Holding companies are a very important component to a well structured global business.\u00a0 Holding companies own assets, often in the form of shares in operating and non-operating companies.\u00a0 The choice jurisdiction of the holding company is crucial to protect assets, mitigate risks, consolidate business divisions, accumulate capital and shareholder value, receive dividends from operating companies and distribute profits to shareholders.\u00a0 When comparing different jurisdictions, take into account the benefits of a particular country\u2019s Double Tax Conventions (Treaties), this will reduce the incidence of foreign withholding tax.<\/p>\n
Optimally, the company should be formed in a jurisdiction that allows receipt of foreign sourced dividends at a low or rates of withholding tax, and ensures those dividends are not highly taxed in the holding company\u2019s country of residence.\u00a0 Assess whether the country permits distribution of available profits to non-resident shareholders at low or preferably zero rates of withholding tax.\u00a0 Consider capital gains tax treatment from the disposal of shares in foreign companies held, is there an exemption on realized gains?\u00a0 Malta has been gaining in popularity as a solid choice for a holding company.\u00a0 Its tax system, adoption of EU Directives and extensive Treaty network provide a good option when planning your global structure.\u00a0 The following is a brief summary of what Malta offers:<\/p>\n
The Corporate Income Tax rate is 35%, but can be reduced to between 0% and 10%.\u00a0 A foreign tax credit paid or deemed to have been paid can be credited against local tax due on foreign income.\u00a0 Dividends are subject to 35% tax, however, if the receiving company qualifies for the participation exemption, the tax drops to zero.\u00a0 There are a number of ways to qualify for a participation exemption, including, ownership of at least 10% of the equity of the company which allows the same percentage the right to vote, participate in distribution of profits and on liquidation.\u00a0 To maintain the participation exemption take care not to contravene the anti-abuse provisions (discussed in an earlier Post).\u00a0 There is no withholding tax on interest or royalties, unless the company has a permanent establishment and conducts business in Malta.\u00a0 Profits distributed to non-resident shareholders are not subject to withholding taxes, regardless of which jurisdiction the shareholders reside, including to offshore jurisdictions.\u00a0 Capital gains from the divestiture of shares in foreign companies benefit from a zero tax rate, irrespective of the holding period or shareholder percentage, and there is no capital gains tax on the liquidation of the holding company itself.<\/p>\n
Carefully evaluate your business to determine which benefits will create the most efficient outcome.\u00a0 Examine a number of different jurisdictions and \u00a0enquire as to the availability of investment or tax incentives (discussed in an earlier Post).\u00a0 Then choose the most efficient holding company for your global business.<\/p>\n","protected":false},"excerpt":{"rendered":"
Holding companies are a very important component to a well structured global business.\u00a0 Holding companies own assets, often in the form of shares in operating and non-operating companies.\u00a0 The choice jurisdiction of the holding company is crucial to protect assets, mitigate risks, consolidate business divisions, accumulate capital and shareholder value, receive dividends from operating companies … Continue reading Holding Companies: Spotlight on Malta<\/span>