Participating Holding Given Wider Scope

May 2012

Recent amendments to the Income Tax Act have extended the scope of participation exemption and participating holding.  Currently, a participation exemption is applicable on income or gains derived from a participating holding or upon the transfer of such participating holding.  However, until now the fundamental precept was that the participating holding was only possible where the holding by the Maltese company was held in a body of persons constituted, incorporated or registered similar to a partnership en commandite the capital of which is not divided into shares – more reading on our website – https://www.fbsmalta.com/malta-tax-structures-2/tax-treatment-of-the-malta-company/

However, by virtue of the new amendments the participating exemption has also been extended to holdings by a Maltese company in a collective investment scheme constituted, incorporated or registered outside Malta which is similar to a partnership en commandite as aforesaid.  This is a welcome step promoting the use of Maltese special purpose vehicles as investment vehicles into collective investment companies.