New guidelines for Investment Aid tax credits scheme

Malta Enterprise

As part of its efforts to sustain the industrial and economic development of Malta by means of encouraging and assisting new investments, Malta Enterprise has recently issued new Incentive Guidelines which shall provide the framework for its Investment Aid scheme untill the year 2020.

Over the past years, similar fiscal incentives where granted in tax credits to a large number of businesses to help them invest in their own operations, both in their initial phases, that is whilst still setting up, as well as when they were investing to expand and further develop their operations.

The new Incentive Guidelines are based on the General Block Exemption Regulation (GBER) covering regional aid between 1st July, 2014 and 31st December, 2020. While abiding to the overall parameters of the regulation, the revised scheme take into account the transformation that the local economy has gone through over the years and seeks to reflect these changes by extending eligiblity to a wider number of industries or niches.

Type of Undertaking 1st July 2014 – 31st December 2017 1st January 2014 – 31st December 2020
Small 35% 30%
Medium 25% 20%
Large 15% 10%
Hotels 15% Small 15%
Medium 15%
Large 10%

Eligible Investments

Qualifying expenditure against which Investment Aid tax credits may be awarded includes tangible and intangible investment costs resulting from the initial investment project. Note that for the purpose of this incentive, tangible investment costs refers to land, industrial buildings, plant and machinery, while intangible assets refers to the transfer of knowledge through the acquisition of patent rights, licences, know-how or unpatented technical knowledge.

In the case of large enterprises, the supported investment project must result in an activiity not previously carried out by the group ( ). SMEs may also be assisted when investing in the extension of the capacity of an existing establishment, diversifying their processes, and when fundamentally changing the overall production process of that establishment.

The acquisition of assets belonging to an establishment that has closed or would have closed had it not been purchased is also eligible for assistance, as long as it is bought by an investor who is totally unrelated to the seller. It is also possible to establish the value of the investment project by considering the wage costs of jobs directly created by the project. When this approach is selected, the value of qualifying investment is calculated on the basis of the estimated wage costs arising from jobs created directly from the investment over a period of two years.

Eligible Activities

Under the new Incentive Guidelines, a wide range of economic activities are being supported, including:

  • Manufacturing, including industrial services as well as manufacture, repair, overhaul or maintenance watercraft, aircraft or their engines;

  • Information Technology, including computer programming, as well as the provision of data processing, hosting and related activities, but excluding gambling and telecommunications;

  • Call Centre Activities;

  • R&D and Innovation processes;

  • Eco-innovation, waste treatment and environmental solutions;

  • Biotechnology and pharmaceuticals;

  • Filming and Audiovisual productions, including the:

    • production of feature films, television films, advertisements and documentaries; the operation and provision of facilities and equipment required in such productions; as well as the development of digital media and digital games;

  • Provision of Tertiary Education;

  • Provision of private Health Care services;

  • Freeport and Logistics Operation;

  • Hotels, resort hotels, suite/apartment hotels or guest houses;

  • Knowledge intensive business services, namely:

    • treasury management; international market research and public opinion polling; architectural and engineering and technical design services; human resource recruitment, provision and management; as well as strategic and organisational planning, decision making, operational control and operations management of linked and partnered enterprises;

  • Cultural Restoration, namely restoration of Art and Antiques, but excluding buildings and other structures;

  • Large Scale cultural, creative and trade facilities; and

  • Industrial Packaging.

The activities above are better defined in the Incentive Guidelines, which also specify a number of disqualifying activities that would make an undertaking ineligible for assistance under this incentive. Broadly speaking, the latter include sale by retail, non-value adding processes, and catering.

Incentive Guidelines and Additional Provisions

Further information may be found in the Incentive Guidelines, which are available on the Malta Enterprise website.

Any tax credits awarded under this incentive which are not absorbed in a particular year of assessment may be carried forward to the following year, but it shall not give rise to a right of any tax refund.

Article By: Malta Enterprise

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