Offshore Company Formation

This explanation is taken directly from the Maltese Income Tax Act:

"participating holding" shall mean a holding which arises where:
(a) a company holds directly at least ten percent of the equity shares of a company whose capital is wholly or partly divided
into shares, which holding confers an entitlement to at least ten percent of any two of the following:
(i) right to vote;
(ii) profits available for distribution; and
(iii) assets available for distribution on a winding up:
Provided that the Commissioner shall be entitled to determine that the provisions of this paragraph are satisfied even
where the said minimum level of entitlement exists in the circumstances referred to in the proviso to the definition of
"equity holding"; or
(b) a company is an equity shareholder in a company and the equity shareholder company is entitled at its option to call for
and acquire the entire balance of the equity shares not held by that equity shareholder company to the extent permitted by
the law of the country in which the equity shares are held; or
(c) a company is an equity shareholder in a company and the equity shareholder company is entitled to first refusal in the
event of the proposed disposal, redemption or cancellation of all of the equity shares of that company not held by that
equity shareholder company; or
(d) a company is an equity shareholder in a company and is entitled to either sit on the Board or appoint a person to sit on
the Board of that company as a director; or
(e) a company is an equity shareholder which holds an investment representing a total value, as on the date or dates on
which it was acquired, of a minimum of one million, one hundred and sixty-four thousand euro (€1,164,000) (or the equivalent
sum in a foreign currency) in a company and that holding in the company is held for an uninterrupted period of not less than
183 days; or
(f) a company is an equity shareholder in a company and where the holding of such shares is for the furtherance of its own
business and the holding is not held as trading stock for the purpose of a trade:
Provided that a holding of a company in a body of persons constituted, incorporated or registered outside Malta, which is not
resident in Malta, and is of a nature similar to a partnership en commandi te the capi tal of which is not divided into shares
constituted under the Companies Act, shall be deemed to constitute a participating holding if it satisfies the provisions of any of
paragraphs (a) to (f) above which shall apply mutatis mutandis to such holding.
For the purposes of this proviso, the terms "equity shares" or "shares" shall be construed as referring to the capital in
the said body of persons which entitles the holder to at least two of the following rights:
(a) a right to vote;
(b) a right to profits available for distribution; and
(c) a right to assets available for distribution on a winding up of the said body of persons, and the term
"equity shareholder" shall be construed accordingly:
Provided that the Commissioner shall be entitled to determine that an equity holding exists even where the particular company
does not have a holding in the share capital in a company or does not consist solely of such a holding of share capital, but it can
demonstrate that in substance it holds an entitlement to at least two of the equity holding rights:
Provided further that in the case of a holding falling within the purport of paragraph (a) above, the provisions of the said
paragraph shall be deemed to be satisfied even where the minimum level of entitlement referred to in that paragraph exists at
any time by reference to the circumstances referred to in the proviso to the definition of "equity holding";
"passive interest or royalties" shall mean interest or royalty income which is not derived, directly or indirectly, from a trade or
business, where such interest or royalties have not suffered or suffered any foreign tax, directly, by way of withholding, or
otherwise, at a rate of tax which is less than five per cent (5%);