International Holding Companies (IHC) What is an IHC? - A holding company registered in Malta with the Maltese Registrar of Companies; - The company’s activities involve the holding of shares in overseas companies, holding of overseas assets including real estate, holding of royalties/intellectual property and receiving income and interests therefrom; - Being a Maltese company having an income arising outside Malta, an IHC may benefit from the various forms of relief from double taxation available under Malta’s tax legislation; - In addition, an IHC may offer significant tax advantages to non-resident shareholders. Advantageous Tax Treatment Malta operates the full imputation system of taxation and any tax paid by the company is imputed to the shareholder in the event of a dividend distribution. Although IHC’s are initially taxed at the normal corporate tax rate of 35%, the law allows a refund to the non-resident shareholders as described below. Thus a non-resident shareholder in receipt of a dividend from an IHC is entitled to a refund of tax paid by the company in respect of the distributed profits, as follows: a. Dividends paid by a company out of its Foreign Income Account entitle its non-resident shareholders to a refund of two-thirds (2/3) of the tax paid by the company on the distributed profits. The Foreign Income Account would include all income and capital gains derived from overseas assets and profits derived from an overseas branch, agency, or permanent establishment; or b. In those cases where the company distributes dividends out of profits derived from a ‘participating holding’ the non-resident shareholder is entitled to a full 100% refund of the tax paid by the company on the distributed profit. A Participating holding means: a. Holdings of 10% or more of the shares in an overseas company; b. Holdings of less than 10% of shares in an overseas company provided that the company: • Is entitled at its option to acquire the balance of the shares of overseas company, to the threshold required by law (at least 10% of the shares in the overseas company); • Holds the right of first refusal on a disposal/redemption/cancellation of shares of the overseas company; • Is entitled to sit on the board of the overseas company; • The value of the shareholding exceeds Lm 500,000 or equivalent in foreign currency; • Holds a strategic stake in the overseas company which will enable it to further its business objectives. This means that when the above conditions are satisfied, the net effective tax payable upon a distribution of profits derived from the worldwide income is 0. Any tax payable by the company with respect to profits derived from international activities is not payable before the earlier of (i) the date of distribution of such profits, or (ii) 18 months after the end of the relevant accounting period of the company. Furthermore the tax legislation binds the Maltese tax authorities to issue the refund not later than the fourteenth day of the month following that in which a valid claim for such refund is submitted. Company requirements All requirements applicable to the formation and registration of Maltese companies (URL Link) apply to IHC’s. This also includes the nominee shareholding/directorship possibility. Setting up an IHC in Malta following a redomiciliation of a foreign company to Malta. 
|
 |
 |