A 16% corporate tax rate does not automatically make Romania cheaper.
A 35% headline rate does not automatically make Malta expensive.
For a holding company, the headline rate is often the least useful number. What matters is how dividends enter the company, how a future sale of shares is taxed and what happens when the money is distributed to the ultimate owner.
That is where Malta and Romania start to look very different.
Romania can be a practical, lower-cost base for a group that has real operations in the country, holds substantial stakes for the long term and reinvests its profits. Malta is usually more flexible for international ownership structures, smaller strategic shareholdings, future exits and distributions to shareholders outside the EU.
Both jurisdictions can exempt qualifying dividend income and capital gains. The conditions, however, are not the same.
| Key question | Malta | Romania |
|---|---|---|
| Effective tax on qualifying holding income | 0% under the participation exemption, or 35% paid with a 100% shareholder refund | 0% where the relevant participation-exemption conditions are met |
| Dividends received by the holding company | May be fully exempt under the participation exemption | Qualifying foreign dividends may be exempt where at least 10% is held for an uninterrupted year and the relevant country conditions are met |
| Capital gain on the sale of a subsidiary | May be fully exempt where the investment qualifies as a participating holding | May be exempt where at least 10% has been held for at least one year and the subsidiary is Romanian or resident in a treaty country |
| Minimum participation | Usually 5%, subject to the rights and other qualifying conditions; alternative tests are also available | Normally 10% |
| General minimum holding period | No general one-year requirement under the standard 5% participation test | One uninterrupted year |
| Dividend paid to a non-resident shareholder | Generally no Maltese withholding tax | 16% domestic rate from 2026, unless reduced or eliminated under an EU directive or tax treaty |
Malta: 0% on qualifying holding income
Malta taxes companies at a headline rate of 35%, but a qualifying holding company may claim the participation exemption on dividends and capital gains. In that case, the effective Maltese tax on that income is 0%.
Alternatively, the Malta company may pay tax at 35% and, following a distribution, its shareholder may claim a 100% refund of that tax. The final Maltese tax result is again 0%, although the exemption route is normally more direct from a cash-flow perspective.
A participating holding will commonly arise where the Malta company owns at least 5% of the equity and receives at least two of the following rights: voting rights, rights to distributable profits and rights to assets on liquidation. Malta also provides alternative routes for an investment to qualify.
For dividends, additional anti-abuse conditions apply. Broadly, the subsidiary should be resident or incorporated in the EU, subject to foreign tax of at least 15%, or derive no more than 50% of its income from passive interest and royalties. An alternative test may still be available where the investment is not a portfolio holding and a minimum 5% foreign-tax condition is met.
Capital gains on the sale of a participating holding can be exempt without the additional dividend tests. This can make Malta particularly useful where an exit may happen relatively quickly.
Malta also generally imposes no withholding tax when a Maltese company distributes dividends to a non-resident shareholder. This is often the decisive point for founders and family groups whose ultimate owners are outside the EU.
This article compares pure holding income only. Management fees, financing income, royalties and income from other activities fall outside this comparison and require separate tax analysis.
Romania: simpler on the surface, but watch the exit route
Romania does not have a separate holding-company regime, but it does provide participation exemptions.
Foreign dividends received by a Romanian corporate-tax payer may be exempt where the Romanian company has held at least 10% of the subsidiary for an uninterrupted period of at least one year and the subsidiary is resident in the EU or another qualifying treaty jurisdiction. A similar 10% and one-year test applies to qualifying capital gains from the sale of shares.
This works well for stable, long-term groups. It is less flexible where the holding company owns 5% to 9.99%, where a sale takes place before the first anniversary, or where the subsidiary is in a country outside Romania’s treaty network. If the exemption does not apply, the gain generally falls into Romania’s 16% corporate tax base.
The second issue is the onward dividend. From 1 January 2026, Romania’s domestic dividend withholding-tax rate is 16%. The rate can be reduced under a double-tax treaty or eliminated under the EU Parent-Subsidiary Directive where all conditions are met. But an individual shareholder cannot use the Parent-Subsidiary Directive, and a non-EU corporate shareholder must rely on the relevant treaty and beneficial-ownership position.
In other words, Romania may collect no tax when the dividend enters the holding company, but tax can arise when the same cash leaves it.
Just an Example
Assume an operating subsidiary distributes €1 million to its holding company, and the holding company later pays the full amount to a non-EU individual owner.
If the participation conditions are met, both a Maltese and a Romanian holding company may receive the dividend without local corporate tax. Malta would generally impose no withholding tax on the onward dividend. Romania starts from a 16% withholding-tax rate, although a treaty may reduce it.
The owner’s country of tax residence may still tax the dividend. The comparison here is the tax leakage inside the holding-company jurisdiction, not the owner’s personal tax bill.
The difference is not visible in the corporate-tax headline. It appears only when the money reaches the owner.
The result changes if the shareholder is a qualifying EU parent company. In that case, Romania’s withholding tax may be eliminated under the Parent-Subsidiary Directive, making Romania much more competitive.
Which jurisdiction is better?
Malta will often be the stronger choice where:
- the ultimate owners are outside the EU;
- profits are expected to be distributed rather than permanently reinvested;
- the group may acquire stakes below 10%;
- an investment could be sold within one year;
- the structure will hold subsidiaries in several countries; or
- the group values an English-speaking corporate and legal environment built around international business.
Romania may be the more practical choice where:
- the group already has management, staff or operations in Romania;
- the holding company will own at least 10% of each subsidiary for more than one year;
- profits will mainly be reinvested;
- the shareholder is a qualifying EU parent company; or
- lower annual maintenance costs matter more than maximum distribution flexibility.
The real test is not Malta versus Romania
The right answer depends on three cash flows:
- dividends from the subsidiaries;
- proceeds from a future sale; and
- distributions from the holding company to the ultimate owner.
Model those three movements before incorporating. A structure that saves money at setup can become far more expensive at the first dividend or exit.
Before recommending either jurisdiction, we review the ownership chain, the countries of the subsidiaries, expected holding periods, future buyers and the final destination of the profits. That is usually enough to see which structure genuinely works and which one only looks cheaper on paper.
This article provides a general comparison based on rules in force in 2026. Tax-treaty access, EU-directive relief, beneficial ownership, substance and anti-abuse rules must be checked for each structure.