Investment Aid (July 2014) Regulations, 2014
Any undertaking which is duly incorporated under the laws of Malta, being (a) a partnership en nom collectif; partnership en commandite or a limited liability company; or (b) any body of persons constituted, incorporated or registered outside Malta, and of a nature similar to an undertaking as specified in (a) and resgitered as an oversea company in accordance with the Companies Act (Cap 386 of the laws of Malta); or (c) a duly registered cooperative under the laws of Malta, is eligible for the investment aid tax credit.
The investment aid tax credits may be awarded to:
A. A small and medium sized enterprise (an "SME") in respect to an investment in tangible and intangible assets related to:
i. the setting up of a new establishment
ii. the extension of the capacity of an existing establishment
iii. the diversification of the output of an establishment into products not previously produced in the establishment; or
iv. a fundamental change in the overall production process of an existing establishment
B. an SME that acquired the assets belonging to an establishment that has closed or would have closed had it not been purchased, and is bought by an investor unrelated to the seller and excludes sole acquisition of the shares of an undertaking.
With respect to large enterprise, the investment aid tax credits are awarded in respect to initial investments in favour of a new economic activity or activities as long as the activity is not the same or a similar activity to the activity previously performed in the establishment.
An undertaking carrying on or intending to carry out a qualifying activity that may contribute to the economic development of Malta shall, subject to the terms and conditions of the guidelines, be entitled to an investment tax credit or a cash grant (subject certain conditions are satisfied), which tax credit shall, with respect to an initial investment or an initial investment in favour of new economic activity be calculated either as percentage of the qualifying expenditure or the wage cost for jobs created.
Any eligible undertaking engaged solely in one or more of the following economic activities is eligible for this Incentive, provided certain conditions are satisfied:
i. Production, manufacture, improvement, assembly, preservation, processing of goods, material, commodities, equipment, plant and machinery and other ancillary services
ii. Information and communication technology
iii. Call centre activities
iv. Research and development, and innovation
v. Eco-innovation, waste treatment and environmental solutions
vii. Formulation, development, manufacturing, preparation and packaging of pharmaceuticals and logistic operations related thereto as may be prescribed in the guidelines issued by the Malta Enterprise ("ME")
viii. Development and provision of audiovisual productions
ix. Provision of tertiary education
x. Provision of private health care services
xi. Freeport and logistic operation
xii. Hotels, resort hotels, suite/apartment hotels or guest houses
xiii. Knowledge intensive business services
xiv. Restoration of works of art and antiques as may be prescribed in the guidelines
xv. Large scale cultural, creative and trade facilities
xvi. Industrial packaging
- An investment aid shall be awarded to a qualifying company in respect to an initial investment project as defined in the Regulations.
- The investment must remain in the region of Malta for at least five (5) years or three (3) years in case where the beneficiary is an SME.
- The investment aid is calculated either in reference to tangible or intangible investment cost resulting from the initial investment project or to the value of wage costs for jobs directly created by the initial investment project.
- The incentive tax credit may not be awarded to an undertaking that sells by retail unless certain conditions are satisfied.
- The total amount of investment that may be awarded depends (i) on whether the 'start of works' takes place before the end of 2017 or after; (ii) on the value of the 'qualifying expenditure'; and (iii) on whether the qualifying undertaking is a small or medium-sized or large undertaking or a hotel.
- No tax credit shall be due to a qualifying undertaking for a year of assessment unless it is claimed in the appropriate section of a tax return submitted by electronic means by not later than the relative tax return date.
- Any tax credit that is not absorbed in a particular year of assessment may be carried forward and shall be increased at the rate established as may be prescribed in the guidelines issued by the Malta Enterprise, provided that the tax credit shall not give rise to a right to a tax refund. The 'carry forward' method is applicable even to any unabsorbed investment tax credits under the old rules.
- Where for a year of assessment, an undertaking qualifies for a tax credit under the Investment Aid Regulations ("IAR") or under the Business Promotion Act ("BPA") and also under these Regulations, such undertakings shall avail itself of the tax credit due under the IAR or BPA as the case may be, before any set-off is made in respect of the tax credit due under these regulations.
The 'qualifying expenditure' is calculated as follows:
a. either as the value of qualifying tangible and intangible assets acquired in relation to an initial investment project; OR
b. the value of wage costs for jobs directly created by the initial investment project.
Where an undertaking has benefited from an investment tax credit under the Regulations, and such undertaking distributes dividends to its members, such undertaking shall state in the dividend warrant that such income has been relieved from tax by an investment tax credit and that tax which has so been relieved shall not be available for refund for any tax purposes.
First time applicants may submit an application for determination of eligibility at any time of the year, which application will be considered by the Corporation. Any grants requested from ME must be applied for before a project is undertaken or before any agreements or acquisitions have been undertaken.
With respect to significant projects, application forms should be submitted to ME before work on the project or activity starts. ME shall consider the aid intensity and the maximum aid (tax credit value) for these projects at approval stage. Such projects should exceed:
- €50,000 in the case of micro and small enterprises
- €100,000 in the case of medium enterprises
- €250,000 in the case of large enterprises
On being satisfied that an undertaking satisfies all the relevant conditions, the Corporation will issue an Incentive Entitlement Certificate, subject to terms and conditions as may be imposed by the Corporation. The benefits entitled by such certificate will not remain valid if the qualifying undertaking does not abide by such terms and conditions and its trade or business does not remain solely in one or more of the activities eligible for this Incentive.
Previous investment tax credit incentive
Undertakings which have received approval from ME with respect to the old tax credits but have not yet received the Incentive Entitlement Certificate will receive a written communication from ME asking them whether the project has been terminated or not and if ME is satisfied that the conditions are satisfied, it will proceed and issue the Incentive Entitlement Certificate.
Furthermore, ME will be requesting undertakings which already have an Incentive Entitlement Certificate under the previous investment tax credit incentive to confirm certain conditions which have been introduced in the new Incentive. If these conditions are not satisfied, the Incentive Entitlement Certificate shall no longer be valid.
Duration of the Incentive
The Incentive is effective as from 1st July 2014 to 31st December 2020, which may be reviewed in line with any revisions of the relevant State Aid regulations or in view of any national policy requirements.