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Industrial Development
The Malta Enterprise Corporation , a government agency in charge of industrial development, offers the following incentives:
In the beginning of 2001 the Maltese Parliament approved the "Business Promotion Act". This Act superceded the "Industrial Development Act" and introduced incentives summerised as follows:
The Incentives Package in Brief
The new Business Promotion Act (BPA) amends the Industrial Development Act of 1988. It introduces greater scope and flexibility to the incentives available for the promotion of business and covers a much wider range of qualifying sectors and activities than before.
The BPA as amended, provides incentives for those industries demonstrating growth and employment potential that are engaged in manufacture, repair, improvement or maintenance activities. New provisions also provide attractive fiscal incentives for companies engaged in certain manufacturing and qualifying activities a summary of which follows.
Qualifying Activities
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Electronic and telecommunications equipment, semiconductors and other components and products
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Software development including installation, implementation & support and training.
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Machinery and engineering
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Fabricated metal products
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Rubber and plastic items
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Pharmaceuticals and medicinals
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Medical, precision and optical instruments and equipment
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Production of audio-visual productions including films, advertising programmes or commercials and documentaries
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Jewellery and related articles
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Repair, improvement and maintenance of aircraft, yachts, motor boats, turbines, gantry cranes and their equipment
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Biotechnology
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Waste treatment and recycling
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Research and
development
NOTE: Companies carrying out "Qualifying Activities" qualify for the incentives listed in section A, in addition to the incentives set out under sections B and C. The incentives listed in sections B and C are available to all qualifying companies
Tax Incentives
SECTION A
Reduced rates of income tax
Qualifying companies benefit from a highly favourable tax structure. The applicable rates of tax will be as follows:
(a) 5% for the first 7 years of operation;
(b) 10% for the following 6 years
(c) 15% for the following 5 years
Investment tax credits
Tax payable can be reduced or eliminated by investment tax credits calculated as the higher of:
(a) 50% of the amount invested; or
(b) 50% of the first 2 year wage cost of new jobs created
(c) For SMEs the percentage for both the above is increased to 65%
(d) Unutilised investment tax credits may be carried forward
The interaction of the above incentives would normally result in minimal or no taxes being paid for a number of years.
Tax incentives applicable to all qualifying companies
SECTION B
Value Added incentive scheme
A scheme whereby companies may benefit from reduced rates of tax according to the increase in value added of their activities. The reduced rates of tax are as follows:
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5% for the first 7 years;
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10% for the following 6 years
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15% for the following 5 years.
The reduced rates of tax apply to part or indeed a multiple of the increased profit when compared to a base period. For new companies since the base period will be NIL all the profits in the initial three years will be taxed at the reduced rate of 5%.
Investment allowances
Tax deductions in addition to normal tax depreciation are provided as follows:
Reduced tax rate for reinvested profits
The tax on profits re-invested in projects approved by the Malta Enterprise Corporation is reduced by 19.25%.
Research and development expenditure
In Malta all research and development expenditure is for tax purposes deducted at 120%
Tax Treaties
Malta has concluded tax treaties with a number of countries (mainly European and including Canada and Australia) which treaties enhance the incentives provided by Maltese domestic legislation. Most of these treaties ensure that profits generated in Malta are either exempt from tax in the country of residence of the investor, or that such a country will provide a tax credit for the Malta tax spared as a consequence of the incentives Malta provides.
Other non-tax incentives applicable to all qualifying companies
SECTION C
Provision of immovable property
The Corporation also provides industrial buildings at competitive rates of rent.
Soft loans
Companies may benefit from loans up to 75% of the qualifying expenditure.
Loan interest rate subsidies
Companies may also qualify for a subsidy on the interest rate payable on loans required to acquire additional assets.
Loan guarantees
The Malta Enterprise Corporation may guarantee loans taken by the company to finance the acquisition of such additional assets.
Exemption from import duties
Plant, machinery and equipment as well as materials, accessories and components to be used for processing may be imported duty free.
Incentives for job creation
The creation of a new job may entitle a company to write off a percentage of the wage costs of the said new job, as a further tax deduction.
Training assistance
Qualifying companies may benefit from substantial training assistance. Depending upon whether a company is classified as a "large", or a "small or medium" enterprise, such assistance may vary from 35% to 80% of costs involved.
Work Permits
Indefinite work permits are granted to shareholders (or their nominees) holding more than 40% of the equity. Definite work permits for specialists are granted according to company requirements.
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