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Fenlex Corporate Services 16 March 2021 News/Tax

Authors: Stephanie Aquilina Galea, Tax Supervisor and Letizia Grech Seychell, Senior Tax Accountant

Date: 16th March 2021

The Malta Enterprise Corporation has published a new set of Guidelines in relation to the Investment Aid Scheme, which guidelines are applicable as from 1st January 2021 and shall remain in force until 31st December 2021 (unless reviewed or updated in line with any revisions made to the relevant State Aid regulations or with any changes to the national policy requirements).

Scope

The Investment Aid Scheme aims to sustain the regional, industrial and economic development of Malta.  The aim is to facilitate initial investments by encouraging the setting up of new establishments as well as the expansion and development of existing businesses.

The applicable aid will be a percentage of qualifying expenditure incurred and may take the form of tax credit and / or cash grant.

Eligible undertakings and projects

The Investment Aid Scheme is available for both small and medium-sized enterprises (SMEs)[1] and large enterprises.

Undertakings shall be eligible if they operate from Malta and are incorporated in the European Union as a partnership or a limited liability company, cooperative or similar set-up.

The Aid will be awarded to eligible investment projects commencing after 31 December 2021, but no later than 31 December 2023, with some specific exceptions.

The conditions for the eligibility of Initial Investment Projects are:

  • Must result in the development, expansion, diversification, or a fundamental change in the carrying out of a Qualifying Economic Activity.
  • The beneficiary shall provide a financial contribution of at least 25% of the eligible costs.
  • Both the investment and the Qualifying Economic Activity shall be retained in Malta for the minimum period of at least five (5) years or three (3) years in the case where the beneficiary is an SME, after completion of the investment project.
  • Confirmation by the applicant that it has not carried out a relocation in the two years preceding the application for aid and commits that not such relocation will occur up to two years after completion of initial investment.

The Guidelines include specific rules for eligibility for both SMEs and large enterprises.

 The list of qualifying economic activities is:

  • Manufacturing
  • Maintenance Repair and Overhaul of watercraft, aircraft or industrial engines, or electromechanical equipment.
  • Industrial Services
  • Computer Programming
  • Data processing and hosting facilities
  • Call Centre
  • Research, development, and design
  • Treatment of waste
  • The operation of environment solutions
  • The carrying out of activities related to Life Sciences
  • Pharmaceutical activities
  • Audio-visual productions
  • Audio recording productions
  • Design and development of digital video games
  • Education and tuition
  • The operation an immovable structure providing human inpatient and/or day care services
  • Freeport operations
  • Operation of a logistics facility
  • Industrial packaging
  • The operation of hotels and guest houses
  • The provision of knowledge-intensive services
  • The restoration of works of art and antiques
  • The operation of temporary or permanent facilities used for cultural events, trade shows, concerts, festivals, exhibitions or sporting activities and film projection.

Eligible project expenditure

This shall be:

  • the acquisition of Qualifying Tangible and Intangible Assets required for the implementation of an eligible Initial Investment Project; or
  • the estimated wage costs arising from job creation as a result of an initial investment.

The Guidelines include details of how each item indicated above is to be calculated. Any taxes or Government induced charges are excluded.

Aid awarded: Form and Intensity

The aid shall amount to a percentage of qualifying expenditure incurred and may take the form of tax credits (which may be claimed against future tax bills) and/or cash grants.

The aid itself is then awarded as a percentage of the qualifying expenditure as follows:

Size of Undertaking Aid Intensity
Small 30%
Medium 20%
Hotels, guest houses and their amenities as licensed by the MTA – SMEs 15%
Large 10%

Benefitting from Investment Aid

An application must be submitted to the Malta Enterprise Corporation for each initial investment project in order to benefit from this aid. This application will serve as a determination of the project’s eligibility within the parameters established in the Guidelines.  The application must be submitted on the appropriate application form and will be reviewed by the Corporation, whereby specific procedures may be followed.  Once reviewed, the applicable feedback will be communicated to the beneficiary.

For further information and assistance, please contact us:

Letizia Grech Seychell – Senior Tax Accountant

letizia.grechseychell@fenlex.com

+356 25 990 430

[1] In terms of the Annex I of the Commission Regulation (EU) No 651/2014)