption is designed for genuine shareholdings in businesses, and the anti-abuse conditions described in Section 2 exclude much passive income.
2. The participation exemption: the core of the regime
Article 12(1)(u) of the Income Tax Act exempts from Maltese tax dividends received from a participating holding and gains on the disposal of one. The exemption is elective: a company can instead bring the income to charge and claim a full refund of the tax paid on distribution, which produces the same result by a longer route. Most holding companies simply take the exemption.
What counts as a participating holding
A participating holding is a shareholding in a company (Maltese or foreign) that is not a property company and that satisfies at least one of the following conditions:
Condition | What it requires |
|---|---|
Equity threshold | At least 5% of the equity shares, conferring an entitlement to at least 5% of any two of: the right to vote, profits available for distribution, and assets available on a winding up |
Option to acquire | An equity shareholding with an option to acquire the entire balance of the shares |
First refusal | An equity shareholding with a right of first refusal on the disposal of the other shares |
Board representation | An equity shareholding entitling the holder to sit on the board or appoint a director |
Investment value | An equity investment of at least €1,164,000 held for an uninterrupted period of at least 183 days |
Business furtherance | Shares held for the furtherance of the holder’s own business, not as trading stock |
A property company, under Article 2 of the Income Tax Act, is a company that owns immovable property situated in Malta or real rights over it, or that holds shares or other interests, directly or indirectly, in an entity which does, where 5% or more of the value of those shares is attributable to that property. A company carrying on a trade whose only Maltese property is a factory, showroom, warehouse or office used solely for that trade is treated as not owning property, provided Maltese property is not more than 50% of the value of its assets and it earns no income from the property. An “equity share” for this purpose is a share that entitles the holder to at least two of the three rights listed in the first row. Preference shares with a fixed dividend and no vote will usually not qualify. A holding in a partnership or similar body can qualify where the body is treated as a company for Maltese purposes.
The anti-abuse conditions for dividends
For dividends, a further test applies, directed at low-taxed and passive income. The company paying the dividend must satisfy at least one of the following:
It is resident or incorporated in an EU member state; or
It is subject to foreign tax at a rate of at least 15%; or
Not more than 50% of its income is derived from passive interest or royalties.
A subsidiary that fails all three can still qualify if the holding is not a portfolio investment and the subsidiary’s passive interest or royalties have been taxed abroad at a rate of at least 5%. In practice, EU subsidiaries and trading subsidiaries in treaty countries pass easily; a subsidiary in a zero-tax jurisdiction earning mainly interest or royalties does not. The anti-abuse conditions apply only to dividends. Gains on the disposal of a participating holding are exempt without them.
Document the qualifying condition at the time the holding is acquired and at each dividend date. The 5% threshold is the one most groups rely on, but the 183-day rule for the investment-value route and the “two of three rights” requirement for equity shares are where the exemption is most often lost in review. |
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3. When the exemption does not apply: the refund system
Income that is not exempt is taxed in the holding company at the standard 35% corporate rate. Malta operates a full imputation system: when the company distributes that taxed income as a dividend, the shareholder can claim a refund of part of the Maltese tax paid at company level. The refund depends on the type of income:
Income | Refund to shareholder | Effective Malta tax |
|---|---|---|
Dividends and gains from a participating holding (where not exempted) | 100% | 0% |
Active trading and other income | 6/7 | 5% |
Passive interest and royalties | 5/7 | 10% |
Income on which double tax relief has been claimed | 2/3 | Depends on the relief claimed |
The refund is paid to the shareholder, not the company, and only after the tax has been paid and the dividend declared. Groups that want the net rate paid upfront, without the refund cycle, can register a fiscal unit under the Consolidated Group (Income Tax) Rules, provided the holding company owns at least 95% of each subsidiary. Our fiscal unity guide explains the conditions and the registration.
Separately, Legal Notice 188 of 2025 introduced an elective final tax of 15% without imputation for companies that prefer a flat rate and no refund mechanism. The election binds the company for at least five years, and the regulations provide that it cannot produce a lower overall liability than the imputation system would. Whether it suits a holding company depends on the mix of exempt and non-exempt income, and it should be modelled before it is made.
4. Other features that matter for a holding company
No withholding tax on outbound payments
Malta does not levy withholding tax on dividends paid to shareholders, whether resident or not, nor on interest or royalties paid to non-residents who are not engaged in a trade in Malta through a permanent establishment. A Maltese holding company can therefore pass exempt dividends up to a foreign parent or to individual shareholders without a Maltese deduction at source.
Capital gains for non-resident shareholders
Under Article 12(1)(c) of the Income Tax Act, a non-resident who sells shares in a Maltese company is not subject to Maltese tax on the gain, provided the company is not a property company (as defined in Section 2) and the beneficial owner of the gain is not resident in Malta and is not owned or controlled, directly or indirectly, by individuals ordinarily resident and domiciled in Malta. That exemption, together with the participation exemption at company level, means a foreign investor can exit a Maltese holding structure without a Maltese tax charge at either level.
Duty on share transfers and the DDT10 exemption
Transfers of shares in a Maltese company normally attract duty at 2% of the value, or 5% where the company is a property company for duty purposes, meaning 75% or more of its assets (excluding current assets other than property) are immovable property situated in Malta. A holding company with more than 90% of its business interests outside Malta can apply to the Commissioner for a determination under Article 47 of the Duty on Documents and Transfers Act, the DDT10 exemption, after which transfers of its shares are free of duty. Our share transfers guide covers the application and the filings.
Notional interest deduction
A Maltese company can claim a notional interest deduction on its risk capital (share capital, share premium, reserves and interest-free loans), calculated at a reference rate set by reference to Malta government stock yields plus a 5% premium, and capped at 90% of chargeable income. For a holding company with non-exempt income and a large equity base, the deduction can reduce the effective rate further.
Treaty network and EU directives
Malta has more than 70 double taxation treaties in force and, as an EU member state, benefits from the Parent-Subsidiary and Interest and Royalties Directives. These reduce or remove withholding tax on dividends, interest and royalties paid to the Maltese holding company from subsidiaries in treaty and EU countries, subject to the beneficial ownership and anti-abuse tests in those instruments.
ATAD rules
Malta has transposed the EU Anti-Tax Avoidance Directive. The rules most relevant to a holding company are the interest limitation rule (net borrowing costs deductible up to 30% of taxable EBITDA, with a €3 million safe harbour), the controlled foreign company rule, the exit tax on migration of assets or residence, and the general anti-abuse rule. Groups with intra-group financing, or with low-taxed subsidiaries that are controlled from Malta, should test their structure against these rules before relying on the exemption.
5. Incorporating the holding company step by step
The company law process is the same as for any Maltese private limited company, with a few choices that matter more for a holding company:
Step | What it involves | Typical timing |
|---|---|---|
1. Structure and shareholders | Decide who holds the shares, the share classes, and whether a two-tier structure is needed. Collect due diligence on every shareholder, director and beneficial owner. | 1 to 2 weeks, driven by due diligence |
2. Memorandum and Articles | Objects clause covering the holding of shares and securities; Articles with the transfer restrictions, pre-emption and board rules the shareholders want. | A few days |
3. Share capital | Minimum authorised capital of €1,164.69, at least 20% paid up (€232.94), deposited in a bank account opened for the company. Larger capital is common where the company will fund acquisitions. | Depends on the bank |
4. Registered office, director and secretary | A registered office in Malta, at least one director and a company secretary. For the substance reasons in Section 6, a majority of Malta-resident directors is usual. | Before filing |
5. Registration with the Malta Business Registry | File the Memorandum and Articles, the beneficial ownership declaration and the registration fee. The fee scales with authorised capital and is lower for electronic filing. | 1 to 5 working days from a complete file |
6. Tax registration | The company is registered with the Malta Tax and Customs Administration on incorporation. A holding company that pays directors’ fees also registers as an employer. | On incorporation |
7. VAT | A pure holding company does not carry on an economic activity for VAT purposes and does not normally register. If it provides management services to subsidiaries for a fee, it does. | Only if services are supplied |
8. Bank account and funding | Open the operating account, pay up the capital, and document any shareholder loans or capital contributions used to acquire the subsidiaries. | 2 to 8 weeks, driven by bank onboarding |
The slowest steps are the ones outside the Registry: due diligence on the shareholders and bank account opening. A holding company whose shareholders are themselves companies in several countries should expect the bank to ask for the full ownership chain, audited accounts of the parent and an explanation of the source of funds for each acquisition.
Keep the objects clause broad enough to cover the holding, financing and disposal of investments, and the provision of management services to subsidiaries. A narrow objects clause is the most common reason a holding company’s Memorandum has to be amended within its first two years. |
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6. Substance and management and control
A company incorporated in Malta is resident and domiciled in Malta for tax purposes, so the Maltese regime applies to it by default. The practical risk runs the other way: if the company is in fact managed and controlled from another country, that country may treat it as resident there, and treaty partners and subsidiaries’ tax authorities may refuse the reliefs described above. Foreign controlled foreign company rules can also attribute the holding company’s income to its shareholders where it has no real presence.
The measures that support Maltese residence and treaty access are well established:
A board with a majority of Malta-resident directors who have the experience to take the decisions the company makes.
Board meetings held in Malta, minuted, at which the strategic decisions (acquisitions, disposals, dividends, financing) are actually taken rather than ratified.
Books, records, contracts and bank accounts maintained in Malta, with the registered office being a real address at which the company can be reached.
Expenditure proportionate to the activity: directors’ fees, professional fees, office costs and, where the company manages its investments actively, staff.
Directors’ fees paid by the holding company are taxable in Malta and processed through the Final Settlement System whether or not the director is resident. Our directors’ fees guide sets out the withholding and reporting.
7. Ongoing compliance
The annual obligations of a holding company are the same as for any Maltese company, and they are not lighter because the company is passive:
Obligation | Deadline | Notes |
|---|---|---|
Annual return to the Malta Business Registry | Within 42 days of the made-up date | Confirms shareholders, directors, secretary and registered office |
Audited financial statements | Approved within 10 months of year-end and filed within 42 days of approval | Required unless the company meets the micro-entity criteria; where it meets two of the three, a review report may replace the audit |
Income tax return | Within nine months of year-end (or by 31 March if later), with electronic filing extensions | Includes the tax account allocations that drive refunds |
Beneficial ownership register | Within 14 days of any change | Annual confirmation with the annual return |
Directors’ fees (FSS) | Monthly FS5; annual FS3 and FS7 by 15 February | Only where fees or benefits are paid |
DAC6 and other reporting | Within 30 days of a reportable arrangement | Cross-border structures may be reportable by the adviser or the company |
The tax return is where the regime is operated in practice. Maltese companies allocate profits to tax accounts (the final tax account, the Maltese taxed account, the foreign income account, the immovable property account and the untaxed account), and the account from which a dividend is paid determines the refund the shareholder can claim. A holding company that mixes exempt participation income with taxed income needs its allocations kept accurately from the first year.
8. Common structures and the pitfalls
The two-tier Maltese structure
A Maltese holding company above a Maltese trading company is the standard structure for owner-managed groups. The trading company pays 35% on its profits; when it distributes to the holding company, the holding company can claim the 6/7 refund, and the cash arrives at the holding level where it can be reinvested or distributed onward without further Maltese tax. Where the holding company owns at least 95% of the trading company, a fiscal unit replaces the refund with an upfront 5% charge.
Mixed holding and trading activity
A holding company that also trades, licenses intellectual property or lends to group companies has income of several types taxed in different ways. That is workable, but it complicates the tax accounts and the anti-abuse analysis. Many groups keep the holding company clean and put financing or IP activity into a separate subsidiary.
Property-rich subsidiaries
A shareholding in a property company, as defined in Section 2, is not a participating holding, gains on its shares are taxed even in the hands of non-residents, and where 75% or more of its assets are Maltese property, transfers of its shares attract duty at 5%. Property should be held through a different structure from the operating businesses.
Passive subsidiaries in low-tax jurisdictions
A subsidiary that earns mainly interest or royalties and pays little or no foreign tax fails the anti-abuse conditions, so its dividends are taxed in Malta at 35% with a 5/7 refund. The Maltese CFC rule may also apply. If the group contains such a company, model the Maltese outcome before placing it under the Maltese holding company.
The exemption is tested holding by holding and dividend by dividend. A holding company with five subsidiaries can have three that qualify and two that do not, and the tax return must treat them separately. |
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9. A worked example
A German entrepreneur owns trading companies in Germany and Italy and plans to sell the Italian business in two years. She sets up a Maltese holding company, capitalised with €2 million, which acquires 100% of both subsidiaries. The Maltese board, two Malta-resident directors and the entrepreneur, meets quarterly in Malta.
Dividends. The German company pays a €500,000 dividend. Both subsidiaries are EU-resident and the holding exceeds 5%, so the participation exemption applies: no Maltese tax. Under the Parent-Subsidiary Directive, Germany levies no withholding tax, subject to its anti-abuse conditions.
Sale. The Italian subsidiary is sold for a gain of €3 million. The gain on a participating holding is exempt in Malta. The proceeds sit in the holding company for reinvestment.
Distribution. The holding company pays a €1 million dividend to the entrepreneur. No Maltese withholding tax applies. The dividend is taxed in her hands under German law, which is where the modelling of the whole chain matters.
Exit. If she later sells the Maltese holding company itself, she is a non-resident selling shares in a company with no Maltese property, so no Maltese tax on the gain provided the company is not a property company, and with a DDT10 determination in place, no duty on the transfer.
Had the Italian subsidiary instead been a financing company in a zero-tax jurisdiction earning interest, its dividends would have failed the anti-abuse test, been taxed at 35% in Malta and qualified for a 5/7 refund on distribution, an effective 10%.
10. Frequently asked questions
How long does it take to set up a holding company in Malta?
The Malta Business Registry typically completes registration within one to five working days of receiving a complete file. The full process, including due diligence on the shareholders and opening the bank account, usually takes four to ten weeks.
What is the minimum share capital for a Malta holding company?
The minimum authorised share capital of a private limited company is €1,164.69, of which at least 20% (€232.94) must be paid up on incorporation. Holding companies are often capitalised with more, because the capital funds the acquisition of subsidiaries and supports the notional interest deduction.
Are dividends received by a Malta holding company taxed?
Not if they come from a participating holding that satisfies the anti-abuse conditions: the exemption under Article 12(1)(u) of the Income Tax Act removes them from Maltese tax. Dividends that do not qualify are taxed at 35%, with a refund of 6/7 or 5/7 of that tax to the shareholder on distribution, depending on the type of income.
Is there withholding tax on dividends paid by a Malta holding company?
No. Malta does not levy withholding tax on dividends paid to shareholders, resident or non-resident. The shareholder’s own country will usually tax the dividend under its rules.
Can a foreign company be the sole shareholder of a Malta holding company?
Yes. A private limited company can have a single corporate shareholder. The Registry and the bank will require the ownership chain up to the ultimate beneficial owners, and the beneficial ownership register must record them.
Does a Malta holding company need to register for VAT?
A pure holding company that only holds shares and receives dividends does not carry on an economic activity for VAT purposes and does not register. If it supplies management or other services to its subsidiaries for a fee, it must register in the normal way.
Does a Malta holding company need an audit?
Usually. The Companies Act micro-entity criteria are a balance sheet total of €46,600, turnover of €93,000 and two employees, tested over two consecutive periods. A holding company almost always exceeds the balance sheet figure, so it cannot take the full exemption; where it stays within the other two criteria it may file a review report under the 2025 audit exemption rules instead of a full audit, and where it exceeds two of the three it must be audited. Our audit exemption guide sets out the tiers.
What substance does a Malta holding company need?
Enough for the company to be genuinely managed and controlled in Malta: a board with Malta-resident directors who take the real decisions at meetings held in Malta, records kept in Malta, and costs in proportion to the activity. The right level depends on the size of the group and on the rules of the countries where the subsidiaries and shareholders are.
Related guides from EGM Assurance
Authoritative references
Planning a holding structure in Malta? EGM Assurance helps directors and investors model the Maltese tax outcome of a proposed structure, test each shareholding against the participation exemption, set up the tax accounts correctly from the first year, and keep the holding company compliant with its audit, return and registry obligations. Learn more about our tax and VAT compliance services in Malta. |
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This article is prepared by EGM Assurance for general informational purposes and reflects the legal and regulatory position in Malta as at October 2026, including the Income Tax Act (Cap. 123), the Companies Act (Cap. 386) and the Duty on Documents and Transfers Act (Cap. 364). It does not constitute legal or tax advice. Whether a holding company is appropriate, and whether a particular shareholding qualifies for the participation exemption, depends on the specific facts and on the tax rules of the other countries involved. Always obtain specific professional advice before setting up or restructuring a holding company.