Important: This guide provides general business, tax and regulatory information. The appropriate structure and outcome depend on the complete facts and every connected jurisdiction.
The direct answer
A holding company primarily owns and governs investments, while a trading company sells goods or services and manages operating risks. One company can receive several income types, but every flow needs correct accounting, tax and legal treatment.
The structure should reflect people, decisions, contracts and risks. A holding company should not invoice for operational activity it does not perform, and a trading company does not obtain a participation exemption merely by owning shares.
Different governance evidence
Holding-company boards should evaluate acquisitions, financing, investee performance, dividends and disposals. Trading boards need commercial budgets, customer, staffing and operating-risk information.
Minutes and delegated authority should match the company’s real role.
Analyse income separately
Dividends and share gains may require participating-holding analysis. Sales, services, interest, royalties and management fees follow their own rules.
Source-country withholding, transfer pricing, deductions and owner distributions must be included in the flow map.
Role comparison
| Issue | Holding company | Trading company |
|---|---|---|
| Core activity | Own and govern investments | Sell and deliver goods or services |
| Typical evidence | Investment papers and financing decisions | Staff, customers, contracts and systems |
| Income | Dividends, gains, interest | Sales and service receipts |
| Main risk | Treating every receipt as exempt | Allocating profit without functions |
Practical scenario
A group considering one company for two roles
A Malta company will own a subsidiary and provide regional services. The group identifies directors and employees responsible for each role and contracts and prices the services.
Accounts track dividend, financing and service income separately. Advisers decide whether one entity remains practical or whether governance and risk support separation.
Evidence and implementation checklist
- Documented purpose for each activity
- People and authority
- Investment and operating records
- Income and expense segmentation
- Participation-exemption analysis
- Transfer-pricing support
- Financing and withholding review
- Owner distribution plan
Common questions
Is a holding company automatically exempt from tax?
No. Qualifying holding income or gains may be exempt, but each statutory condition and income stream must be tested.
Can one company hold shares and trade?
Potentially, but accounting, risk, governance and tax implications should be assessed.
Which requires more substance?
The required capability depends on functions and risks, not the label. A trading operation normally needs evidence appropriate to active delivery.
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Official and primary sources
Editorial status: Original VisitMalta.co.uk guidance checked against the sources above on 5 September 2026.