Throughout the past years, the Government of Malta introduced a number of incentives designed to attract film makers to Malta to boost Malta’s film industry. These incentives come in the form of financial assistance and fiscal measures available to qualifying companies on eligible production expenditure in Malta.
Financial Incentive - Cash Rebate
The cash rebate will finance up to 27% of eligible expenditure incurred by qualifying producer companies upon the completion of a qualifying production project. A set of eligible criteria are in place distinguishing between qualifying companies and projects and non qualifying companies and projects. The cash rebate is fully exempt from Maltese income tax. To date, this incentive is available to qualifying companies with respect to expenditure incurred up to 31 December 2018 unless this is reviewed beforehand. All applications are handled and evaluated by the Malta Film Commission.
Certain conditions must be adhered to before commencement of the principal activity in Malta and the prospective applicant has to:
Successfully complete a cultural test, the results of which determine the percentage rebate that will be granted;
Submit an application to the Film Commissioner for provisional approval at least thirty (30) days before commencement of the principal filming in Malta or in another EU member state for which a benefit is sought;
Submit a detailed projection of the budget to be expended in Malta;
Submit a second application for final approval of the project by the Film Commissioner;
There is no criteria set up by the Film Commission to help determine whether a particular production qualifies for the incentives or not. Principally, the audiovisual work should be produced wholly for exhibition to the public in cinemas or through television broadcasting. Furthermore, it should validly contribute towards the expression of creativity and culture through the development of production capability skills in the media of film and television.
The Malta Film Commissioner also has a recommended format which needs to be followed in this case. The typical audiovisual productions which would be considered as a qualifying production and be eligible for the financial incentives are:
Television film or television series or mini-series
Trans-media and cross-media productions
The eligible expenditure should be directly related to the production project in question where a maximum of 80% of the production budget may be considered for the benefit of a qualifying company. The following are typical services subject to eligibility:
Services engaged in Malta during production, accommodation, transportation, location fees, catering services, per diems, marine construction, leasing of office and facilities, props rentals, animals, grip equipment rental, and air travel and shipping;
Wardrobe rentals, SFX and telecommunications, craft services, marine services, professional services and post-production.
Once the shooting is complete, the qualifying company must present the accounting records, invoices and such other documents to the Film Commissioner in order for the Commissioner to determine the eligible expenditure incurred by the qualifying company. A cash rebate is forwarded to the qualifying production no later than five months from the date of receipt of the documents relating to the film production in Malta.
Fiscal Incentives - Tax Credits
The qualifying company may be granted a tax credit calculated as a percentage of the investment made on audiovisual infrastructures and other qualifying expenditure in Malta or on the number of jobs created by the launch of the qualifying project.
A tax credit is a credit against the tax liability of the company. In other words the tax credit would reduce the tax bill of the qualifying company. The tax liability of the company is calculated and after that a tax credit (if applicable) will be availed of, thus reducing the tax balance of the company.
The level of tax credit varies according to the size of the qualifying company as follows:
35% if the undertaking is small.
25% if the undertaking is medium.
15% if the undertaking is large.
The investment/job created must be retained in Malta for at least five (5) years or three (3) years where the particular undertaking is an SME.
Typically, an undertaking carrying on filming and audiovisual productions is eligible for the tax credit if the undertaking is engaged in:
the production (through scriptwriting, casting, shooting, directing and editing) of audiovisual productions consisting of feature films, television films, advertisements and documentaries; and/ or
the operation and provision of facilities and equipment required in the production of feature films, television films, advertisements and documentaries; and/ or
the operation of a sound studio; and/ or
the development of digital audiovisual media and digital games
This tax credit scheme is expected to remain open until 31 December 2020 unless reviewed beforehand.
Similar to the cash rebate, the tax credit is subject to an application process as administered by Malta Enterprise Corporation. Depending on the size of the entity, projects of a certain value (€50,000 for a small entity; €100,000 for a medium entity and €250,000 for a large entity), would require a pre-approval process of the application. This pre-approval method would ensure that the producer company is really eligible for the tax credit in question.
Apart from the incentives specific to the film making industry as described above, the Maltese jurisdiction has an efficient and effective fiscal system, which, through the appropriate structuring may provide the investor with cash flow advantages for the reinvestment of profits.