Malta: Offshore Business Sectors
Financial Holding and Investment Activities
Many international investors choose Malta as the location for financial holding and investment companies, using the International Holding Company form, due to the jurisdiction's combination of tax treaties and low-tax offshore regime.
Investment into most of the leading OECD economies benefits from low treaty withholding tax rates. Often it would be best for the investment to have a high debt component, since the interest is normally a charge against profit in the destination country, and the treaty rates of withholding tax on interest payments are normally lower than the withholding rate on dividends, except in some cases where there is a major (usually means 25%) participation.
Whatever the mix of interest and dividends, the income once in Malta will be taxed after deduction of expenses at an effective rate of 12% or less, and if there is a 10% participation by the Maltese company the rate will be zero as long as the profits are distributed onwards to non-resident persons. Distributions to some countries will benefit from tax-sparing credits. US investors will be able to mix low-tax Malta income with high-tax income, avoiding wastage of tax credits; and even for countries like the UK which have rules on the attribution of profits from Controlled Foreign Corporations there are benefits to be got from careful planning of international financing structures.