Malta holding company for a family, in depth: the participating holding test, the participation exemption on dividends and gains with its anti-abuse conditions and the beneficial owner test for selling a Malta subsidiary, the company rate with shareholder refunds, the five tax accounts, tax deduc…
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| Item | Value | Note (verbatim from the page) |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/cap/123/eng/pdf |
| Participating holding, route (a), article 2(1) | at least five percent of the equity shares | "a company holds directly at least five percent of the equity shares" |
| Participating holding, route (e), article 2(1) | EUR 1,164,000 | "one million, one hundred and sixty-four thousand euro (€1,164,000)" |
| Holding period for route (e) only | 183 days | "held for an uninterrupted period of not less than 183 days" |
| Dividend anti-abuse, limb (i)(2), article 12(1)(u) | 15% | "it is subject to any foreign tax of at least fifteen per cent (15%)" |
| Dividend anti-abuse, limb (i)(3), article 12(1)(u) | 50% | "it does not have more than fifty per cent (50%) of its income derived from passive interest or royalties" |
| Dividend anti-abuse, limb (ii)(2), article 12(1)(u) | 5% | "subject to any foreign tax at a rate which is not less than five per cent (5%)" |
| Company rate, article 56(6) | thirty-five cents on every euro | "at the rate of thirty-five cents (0.35) on every euro of the chargeable income of every" |
| Tax deducted from an untaxed dividend paid to a recipient, article 62(1) | fifteen per cent | "deduct therefrom tax at a rate of fifteen per cent" |
Figures are for tax year 2026. Malta taxes by year of assessment, so income of calendar 2026 is taxed in year of assessment 2027. This Guide covers a company registered in Malta that holds shares for a family: what counts as a participating holding, when its dividends and gains are exempt, the alternative of paying the company rate and letting the shareholder claim a refund, the tax accounts that decide which route a dividend takes, the tax deducted from untaxed dividends paid to the family, and the elective fifteen-cent final tax. Every figure sits in a table that names its page on legislation.mt. The Acts print most rates and fractions in words; this Guide keeps them in words. Pages were read on 4 October 2026.
This Guide does not cover sales of Malta property or the general capital gains rules (see mt-capital-gains), the mechanics of selling a Maltese company (see selling-a-company-in-malta), where the company is resident and what substance it needs (see mt-company-residence-and-substance), controlled foreign company rules (see cfc-and-substance-rules-compared), how to set up a family office in Malta (see mt-family-office-setup), or how Malta compares with other holding locations (see family-holding-company-location-compared).
mt-company-residence-and-substance.cfc-and-substance-rules-compared).| Item | Value | Note (verbatim from the page) |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/cap/123/eng/pdf |
| Participating holding, route (a), article 2(1) | at least five percent of the equity shares | "a company holds directly at least five percent of the equity shares" |
| Participating holding, route (e), article 2(1) | EUR 1,164,000 | "one million, one hundred and sixty-four thousand euro (€1,164,000)" |
| Holding period for route (e) only | 183 days | "held for an uninterrupted period of not less than 183 days" |
| Dividend anti-abuse, limb (i)(2), article 12(1)(u) | 15% | "it is subject to any foreign tax of at least fifteen per cent (15%)" |
| Dividend anti-abuse, limb (i)(3), article 12(1)(u) | 50% | "it does not have more than fifty per cent (50%) of its income derived from passive interest or royalties" |
| Dividend anti-abuse, limb (ii)(2), article 12(1)(u) | 5% | "subject to any foreign tax at a rate which is not less than five per cent (5%)" |
| Company rate, article 56(6) | thirty-five cents on every euro | "at the rate of thirty-five cents (0.35) on every euro of the chargeable income of every" |
| Tax deducted from an untaxed dividend paid to a recipient, article 62(1) | fifteen per cent | "deduct therefrom tax at a rate of fifteen per cent" |
A holding is a participating holding where ANY ONE of these routes is met (the Act joins them with "or"):
Routes (b) to (f) need only an equity holding, not the five percent of route (a). A proviso to the definition extends it to holdings in certain partnerships, EEIGs, bodies of persons and non-resident collective investment vehicles, reading "equity shares" as the capital that carries at least two of the three rights above.
WHAT IS EXEMPT. Article 12(1)(u) exempts "any income or gains derived by a company registered in Malta from a participating holding or from the transfer of such holding", where the company "has not shown such income or gain as part of his chargeable" income in its return. The exemption is the company's choice: it may instead declare the income, pay the company rate and let the shareholder claim a refund (see "The refund route" below).
DIVIDENDS: THE ANTI-ABUSE CONDITIONS. For a dividend from a participating holding acquired on or after 1 January 2007, the exemption applies only if condition (i) OR condition (ii) is met. From 1 January 2011 the same conditions also apply to dividends from holdings acquired before 1 January 2007, so they now apply to every dividend.
These conditions are written for dividends. The Act does not apply them to gains on the transfer of the holding.
EU SUBSIDIARIES. From 1 January 2016, where profits received from a participating holding by a Malta-resident parent company benefit from the withholding tax exemption in article 5 of Directive 2011/96/EU, the exemption under sub-paragraph (u)(1) "shall only apply to the extent that such profits are not deductible by the relevant subsidiary in that other EU Member State". The deductible part is taxed under article 4(1).
NON-COOPERATIVE JURISDICTIONS. The exemption "shall not apply to income derived from a participating holding in a body of persons resident for tax purposes in a jurisdiction that is included in the EU list of non-cooperative jurisdictions for a minimum period of three (3) months during the year immediately preceding the year of assessment", unless the company proves to the Commissioner that the body keeps "sufficient significant people functions" there.
GAINS ON A MALTA-RESIDENT HOLDING: THE BENEFICIAL OWNER TEST. A further proviso covers (a) a participating holding "in a company or in a partnership, EEIG, other body of persons or collective investment scheme" referred to in the definition, "that is resident in Malta", and (b) "a participating holding in any other body of persons that holds, directly or indirectly, shares or other interests in a company or in a partnership, EEIG, other body of persons or collective investment scheme" referred to in the first proviso to the definition, "that is resident in Malta". Gains on transferring those holdings "shall only qualify for the exemption if such gains or profits would have been exempt in terms of sub-paragraph (ii) of paragraph (c) had the transfer of the holding been made by the beneficial owner" of the company.
How the gain is then taxed, and duty on the share transfer, are in mt-capital-gains and selling-a-company-in-malta.
The Act requires a Malta company's distributable profits to be allocated to five accounts: "final tax account, immovable property account, foreign income account, Maltese taxed account, and untaxed account". The definitions, read on the Act:
Read together, profits that bore no Malta tax, including participation-exempt dividends and gains, appear to fall into the untaxed account. That reading decides whether article 62 tax is deducted when they are paid out. Confirm it before advising (see "Ask the client first").
Instead of the exemption, the company can declare the income, pay tax at the company rate, and distribute. The shareholder, not the company, then claims a refund.
| Item | Value | Note (verbatim from the page) |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/cap/372/eng/pdf |
| Standard refund, article 48(4A)(a): dividends from the Maltese taxed account or foreign income account | six-sevenths | "may claim a refund of six-sevenths of the Advance Company Income Tax" |
| Profits of passive interest or royalties, or dividends from a participating holding that fails the article 12(1)(u) conditions, article 48(4A)(a) proviso (i) | five-sevenths | "the rate of refund shall be of five-sevenths of the said Advance Company Income Tax" |
| Foreign income account profits, article 48(4)(a) (the route where the company claimed double taxation relief, since article 48(4A) is then barred) | two-thirds | "may claim a refund of two-thirds of the Malta tax paid by the company" |
| Foreign income account profits from a participating holding or its disposal, article 48(4)(b) | all of the Malta tax paid | "a claim may be made for a refund of all of the Malta tax paid in respect of those profits" |
Rules, from article 48 of the Income Tax Management Act, Cap. 372:
Under article 62(1) of the Income Tax Act, "Every company shall, on payment of untaxed dividend" to a recipient, "deduct therefrom tax at a rate of fifteen per cent" (the rate in the Cap. 123 table above). An "untaxed dividend" is a dividend paid by a company resident in Malta "to the extent that it is paid out of distributable profits allocated to its untaxed account" (article 61(b)).
A "recipient" (article 61(a)) is any ONE of:
Who is NOT a recipient: a company resident in Malta; a non-resident person not owned and controlled by, and not acting for, an individual ordinarily resident and domiciled in Malta; a trustee whose beneficiaries are not within (i) or (ii). An untaxed dividend paid to a person who is not a recipient is not "charged to tax under this Act in the hands of such person" (article 66).
Other rules:
| Item | Value | Note (verbatim from the page) |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/sl/123.217/eng/pdf |
| Elective rate, regulation 3(1)(b) | fifteen cents on every euro | "at the rate of fifteen cents (0.15) on every euro of the chargeable income" |
| Lock-in, regulation 3(3)(a) | five-year period | "shall not be made before the end of the five (5)- year period" |
Rules, from the Final Income Tax Without Imputation Regulations, S.L. 123.217 (Legal Notice 188 of 2025):
WHEN IT CAN BEAT THE REFUND ROUTE for a Maltese-resident family, on the wording above:
| Item | Value | Note (verbatim from the page) |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/sl/123.176/eng/pdf |
| Premium added to the reference rate | 5% | "with a remaining term of approximately 20 years plus a premium of 5%" |
| Cap on the deduction, rule 4(2)(a) | 90% | "exceeds ninety per cent (90%) of the undertaking’s chargeable income" |
Under the Notional Interest Deduction Rules, S.L. 123.176 (in force from year of assessment 2018), a Malta-resident company or partnership may deduct deemed interest on its "risk capital" (share capital, share premium, positive retained earnings, interest-free loans and other equity). The reference rate is the yield on Malta Government Stocks with about 20 years to run plus the premium in the table. The deduction applies only to profits that stand to be allocated to the foreign income account or the Maltese taxed account, and the excess over the cap in the table may be carried forward. Risk capital invested in holdings that could produce exempt income is left out of the base. Each shareholder is deemed to receive interest income equal to its share of the deduction claimed (rule 5). For a pure holding company living on participation-exempt income it usually has little to work on.
Malta's controlled foreign company rules are in regulation 7 of the EU Anti-Tax Avoidance Directives Implementation Regulations, S.L. 123.187. They are covered, with the thresholds, in cfc-and-substance-rules-compared. Residence of the Malta company itself is in mt-company-residence-and-substance.
All four are hypothetical facts, not a real client. Amounts are recomputed from the rates and fractions in the tables above.
Hypothetical 1. A Malta holding company owned by Malta-resident individuals receives a dividend of EUR 1,000,000 from a participating holding in a trading company resident in another EU state. Limb (i)(1) is met and the subsidiary cannot deduct the dividend.
Route A, exemption claimed. The company leaves the dividend out of its return: no company tax. If the profit sits in the untaxed account (see "The tax accounts"), a dividend paid on to Malta-resident family members bears the article 62(1) deduction.
| Step | Value | Note |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/cap/123/eng/pdf |
| Hypothetical dividend received | EUR 1,000,000 | assumption |
| Company tax, exemption claimed | EUR 0 | article 12(1)(u) |
| Tax deducted at fifteen per cent if paid on to Malta-resident individuals from the untaxed account | EUR 150,000 | article 62(1); nil if paid to a non-recipient (article 66) |
Route B, dividend declared. The company pays tax at the company rate. The profit goes to the foreign income account. A registered shareholder claims the full refund under article 48(4)(b). For a Malta-resident individual, first settle article 12(1)(c)(iii) of the Income Tax Act (see "When to refuse or refer"): if the dividend is exempt in that individual's hands, the refund bar in the last proviso to article 48(1) of Cap. 372 may reach this refund, and the refund row below may be nil.
| Step | Value | Note |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/cap/372/eng/pdf |
| Company tax at thirty-five cents on every euro | EUR 350,000 | article 56(6) Cap. 123 |
| Full refund to the shareholders | EUR 350,000 | article 48(4)(b); assumes no bar under article 12(1)(c)(iii)(B) |
| Malta tax left after the refund | EUR 0 | refund paid after the dividend and the claim |
Route B costs the family cash until the refund is paid. Route A may cost the article 62 deduction on the way out, if the untaxed-account reading holds. Which is better for Malta-resident individuals depends on the account allocation and on article 12(1)(c)(iii)(B); for non-resident shareholders who are not recipients, Route A leaves nothing to deduct.
Hypothetical 2. A Malta company earns trading profit of EUR 100,000 (allocated to its Maltese taxed account) and distributes it. A registered shareholder claims six-sevenths.
| Step | Value | Note |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/cap/372/eng/pdf |
| Hypothetical trading profit | EUR 100,000 | assumption |
| Company tax at thirty-five cents on every euro | EUR 35,000 | article 56(6) Cap. 123 |
| Refund at six-sevenths | EUR 30,000 | article 48(4A)(a) |
| Malta tax left after the refund | EUR 5,000 | only once the dividend is paid and the refund claimed |
Hypothetical 3. The same EUR 100,000 under the elective final tax.
| Step | Value | Note |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/sl/123.217/eng/pdf |
| Tax at fifteen cents on every euro | EUR 15,000 | regulation 3(1)(b) |
| Floor where all shareholders could claim six-sevenths | EUR 5,000 | regulation 3(4)(a): ordinary tax less refunds claimable |
| Tax payable (the higher of the two) | EUR 15,000 | final; no refund; profits to the final tax account |
Here the election costs more than the refund route on distributed profits. On retained profits the EUR 15,000 is paid against EUR 35,000 under the ordinary system until a dividend is paid and the refund claimed, but only if the regulation 3(4)(a) floor counts the refunds the shareholders could claim on a later dividend. The regulation says "claimed or claimable"; if nothing is claimable before a dividend is paid, the floor is the full ordinary tax and the election saves nothing. Confirm before relying on it.
Hypothetical 4. A Malta holding company owned by two Malta-resident siblings sells its whole holding in a Malta-resident trading company (not a property company) at a gain of EUR 2,000,000.
| Step | Value | Note |
|---|---|---|
| Source | all figures below | https://legislation.mt/eli/cap/123/eng/pdf |
| Hypothetical gain | EUR 2,000,000 | assumption |
| Exempt under article 12(1)(u) | EUR 0 | the beneficial owners are resident in Malta, so article 12(1)(c)(ii) would not have exempted them |
| Company tax at thirty-five cents on every euro | EUR 700,000 | article 56(6), before any shareholder refund on distribution |
If one sibling were not resident in Malta and not owned or controlled by an individual ordinarily resident and domiciled in Malta, the exemption would reach that sibling's share of the gain only. Being a participating holding is not enough: the subsidiary's residence in Malta switches on the beneficial owner test. The gain also cannot go to the foreign income account, which excludes "a participating holding in a company resident in Malta". Refunds on its distribution and duty on the transfer are for selling-a-company-in-malta and mt-capital-gains.
selling-a-company-in-malta and a Malta accountant. Do not state that the participation exemption covers it.mt-capital-gains).cfc-and-substance-rules-compared and residence or substance questions to mt-company-residence-and-substance.Pasting this into your AI section by section is slow and easy to get wrong. Add to your AI and it loads the whole Guide automatically — with dependency resolution and conservative defaults, every figure cited to its source.
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