Property holding companies are legal entities used by net worth individuals or groups of companies to invest in real estate or to hold shares or participations in other companies investing in real estate. A property holding company may be used to invest in a single property or a large number of properties forming part of a large development project. In some cases, a property holding company will be used for each property forming part of large development project. In addition to the holding of immovable property, property holding companies may engage themselves in other activities such as:
- Leasing real estate to companies forming part of the same group or to un-related third parties; and
- Financing of immovable property development projects
In cross-border scenarios, the ideal location of a property holding company becomes a critical issue and normally takes into consideration and addresses a number of tax issues. Proper structuring may achieve the following benefits:
- Tax efficient repatriation of gains from the sale / transfer of immovable property to the beneficial owners
- Facilitating the transfer of ownership. Selling shares in the holding company itself may be a viable option to
- transfer the legal title of the immovable property which in certain cases may not attract capital gains tax.
- Rental and financing income arises in a tax efficient jurisdiction
Using a Maltese Property Holding Company
Malta has always been a favourite jurisdiction for locating a property holding company. In particular a Maltese property holding company may allow investors to achieve the following tax objectives:
- Efficient repatriation of earnings to any jurisdiction without suffering any withholding tax in Malta
- Transferring ownership without any incidence of taxation in Malta
- Low tax burden on rental and financing income arising in Malta
The attractive features of the Maltese tax system attributable to property holding companies are the following:
Participation Exemption Regime
Income from dividends and capital gains on the disposal of a participation in a non-resident company which qualifies as a participating holding are exempt from tax in Malta. For more details on the participation exemption regime please see our Holding companies section.
Tax Refund System
Income other than dividends and capital gains from a participating holding such as rental income and interest income from financing activities is subject to corporate income tax. Resident and non-resident shareholders in a Maltese company may however claim back refunds of corporation tax paid in Malta upon a distribution of dividends by a Maltese company.
Shareholders are entitled to claim one of the following refunds of tax:
- 6/7ths of the Malta tax
- 5/7ths of the Malta tax
- 2/3rds of the tax payable in Malta
- Full refund
The tax refund system significantly reduces the tax suffered in Malta on any income which is not subject to the participation exemption in Malta and subject to tax at the normal corporate rate of tax. More details on the tax refund system in Malta.
No withholding tax on dividends distributed by a Maltese company
Malta does not levy any withholding tax on payments of dividends to non-resident shareholders of Maltese companies. This feature of the Maltese tax system facilitates the repatriation of profits to low-taxed jurisdictions.
No capital gains on the transfer of shares in a Maltese company
Capital gains derived by non-residents on the transfer of shares in a Maltese company are not subject to capital gains tax in Malta provided that the assets of the Maltese company do not consist wholly or principally of immovable property situated in Malta.
No Stamp Duty
Malta does not levy any stamp duty on the transfers of shares in a Maltese company by persons who are not resident in Malta provided that certain conditions are met.
No Thin capitalisation Rules
There are no thin capitalisation rules in Malta. The absence of thin capitalisation rules allows a holding company to finance the acquisition of a participation and push-down debt in a tax-efficient manner. Provided that certain conditions are met, the holding company may fully deduct any interest on loans received from its shareholders. The absence of thin capitalisation rules increases the attractiveness of using a Maltese holding company also as a tax efficient financing vehicle.
Incorporation a Maltese Property Holding Company
A Maltese property holding company may be incorporated as a normal company registered under the
A Maltese company may be incorporated with a minimum issued share capital of Lm 500 (EUR 1,165).
Company incorporation is an easy and straight-forward process in Malta. Provided that the required due diligence documentation is submitted to the Registry of Companies in Malta, a company may be registered within 24 hours from the submission of the Memorandum and Articles of Association and other due diligence documents which may be required.
There is no need for a Maltese company to open a bank account with a Maltese bank, however it is recommended under certain circumstances to open a bank account in Malta
No substance requirements, no need to have registered employees or Maltese resident directors. A Maltese company is obliged to have a registered address in Malta. A certain degree of substance may nevertheless be required to gain treaty access.
Exclusive Holding Activities
Holding and Financing
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