A Malta property holding company is frequently used by high net worth individuals to invest in real estate situated outside Malta. A property holding company may invest in a single property or else in a whole development project.
Proper cross-border structuring of immovable property investment may achieve the following benefits:
- Facilitating the transfer of ownership which may be achieved by selling shares in the Malta holding company itself rather than transferring the legal title of the immovable property itself, which in certain cases the former may not attract capital gains tax.
- Putting the structure into place does not necessitate a transfer of the property. Malta allows re-domiciliation of foreign companies to Malta. We have been involved in the re-domiciliation of Gibraltar companies owning Portuguese real estate to Malta.
- Tax efficient repatriation of gains from the eventual sale of immovable property to the beneficial owners. Malta does not impose any withholding taxes on outbound dividends.
- During the period of holding of the immovable, any rental income derived from such immovable property can be subject to low rates of tax in the hands of the Malta Immovable Property Holding Company.
A foreign owned company holding immovable property is re-domiciled to Malta. No stamp duties or taxes should be payable since there is no transfer of the immovable asset itself.
Tax on rental income:
Rental income derived from immovable property can be subject to an effective tax rate of 5%. Deductions allowed represent interest paid on financing original acquisition of immovable, and a notional 20% maintenance deduction.
Tax on eventual sale of the immovable property:
If the non-resident shareholders would like to sell the immovable asset, it can be structured in a number of ways:
Malta Holdco can transfer the immovable property itself. 5% effective tax applies in Malta.
Alternatively, shareholders can decide to dispose their shares in Malta Holdco – buyer will acquire the Maltese Holding Company and the underlying immovable asset. 0% tax in Malta.