Malta continues to solidify its position as a jurisdiction of choice for international business structures, thanks to its attractive tax regime, EU membership, and business-friendly environment. Among the structuring options available, the double Malta structure involving a Maltese holding company and an operating trading company, or two Malta holding companies, has become a popular vehicle for businesses aiming to optimise tax outcomes while maintaining operational substance.

This article examines the two-tier Malta company structure or double Malta structure in-depth outlining the tax benefits, regulatory considerations, and strategic advantages of this structure, as well as the key risks and compliance requirements that must be addressed for successful implementation.

How does an International Double Structure in Malta work?

At its core, the Maltese double structure involves the layering of a holding company and a trading company, both incorporated in Malta, with possible foreign subsidiaries beneath. This setup is designed to centralise business operations while optimising tax efficiency and simplifying cross-border activities.

A typical configuration would look like this:

• The Maltese Top Holding Company (Hold Co) is established at the top of the structure. Its primary role is to own shares in the Maltese Trading Company and act as the “principal taxpayer” for fiscal purposes.
• The Maltese Trading Company (Trading Co) and/or Sub-Holding Company (Sub Hold Co) operates as the active business entity, contracting with third-party clients and service providers, and generating trading income (such as brokerage fees).
• Below this level, the Sub Hold Co or the Trading Co may own subsidiaries in other jurisdictions (for instance, a Swiss company acting as a sub-broker), allowing for localised service delivery while keeping strategic management centralised in Malta.

This structure allows for both operational flexibility, tax efficiency and clarity on governance. By separating ownership (Hold Co) and operational activities (Trading Co), businesses can manage risk, ensure regulatory compliance, and streamline financial reporting—all within the robust legal framework of Malta.

What are the Tax Benefits of a Double Malta Structure?

The primary fiscal appeal of the Maltese double structure lies in the effective tax rate of just 5% on trading income, achieved through Malta’s full imputation system. Although corporate profits are taxed at a headline rate of 35%, shareholders are entitled to a refund of 6/7ths of the tax paid on active trading income once profits are distributed. This mechanism significantly reduces the overall tax burden without compromising transparency or compliance with EU standards.

In addition, dividends received by the Maltese Trading Company from foreign subsidiaries – such as a Swiss sub-brokerage entity – are typically exempt from Maltese tax under the participation exemption regime, provided certain holding and activity thresholds are satisfied. Crucially, Malta does not levy withholding tax on outbound dividends, enabling efficient profit repatriation to non-resident shareholders.

The adoption of Malta’s fiscal unit regime further enhances cash flow management. By treating the holding and trading companies as a single tax entity, businesses can immediately apply the reduced effective tax rate, avoiding the time lag associated with shareholder refund claims.

What are the Key Compliance and Regulatory Considerations?

Establishing and maintaining a compliant double structure in Malta requires careful attention to both local and EU-level obligations. Several key considerations arise:

• The Maltese entities must be properly constituted, with demonstrable substance including local management, office presence, and effective decision-making within Malta. This is vital to defend against challenges related to place of effective management and permanent establishment risks in other jurisdictions.
• The structure may fall within the scope of the EU’s DAC6 mandatory disclosure rules if it is deemed to provide a reportable tax advantage. While disclosure is required to Maltese tax authorities, such information is not automatically exchanged with non-EU states like Switzerland.
• Compliance with the EU Anti-Tax Avoidance Directives (ATAD), particularly the General Anti-Abuse Rule (GAAR) and Controlled Foreign Company (CFC) provisions, is essential. However, where genuine economic activity exists, these provisions should not pose significant hurdles.

VAT treatment is another important consideration. Brokerage services related to immovable property are taxed where the property is located. For instance, fees derived from German real estate transactions would not attract Maltese VAT, aligning with EU VAT directives.

What are the Strategic Advantages of Choosing Malta for Such Setups?

Beyond tax efficiency, Malta offers a stable and predictable legal environment that appeals to international businesses. Its EU membership facilitates market access while its extensive network of double taxation treaties enhances cross-border tax planning. The country’s pragmatic regulatory approach, combined with its cost-effective professional services sector, further strengthens its appeal.

For businesses seeking to expand into the European market while maintaining a neutral, internationally respected base of operations, Malta provides a compelling proposition. The double structure format, in particular, allows for clear delineation of functions between holding and trading activities, ensuring operational clarity and tax optimisation.

How are Risks Managed in a Double Structure?

A successful Maltese double structure hinges on robust governance. Key management decisions must be demonstrably made in Malta, with appropriate documentation to reflect board-level deliberations. Transfer pricing arrangements between related entities, such as Swiss and European companies, must be carefully benchmarked to ensure compliance with OECD guidelines.

It is equally important to avoid inadvertently creating a permanent establishment abroad. This requires that no binding contracts on behalf of the Maltese entities are negotiated or concluded outside Malta, and that dependent agent risks are proactively managed.

While Switzerland does not have Controlled Foreign Company rules, it does apply a substance-over-form approach. Thus, the Maltese entities must be seen as independently viable, not mere conduits for Swiss-based management.

Conclusion

The double structure remains a highly effective tool for businesses seeking to leverage Malta’s tax regime while operating within the boundaries of EU compliance. By combining a low effective tax rate with access to European markets and a robust legal framework, Malta offers a strategic advantage for international business expansion.

However, the benefits of such structures are contingent on proper implementation. Substantial economic activity, adherence to governance best practices, and proactive compliance with both Maltese and EU regulations are essential to sustain the structure’s effectiveness and legitimacy.

As global tax transparency initiatives intensify, businesses must remain vigilant, ensuring that their Maltese operations reflect genuine substance and commercial purpose. When structured and maintained correctly, a Maltese double structure offers a compelling blend of efficiency, compliance, and strategic positioning.

If you are considering structuring an investment fund through a double structure or two-tier structure in Malta or other European jurisdictions, contact LINDEMANNLAW for expert legal advice and cross-border structuring support. Our team of international fund lawyers is equipped to advise on every stage of fund formation, authorisation, and operation.