Malta: Malta Grants And Incentives - Investment Aid

INVESTMENT AID

The Investment Aid incentive entered into force in the fiscal year starting on 1 January 2008 and applies to eligible expenditure incurred on or after 1 January 2008. The current scheme is applicable until 31 December

1. Legal basis and designated authority

The Investment Aid incentive takes the form of investment tax credits expressed as a percentage of the investment in qualifying expenditure, undertaken by entities engaged in qualifying activities and is regulated by the 'Investment Aid Regulations' (Subsidiary Legislation 463.02 issued under the Malta Enterprise Act) and the Official Incentive Guidelines published by Malta Enterprise. Version 2 of these Incentive Guidelines came into force in the fiscal year starting on 1 January 2012. Malta Enterprise, which administers this incentive, is enabled to issue and publish such guidelines in terms of Article 8(3) (a) of the Malta Enterprise Act.

2. Investment tax credits

Investment tax credits are awarded to a qualifying company and computed as a percentage of qualifying expenditure. The qualifying investment is expected to remain in Malta for at least five years in the case of large enterprises or three years in the case of small and medium-sized enterprises, with the exception of plant or machinery which has become outdated within this period due to rapid technological change, provided the underlying economic activity is retained in Malta for the minimum period of five or three years as explained.

The investment tax credits cannot exceed the following aid intensities:

However, in the case of hotels, resort hotels, suite/ apartment hotels or guest houses (as explained in 5.m below) the maximum aid intensity cannot exceed 15% of the qualifying expenditure incurred. Furthermore, in the case of large investment projects, the investment tax credit cannot exceed 15% of the qualifying expenditure for that amount in excess of €50 million and 10.2% of the qualifying expenditure for the part exceeding €100 million.

The tax credit is deducted against the Malta tax payable by the enterprise on income that is directly derived from the qualifying activity of the beneficiary undertaking. Any tax credit that exceeds the tax payable for a particular year of assessment may be carried forward and increased by a percentage rate for Malta as calculated by the EU Commission (1 January 2013: 0.66%).

3. Qualifying expenditure

The value of qualifying expenditure is calculated, at the company's option, either as the value of:

1. Qualifying tangible and intangible assets acquired in relation to an initial investment project; or
2. Wage costs for jobs directly created by the initial investment project.

4. Initial investment project

An 'Initial Investment Project' entails the acquisition or development of tangible and intangible assets for:

1. The setting up of a new establishment;
2. The extension of an existing establishment;
3. Diversification of the output of an establishment into new, additional products; (d) A fundamental change in the overall production process of an existing establishment;
4. The acquisition by an independent qualifying company of capital assets directly linked to an establishment which has closed or which would have closed had it not been purchased.

5. Qualifying activities

To qualify for assistance an enterprise needs to be solely engaged in one or more of the following activities:

1. Manufacturing, which includes the repair, overhaul or maintenance of pleasure crafts, yachts, aircraft engines or equipment incorporated or used in such vessels or aircraft.
2. Information Technology (IT), being significant developmental activities and/or provision of infrastructure service for IT developmental activities, but excluding gaming companies and telecommunication service providers.
3. Call centre activities, being inbound or outbound call centre services that receive customer orders, provide product information, deal with customer requests for assistance, address customer complaints, sell or market goods or services to potential customers, undertake market research or public opinion polling and similar activities for clients; provided that number of full time equivalent employment is at least equal to 25.
4. Research and development and innovation, being the design, development, testing and technical analysis of new products and processes that are at the leading edge of the applicable market.
5. Eco-innovation, waste treatment and environmental solutions, being the operation of physical, thermal, chemical or biological processes which change the characteristics of the waste in order to reduce its volume or hazardous nature, facilitate its handling or enhance recovery, and processes that significantly prevent, reduce or reverse the negative impacts of human activities on the environment. (f) Biotechnology, being the research, development, quality assurance and/or production of products and services requiring the use of bio-technologies for their modification, synthesis or exploitation; the research, development, validation and commercialisation of human tissue programmes; the production, quality assurance and clinical validation of new medical devices based on research in life sciences; the development and application of research in life sciences within industry.
6. Pharmaceuticals, being the formulation, development and manufacture of pharmaceuticals, licensed for use as medications and the preparation and packaging of such pharmaceuticals; provided that undertakings must hold a Good Manufacturing Practice certificate issued by the Medicines Authority in Malta.
7. Facilities for filming and audiovisual productions, being the production 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 same; and/or the operation of a sound studio; and/ or the development of digital audiovisual media and digital games; provided that undertakings engaged in broadcasting of audiovisual content to live audiences are ineligible.
   
   
8. Provision of tertiary education, leading to qualifications classified by the Malta Qualifications Council at Level 5 or higher, provided that within a 24 month period, there is an investment of at least €2 million in educational and teaching resources or there is an investment in educational and teaching resources that results in the creation of at least 25 direct new full-time equivalent jobs.
9. Provision of private health care services, constituting an investment of at least €5 million in medical equipment (diagnostic equipment, therapeutic equipment, life support equipment and medical monitors) within a 24 month period; or an investment in medical equipment and result in the creation of at least 25 direct new full-time equivalent jobs within a 24 month period.
10. Logistics operations by large undertakings, being operations that include both the management of the flow of third party goods and the part-transformation that adds value to such goods; provided that more than 50 new direct full-time equivalent jobs are created.
11. Freeport activities, being licensed activities undertaken in the Malta Freeport in terms of Article 11 of the Malta Freeports Act, Chapter 334 of the Laws of Malta.
12. Hotels, resort hotels, suite/apartment hotels or guest houses, where the economic activity consists mainly in the operation or management of licensed hotel or group of licensed hotels, and where there is an investment in the development or upgrading of such hotel/s.
13. Shared regional and global management and services linked to established manufacturing activities, being the provision of one or more of the following shared services for the purpose of consolidation and vertical integration of existing operations: marketing, sales and business development; legal services; financial services; back office services; corporate services and logistical services.
    
    Provided that eligible undertakings must have been established after 1 January 2012; are linked to an existing undertaking that has been considered eligible for investment aid for at least the preceding two years and which had an employment of at least 50 full-time employees for the past two years; and create at least 30 direct new full time equivalent jobs during the first 12 months from commencement of operations.
14. Knowledge intensive business services, being one of the following services: treasury management; international market research and public opinion polling; architectural and engineering and technical design services; human resources recruitment, provision and management; strategic and organisational planning, decision making, operational control and operations management of linked and partnered enterprises.
    
    Provided that eligible undertakings must have been established after 1 January 2012.
    
    Provided that at least 30 direct full time equivalent jobs are created within 12 months from commencement of operations from a services centre in Malta (or 20 in Gozo). At least 60% of the employees must have a Bachelor's Degree or higher.
    
    Provided also that eligible undertakings are not related directly or indirectly to banks and other credit institutions, audit firms, fiduciary services, insurance firms and other enterprises engaged in financial services. Undertakings engaged in qualifying activities 5.b. to 5.o. above, require preapproval of their project by Malta Enterprise.

6. Disqualifying activities

An undertaking, irrespective of whether it is carrying out an eligible activity as indicated above, would be disqualified if it undertakes sales by retail or is engaged in non-value-adding processes such as dividing, sorting, packaging and mixing without changing the character of the good, or is engaged in the preparation of food in the course of catering (unless such a process in carried out by hotels as defined in 5.m above).

7. Application process

An undertaking shall be eligible to qualify for investment tax credits after it has completed and submitted the relevant application form and necessary documentation, including its Memorandum and Articles of Association and its latest financial statements where applicable.

The enterprise shall be issued with an Incentive Entitlement Certificate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.