Business Promotion (Amendment No. 2) Regulations, 2003

L.N. 98 of 2003

BUSINESS PROMOTION ACT

(Cap. 325)

Business Promotion (Amendment No. 2) Regulations, 2003

IN exercise of the powers conferred upon him by section 59 of the

Business Promotion Act, hereinafter referred to as the “Act”, the Minister

responsible for Economic Services has made the following regulations>-

(1) The title of these regulations is the Business Promotion Citation and

(Amendment No. 2) Regulations, 2003, and shall be read and construed commencement.

as one with the Business Promotion Regulations, 2001, hereinafter L.N. 135 of 2001.

referred to as “the principal regulations”.

(2) These regulations shall be deemed to have come into

force as follows>

(a) paragraph (a) of regulation 2, paragraphs (a) and (b)(ii)

of regulation 3, regulation 4, paragraph (a) of regulation 5 and

regulation 7 shall be deemed to have come into force on the 1st

January 2003<

(b) paragraphs (b), (c) and (d) of regulation 2, paragraph

(b) of regulation 5 and regulations 6, 8 and 9 shall be deemed to

have come into force on the 1st November 2000<

(c) paragraph (e) of regulation 2 shall be deemed to have

come into force on the 1st January 2002 and shall apply with respect

to year of assessment 2003 and subsequent years of assessment<

(d) paragraph (b)(i) of regulation 3, and regulation 10 shall

be deemed to have come into force on the 1st January 2003 and

shall apply with respect to year of assessment 2004 and subsequent

years of assessment.

Regulation 2 of the principal regulations shall be amended as Amends regulation

2 of the principal

follows>

regulation.

(a) for paragraph (c) of the definition of “Corporation” there

shall be substituted the following>

“(c) for the purpose of regulations 4, 5, 6, 7, 8, 9 10,

12, subregulations (6) to (9) of regulation 14, regulations 18,

20, 28 and 30 to 39, the Malta Development Corporation<”<

(b) in paragraph (a) of the definition of “qualifying

expenditure”, the words “plant and machinery< or” shall be deleted

and substituted by “plant and machinery (including computer

sofware)< or”.

(c) after paragraph (b) of the definition of ‘qualifying

expenditure”, and immediately preceding the words “where the

investment project”, there shall be added the words>

“where the tangible and intangible assets referred to in

paragraphs (a) and (b) are used in the production of the income

derived from the activities referred to in the second proviso

to subregulation 5(12)< and”

(d) In paragraph (i) of the third proviso to the definition of

“qualifying expenditure” the words “which are used” shall be

deleted and substituted by the words “which are new or used”.

(e) In paragraph (ii) of the fourth proviso to the definition

of “qualifying expenditure”, the word “other” shall be deleted.

Regulation 3 of the principal regulations shall be amended as

(a) in the proviso to subregulation (5) thereof, for the words

“the determination shall be made on the basis of a reliable estimate

of the enterprise, which estimated is to be approved by the

Corporation”, there shall be substituted the words “the

determination of whether or not a company satisfied those

conditions shall be made by the Corporation on the basis of

information provided by the company and any other information

available to the Corporation.”.

(b) immediately after subregulation (11) thereof, there shall

be added the following new proviso>

“Provided that this subregulations shall not be applicable

for the purpose of determining whether or not an enterprise

is a small, medium-sized or micro enterprise in order to

establish>

(i) the tax benefits such enterprise will be entitled to

in year of assessment 2004 and subsequent years of

assessments<

(ii) the other benefits such enterprises will be entitled

to as from 1 January 2003.”.

In paragraph (a) of regulation 4(2) of the principal regulations, Amends regulation

4 of the principal

for the words “31 December 2002” there shall be substituted the words regulations.

“30 April 2003”.

Regulation 6 of the principal regulations shall be amended as Amends regulation

6 of the principal

follows>

regulations.

(a) in paragraph (a) of subregulation (2) thereof, for the

words “31 December 2002”, there shall be substituted the words

“30 April 2003”< and

(b) in the first proviso to subregulation (3) thereof, for the

word “multiplying” there shall be substituted the word “dividing”

and for the words “dividing the product thereof,” there shall be

substituted the words “and multiplying the result thereof”.

In subregulation 22(2) of the principal regulations, for the Amends regulation

words “by regulation 8”, there shall be substituted the words “by 22

regulations.

regulations 8 and 9” and after the words “by the Corporation”, there

shall be added the words “and the company benefiting from these

regulations shall be entitled to deduct the benefit accruing to it in an

accounting period from its chargeable income of that accounting period”.

In regulation 28(1) (b) of the principal regulations for the words Amends Regulation

28 of the principal

“31 December 2002” there shall be substituted the words “30 April regulations.

2003”.

Immediately after subregulation 29(5) of the principal Amends Regulation

29 of the principal

regulations, there shall be added the following new subregulation>

regulations.

“(6) Notwithstanding the provisions of subregulation (3)

hereof, the year of assessment referred to in article 11(5) of the

Act shall be year of assessment 2001.”.

In regulation 30 of the principal regulations, immediately after Amends Regulation

30 of the principal

subregulation (2)(b) thereof, there shall be added the following proviso> regulations.

“Provided that the provisions of this subregulation shall also

apply where any assets, liabilities, rights and obligations, are for

the purpose of privatisation, transferred to the second company by

any entity or corporation which is fully owned, directly or

indirectly, by the Government, so long as the second company is

entitled to the benefits provided by regulations 4 and 5 of these

regulations.”.

Immediately after Regulation 30 of the principal regulations,

there shall be added the following new regulations>

“31

(1) Where a qualifying company>

a) does not qualify as a small or medium-sized

enterprise<

b) (i) is entitled to any of the benefits provided

by articles 4, 5 or 5A of the Act subsequent to year of

assessment 2003 and waives, in terms of article 34(2) of

the Act its right of entitlement to benefit from the

provisions of these articles with effect from year of

assessment 2004< or

(ii) is entitled to any of the benefits provided by

articles 18 or 20 of the Malta Freeports Act in any year

of assessment subsequent to year of assessment

subsequent to year of assessment 2003 and waives, in

terms of article 27(5) of the said Act its right of

entitlement to benefit from the said provisions of article

18 of that Act with effect from year of assessment 2004

and its right of entitlement to benefit from the provisions

of article 20 of that Act with effect from 1st January

2003<

c) (i) had waived its entitlement to the benefits

provided by articles 4, 5 and 5A of the Act and as a

result of such waiver became entitled to the benefits

provided by regulations 4 and 5 of these regulations< or

(ii) pursuant to a change in legislation is no longer

entitled to benefit from the provisions of articles 4, 5 or

5A of the Act or of articles 18 or 20 of the Malta Freeports

Acts, such company shall, subject to the approval of the

Corporation, be entitled to the benefits provided by

regulations 4 and 5 of these regulations and to utilise the

tax credits provided by regulations 32 to 35, as reduced

by regulation 36, in accordance with the provisions of

regulation 37< and for the purpose of regulation 4 of these

regulations, such company shall, for the years of

assessment in respect of which it can utilise the

aforementioned tax credits in accordance with regulation

37, be deemed to be a company to which subregulation

4(2)(b) refers.

(2) A company shall be eligible to qualify for the

benefits provided by any of the regulations referred to in

subregulation (1) hereof if it has been determined that it is so

eligible by the Corporation.

(3) On being satisfied that a company is eligible to any

of the said regulations, the Corporation shall provide the said

company with a certificate setting out therein the tax credits

and their respective amounts to which the company is so

entitled.

(4) A certificate issued by the Corporation in terms of

subregulation (3) hereof shall, without prejudice to any other

proof available to the company, be conclusive evidence of

the matters stated therein.

(5) A company wishing to avail itself of the said

regulations shall apply for a determination referred to in

subregulation (2) hereof by submitting an application to the

Corporation.

(6) The provisions of article 25 of the Act shall, as far

as is applicable, apply to the incentive provided by this

regulation and to regulations 32 to 37 of these regulations.

(1) A company which has been determined by

the Corporation as having satisfied the conditions set out in

subregulation 31(1) and in this regulation shall be entitled to

an investment credit which shall be equal to a percentage of

the expenditure incurred by such company on qualifying

expenditure on or after the 1 st January 1995 up to 31 st

December 2006 and for this purpose the qualifying

expenditure incurred up to 31st December 2001 shall be

multiplied by 1.07 n (1.07 to the power of “n”) where “n” is a

number arrived at by deducting from 2002 the year in which

the expenditure was incurred>

Provided that the qualifying expenditure shall be that

which is incurred under a programme approved by the

company by the 31 st December 2002 and notified to the

Corporation by such date as it shall determine.

(2) The percentage referred to in subregulation (1)

hereof shall be>

(a) 75%, where the company was entitled to any

of the benefits provided by articles 4, 5, or 5A of the Act

or by articles 18 or 20 of the Malta Freeports Act on or

before the 31 st December 1999<

(b) 50%, where the company became entitled to

any of the benefits provided by articles 4, 5 or 5A of the

Act or by articles 18 or 20 of the Malta Freeports Act on

or after the 1 st January 2000.

(1) A company which has been determined by

Research and

development

the

Corporation

as having satisfied the conditions set out in

regulation 31(1) and in this regulation shall be entitled to a

research and development tax credit which shall be equal to a

percentage of the eligible expenditure incurred by such

company on or after 1 st January 1995 up to 31 st December

2002 and for this purpose the eligible expenditure incurred

up to 31st December 2001 shall be multiplied by 1.07 n (1.07

to the power of “n”) where “n” is a number arrived at by

deducting from 2002 the year in which the expenditure was

incurred>

Provided that the eligible expenditure shall be that which

is incurred under a programme approved by the company by

the 31 st December 2002 and notified to the Corporation by

such date as it shall determine.

(2) The percentage referred to in subregulation (1)

hereof shall be>

a) 75% where the expenditure has been incurred

on fundamental research activities<

b) 60% where the expenditure has been incurred

on industrial research activities<

c) 35% where the expenditure has been incurred

on development activities<

d) 75% where the expenditure has been incurred

on studies preparatory to industrial research activities<

e) 60% where the expenditure has been incurred

on studies preparatory to development activities<

(3) In this regulation>

a) “fundamental research activities” means an

activity or activities designed to broaden scientific and

technical knowledge not linked to industrial or

commercial objectives<

b) “industrial research activities” means an

activity or activities consisting of critical investigation

aimed at the acquisition of knowledge with the objective

that such knowledge may be useful in developing new

products, processes or services or in bringing about a

significant improvement in existing products, processes

or services<

c) “development activities” means an activity or

activities consisting of the shaping of the results of

industrial research into a plan, arrangement or design

for new, altered or improved products, processes or

services, whether they are intended to be sold or used-

including the creation of initial prototypes which could

not be us ed commercially and the conceptual

formulation and design of products, processes or services

and initial demonstration projects or pilot projects

provided that such products cannot be converted or used

for industrial applications or commercial exploitation -

but excluding the routine or periodic changes made to

products, production lines, manufacturing processes,

existing services and other operations in progress even

if such changes may represent improvements.

(4) The eligible expenditure shall consist of>

a) personnel expenses comprising all emoluments

paid for services rendered by researchers, technicians

and other employees attributable to such employees’ time

spent on the research activity and including the

employer’s share of social security contributions

attributable to such emoluments<

b) the costs of instruments, plant and machinery

and land and buildings used solely for the research

activity<

c) the cost of renting instruments, plant and

machinery and land and buildings for the period of time

used for the research activity<

d) the cost of consultancy and equivalent services

used exclusively for the research activity, including the

research, technical knowledge and patents bought from

outside sources<

e) additional overheads incurred directly as a

result of the research activity<

f) other expenses, including costs of materials,

supplies and similar products, incurred directly as a result

of the research activity.

34 (1) A company which has been determined by the

Corporation as having satisfied the conditions set out in

regulation 31(1) and in this regulation shall be entitled to a

training credit which shall be equal to a percentage of the

eligible costs incurred by such company on or after 1 st January

1995 up to 31 st December 2006 and for this purpose the

eligible costs incurred up to 31st December 2001 shall be

multiplied by 1.07 n (1.07 to the power of “n”) where “n” is a

number arrived at by deducting from 2002 the year in which

the expenditure was incurred>

Provided that the qualifying expenditure shall be that

which is incurred under a programme approved by the

company by the 31 st December 2002 and notified to the

Corporation by such date as it shall determine.

(2) The percentage referred to in subregulation (1)

hereof shall be one of the percentages set out in paragraph (b)

of subregulation 14(1) of these regulations depending on

whether the training qualifies as general training.

(3) The eligible costs referred to in subregulation (1)

hereof shall be the costs set out in subregulation 14(2) of these

regulations.

(4) For the purpose of calculating the training credit

provided by this regulation, the term “general training” shall

have the meaning assigned to it by subregulation 14(3) of

these regulations.

Environmental

35 (1) A company which has been determined by the

Corporation

as having satisfied the conditions set out in

regulation 31(1) and in this regulation shall be entitled to an

environmental credit which shall be equal to 60% of the

eligible expenditure incurred by such company on or after

1st January 1995 up to 31st December 2006 and for this

purpose the eligible expenditure incurred up to 31st December

2001 shall be multiplied by 1.07 n (1.07 to the power of “n”)

where “n” is a number arrived at by deducting from 2002 the

year in which the expenditure was incurred.

Provided that the eligible expenditure shall be that which

is incurred under a programme approved by the company by

the 31st December 2002 and notified to the Corporation by

such date as it shall determine.

(2) The eligible expenditure shall consist of the

expenditure set out in subregulation (3)>

(a) where such expenditure is incurred for the

purpose of reducing pollution and nuisances or to adopt

production methods with a view to protecting the

environment< and

(b) to the extent that the company did not incur

such expenditure for the purpose of it complying with

any applicable laws or regulations.

(3) The expenditure referred to subregulation (2) shall

be>

(a) the acquisition of land which is strictly

necessary to meet environmental objectives<

(b) the acquisition, development or construction

of buildings or structures, plant and machinery<

(c) the acquisition or development of technology

or know-how, which is

(i) a depreciable asset in accordance with

generally accepted accounting principles<

(ii) acquired on market terms from a person

in which the company has no direct or indirect

control<

(iii) included in the assets of the company

which retains ownership or use or both such

ownership and use of the intangible asset for a

period of five years or a shorter period if the

intangible assets are technically out of date before

the expiry of this five year period.

Provided that should such intangible assets be sold before

the expiration of five years from the date of their acquisition

or development completion the sales proceeds shall be

deducted from the amount of the eligible expenditure.

(1) The aggregate of the tax credits a company

may be entitled to in terms of regulations 32 to 35 of these

regulations shall be reduced by the benefits accruing to that

company, on or after the 1 st January, 2001, as a consequence

of it having availed itself of any of the benefits provided by

articles 5, 5A, 7, 16, 19, 20 or 24C of the Act or by regulations

5, 8, 9 or 14 of these regulations or by articles 18 or 20 of the

Malta Freeports Act and the benefits accruing to such

company shall be calculated as follows>

a) in the case of an income tax benefit provided

by articles 4, 5, 5A, 6 and 7 of the Act and by regulations

5 and 14 of these regulations and by article 18 of the

Malta Freeports Act, the benefit accruing shall be the

amount of income tax that would have been borne by

the company for a year of assessment in the absence of

the provisions of the above mentioned articles and

regulations, less the amount of income tax actually borne

by the company for that year of assessment and the result

of this subtraction shall, for each year of assessment, be

multiplied by 1.07 n (1.07 to the power of “n”) where “n”

is a positive number arrived at by deducting from 2002

the year of assessment in which the benefit was availed

of>

Provided that where the profits brought to charge to tax

in year of assessment 2002 or 2003 relate to an accounting

period which commenced prior to the 1 st January 2001, the

benefit accruing from the 1 st January 2001 up to the end of

that accounting period shall be determined by dividing the

result of the calculation hereinabove described for that

accounting period by the total number of days comprised in

that accounting period and multiplying the result by the

number of days in that accounting period which are in 2001and

2002 as applicable<

b) in the case of a benefit provided by article 16

of the Act, the benefit shall be arrived at by multiplying

the after-tax interest saved from the soft loan facility in

each year up to 31 st December 2002 by 1.07 n (1.07 to

the power of “n”) where “n” is a number arrived at by

deducting from 2002 the year in which the after-tax

interest saving was obtained and discounting the after-

tax interest saving to be obtained in each year after 31 st

December 2002 by the discount factor 1#1.07 n (1 divided

by 1.07 to the power of “n”) where “n” is a number

arrived at by deducting 2002 from the year in which the

after-tax interest saving is to be obtained< and the after-

tax interest saved shall be calculated by multiplying the

interest saved by the percentage (100%- x%) where x%

is the rate of income tax applicable to the company in

the absence of the provisions of the articles and

regulations referred to in paragraph (a) hereof<

c) in the case of a grant provided by articles 19,

20 and 24C of the Act and by regulation 14 of these

regulations, the benefit shall be the amount of the grant

received in each year up to 31 st December 2002, which

amount shall be multiplied by 1.07 n (1.07 to the power

of “n”) where “n” is a number arrived at by deducting

from 2002 the year in which the grant was received<

d) in the case of the duty exemption provided by

article 20 of the Malta Freeports Act, the benefit shall

be the amount of duty exempted, which amount shall be

multiplied by 1.07 n (1.07 to the power of “n”) where

“n” is a number arrived at by deducting from 2002 the

year in which the exempted duty would have been

payable<

e) In the case of a benefit provided by regulations

8 and 9 of these regulations, the benefit shall be arrived

at by multiplying the tax-free benefit obtained in each

year up to 31 st December 2002 by 1.07 n (1.07 to the

power of “n”) where “n” is a number arrived at by

deducting from 2002 the year in which the tax free benefit

was obtained and discounting the tax-free benefit to be

obtained in each year after 31 st December 2002 by the

discount factor 1#1.07 n (1 divided by 1.07 to the power

of “n”) where “n” is a number arrived at by deducting

2002 from the year in which the tax-free benefit is to be

obtained.

(2) Where the sum of the deductions set out in this

regulation exceeds the amount of the tax credits calculated in

accordance with the provisions of articles 32 to 35 of these

regulations, the amount of the tax credits shall be deemed to

be zero.

(3) A deduction in respect of benefits availed of

pursuant to articles 19 or 20 of the Act or regulation 14 of

these regulations, shall only be made if the relevant company

claims training credits pursuant to regulation 34 of these

regulations.

(1) With effect from year of assessment 2004, a

company which is entitled to any of the benefits provided by

regulations 32 to 35 as reduced by regulation 36 (hereinafter

in this regulation collectively referred to as the “tax credits”)

shall be entitled to utilise the tax credits only as described

below>

a) where the company became so entitled by

virtue of it having been entitled to the incentive provided

by article 4 of the Act, it shall be entitled to deduct from

the amount of income tax which is due on its chargeable

income, derived from its trade or business, for the

consecutive years of assessment, forming part of the

original ten consecutive years of assessment referred to

in article 4(1) of the Act, subsequent to year of

assessment 2003, the amount of the tax credits and with

effect from year of assessment 2004 and subsequent

years of assessment where the tax credits exceed such

income tax payable by such a company for any of such

years, the excess shall be increased by the percentage

referred to in the first proviso to regulation 5(12) of these

regulations and the amount so increased shall be the

amount which the company shall be entitled to deduct

from the amount of income tax which is due on its

chargeable income, derived from its trade or business,

for the remaining consecutive years of assessment above

mentioned<

b) where the company became so entitled by

virtue of it having been entitled to the incentive provided

by article 5 of the Act, it shall be entitled to deduct from

the whole or a proportion of the amount of income tax

due on its chargeable income, derived from its trade or

business for the remaining years of assessment, the

company is still entitled to benefit from the incentive

provided by the said article 5 subsequent to year of

assessment 2003, the amount of the tax credits and with

effect from year of assessment 2004 and subsequent

years of assessment where the tax credits exceed such

income tax payable by such a company for any of such

years, the excess shall be increased by the percentage

referred to in the first proviso to regulation 5(12) of these

regulations and the amount so increased shall be the

amount which the company shall be entitled to deduct

from the whole or a proportion of the amount of income

tax which is due on its chargeable income, derived from

its trade or business, for the remaining years of

assessment above mentioned< and the “whole or a

proportion of the amount of income tax due” shall be

determined by multiplying the total income tax due on

the company’s chargeable income, derived from its trade

or business, by a percentage which shall be calculated

by dividing the income tax due in any year of assessment,

as may be determined by the company, between year of

assessment 1995 and year of assessment 2003, in respect

of which the company qualified for the incentive

provided by article 5 of the Act, by the income tax that

would have been payable by the company in the absence

of that incentive>

Provided that where a company demonstrates to the

satisfaction of the Corporation that the percentage as

calculated in accordance with the above provisions is

materially different from that which the company

reasonably expects, the Corporation may approve a

different percentage based on the evidence provided by

the company<

c) where the company became so entitled by

virtue of it having been entitled to the incentive provided

by article 5A of the Act, it shall be entitled to deduct

from the whole or a proportion of the amount of income

tax due on its chargeable income, derived from its trade

or business for the remaining years of assessment, the

company is still entitled to benefit from the incentives

provided by the said article 5A subsequent to year of

assessment 2003, the amount of the tax credits and, with

effect from year of assessment 2004 and subsequent

years of assessment, where the tax credits exceed such

income tax payable by such a company for any of such

years the excess shall be increased by the percentage

referred to in the first proviso to regulation 5(12) of these

regulations and the amount so increased shall be the

amount which the company shall be entitled to deduct

from the whole or a proportion of the amount of income

tax which is due on its chargeable income, derived from

its trade or business, for the remaining years of

assessment above mentioned< and the “whole or a

proportion of the amount of income tax due” shall be

determined by multiplying the total income tax due on

the company’s chargeable income, derived from its trade

or business, by a percentage which shall be calculated

by dividing the income tax due in any year of assessment,

as may be determined by the company, between year of

assessment 1995 and year of assessment 2004, in respect

of which the company qualified for the incentive

provided by article 5A of the Act, by the income tax that

would have been payable by the company in the absence

of that incentive>

Provided that where a company demonstrates to the

satisfaction of the Corporation that the percentage as

calculated in accordance with the above provisions is

materially different from that which the company

reasonably expects, the Corporation may approve a

different percentage based on the evidence provided by

the company>

Provided further that the entitlement to the said

deduction shall be conditional on the company satisfying

the conditions set out in sub-article (1) of the said article

5A for that year of assessment<

d)

For the purposes of paragraphs (b) and (c)

hereof>

(i) a company which would have been enti-

tled to benefit for the incentives provided by the

said articles 5 and 5A in any year of assessment

between year of assessment 1995 to year of assess-

ment 2003 but did not so benefit solely due to the

fact that it did not have any chargeable income, shall

be deemed to be a company which qualified for the

incentive provided by article 5 or 5A as the case

may require and its chargeable income for that year

of assessment shall be deemed to be Lm100<

(ii) for the purpose of determining the per-

centage referred to therein, the income tax due in

any of the years of assessment between year of as-

sessment 1995 to year of assessment 2003 shall be

calculated on the basis that the base period profits

referred to article 5(2) of the Act are deemed to be

zero<

(iii) the remaining years of assessment in

respect of which the company is entitled to benefit

from the provisions of article 5 of the Act subse-

quent to year of assessment 2003 shall be consecu-

tive years of assessment commencing from year of

assessment 2004<

(iv) the remaining years of assessment in

respect of which the company is entitled to benefit

from the provisions of article 5A subsequent to year

of assessment 2003 shall, in the case of a company

to which paragraph (c)(ii) of subregulation 31(1)

applies, be computed after deducting any years of

assessment in respect of which such company

benefitted from the provisions of regulations 4 or 5

of these regulations.

e) where a company became so entitled by virtue

of it having been entitled to the incentives provided by

articles 18 or 20 of the Malta Freeports Act, it shall be

entitled to deduct from>

(i) the amount of any duty payable by it in

terms of the Duty on Documents and Transfers Act

on or after the 1 st January 2003, and which duty

would not have been payable in terms of article 20

of the Malta Freeports Act< and

(ii) the amount of income tax due on its

chargeable income, derived from its trade or busi-

ness exercised in a freeport pursuant to the provi-

sions of article 11 of the Malta Freeports Act, for

the years of assessment subsequent to year of as-

sessment 2003,

the amount of the tax credits and where the tax

credits, for year of assessment 2007 and subsequent years

of assessment, exceed such duty and/or such income

tax payable by such company in or for that year the excess

shall be increased by the percentage referred to in the

first proviso to regulation 5(12) of these regulations and

the amount so increased shall be the amount which the

company shall be entitled to deduct from the amount of

such duty and/or such income tax payable by it in

subsequent years of assessments>

Provided that a company shall be entitled to the

benefit provided by this paragraph for as long as it

remains a company licensed to operate in a freeport in

accordance with the Malta Freeports Act and provided

that it satisfies the conditions, as set out in that Act, it

would have been required to satisfy in order for it to

qualify for the exemptions provided by the said articles

18 and 20 of the Malta Freeports Act<

f) the entitlement to set-off the tax credits against

the income tax payable by the company in the manner

provided herein, shall be exercised after the application

of any other benefits available to the company in terms

of the Act and these regulations.

(2) The provisions of subregulations (14) and (15)

of regulation 5 shall apply mutatis mutandis to the tax

credits and references in those subregulations to

investment tax credits shall be construed as references

to tax credits.

(1) Where a qualifying company>

a) qualifies as a small or medium-sized enterprise<

b) satisfies the conditions set out in paragraph (b)

and (c) of subregulation (1) of regulation 31 hereof<

such company shall, subject to the approval of the

Corporation, be entitled to the benefits provided by

this regulation in lieu of the benefits provided by

regulations 4, 5 or 6 of these regulations>

Provided that a company that benefits from the

provisions of this regulations shall not be entitled to the

benefits provided by regulations 4, 5 or 6 of these regulations.

(2) A company which satisfies the conditions set

out in subregulation (1) hereof by virtue of it having been

entitled to the benefit provided by article 4 of the Act shall,

up to year of assessment 2012, be exempt from income tax

due on its chargeable income, derived from its trade or

business, for the consecutive years of assessment, forming

part of the original ten consecutive years of assessment

referred to in article 4(1) of the Act, subsequent to year of

assessment 2003, subject to it satisfying the conditions of the

said article 4 other than the condition set out in paragraph (b)

of sub-article (1) of the said article 4.

(3) A company which satisfies the conditions set

out in subregulation (1) hereof by virtue of it having been

entitled to the benefits provided by article 5 of the Act shall,

for the remaining years of assessment the company is still

entitled to benefit from the incentives provided by the said

article 5 subsequent to year of assessment 2003, be entitled,

up to year of assessment 2012, to a reduction of the whole or

a proportion of the amount of income tax due on its chargeable

income derived from its trade or business< and the “whole or

a proportion of the amount of income tax due” shall be

determined by multiplying the total income tax due on the

company’s chargeable income, derived from its trade or

business, by a percentage which shall be calculated by dividing

the income tax due in any year of assessment, as may be

determined by the company, between year of assessment 1995

and year of assessment 2003, in which the company qualified

for the incentive provided by article 5 of the Act, by the income

tax that would have been payable by the company in the

absence of that incentive>

Provided that where a company demonstrates to the

satisfaction of the Corporation that the percentage as

calculated in accordance with the above provision is materially

different from that which the company reasonably expects,

the Corporation may approve a different percentage based on

the evidence provided by the company.

(4) A company which satisfies the conditions set

out in subregulation (1) hereof by virtue of it having been

entitled to the benefits provided by article 5A of the Act shall,

for the remaining years of assessment the company is still

entitled to benefit from the incentives provided by the said

article 5A subsequent to year of assessment 2003, be entitled,

up to year of assessment 2012, to a reduction of the whole or

a proportion of the amount of income tax due on its chargeable

income derived from its trade or business< and the “whole or

a proportion of the amount of income tax due” shall be

determined by multiplying the total income tax due on the

company’s chargeable income, derived from its trade or

business, by a percentage which shall be calculated by dividing

the income tax due in any year of assessment, as may be

determined by the company, between year of assessment 1995

and year of assessment 2003, in which the company qualified

for the incentive provided by article 5A of the Act, by the

income tax that would have been payable by the company in

the absence of that incentive>

Provided that where a company demonstrates to the

satisfaction of the Corporation that the percentage as

calculated in accordance with the above provision is materially

different from that which the company reasonably expects,

the Corporation may approve a different percentage based on

the evidence provided by the company>

Provided further that the entitlement to the said reduction

shall be conditional on the company satisfying the conditions

set out in sub-article (1) of the said article 5A for that year of

assessment.

(5) For the purposes of subregulations (3) and (4)

hereof>

(a) a company which would have been entitled

to benefit for the incentives provided by the said articles

5 and 5A in any year of assessment between year of

assessment 1995 to year of assessment 2003 but did not

so benefit solely due to the fact that it did not have any

chargeable income, shall be deemed to be a company

which of the Act qualified for the incentive provided by

article 5 or 5A of the Act as the case may require and its

chargeable income for that year of assessment shall be

deemed to be Lm100.

(b) for the purposes of determining the percentage

referred to therein, the income tax due in any of the years

of assessment between year of assessment 1995 to year

of assessment 2003 shall be calculated on the basis that

the base period profits referred to article 5(2) of the Act

are deemed to be zero.

(6) A company which satisfies the conditions set

out in subregulation (1) hereof by virtue of it having been

entitled to the benefits provided by articles 18 or 20 of the

Malta Freeports Act>

(i) shall, up to the 31 st December 2011, be exempt

from the payment of duty chargeable in terms of the Duty

on Documents and Transfers Act to the same extent as it

would have been exempt from the payment of such duty

in terms of article 20 of the Malta Freeports Act< and

(ii) shall, up to year of assessment 2012, be

exempt from the payment of income tax due on its

chargeable income, derived from its trade or business

exercised in a freeport pursuant to the provisions of

article 11 of the Malta Freeports Act, for the years of

assessment subsequent to year of assessment 2003>

Provided that a company shall be entitled to the benefit

provided by this paragraph for as long as it remains a company

licensed to operate in a Freeport in accordance with the Malta

Freeports Act and provided that it satisfies the conditions, as

set out in that Act, it would have been required to satisfy in

order for it to qualify for the exemptions provided by the said

articles 18 and 20 of the Malta Freeports Act.

(7) The provisions of subregulations (2) to (6) of

regulation 31 of these regulations shall apply mutatis mutandis

to this regulation as they apply to regulation 31.

(8) Profits which are relieved from tax in

accordance with the provisions of this regulation shall, for

the purposes of the Income Tax Act, be allocated to the

Maltese Taxed Account and upon distribution shall be exempt

from income tax to the same extent as dividends referred to

in article 9 of the Act.

(9) The provisions of article 25 of the Act shall,

as far as is applicable, apply to the incentive provided by this

regulation.

(10) The benefit provided by this regulation shall

cease to apply with respect to a company which ceases to

qualify as a small or medium sized enterprise by reason of

the fact that it was merged with another company or another

company merged with it or as a consequence of the acquisition

by it of another business.

(1) The provisions of regulations 31 to 38 of these

Limitation of

applicability

regulations shall not be applicable with respect to a qualifying

regulations company for a year of assessment if, in the accounting period

ending in the year preceding that year of assessment, there

has been a material change in the trading activities of such

qualifying company.

(2) A certificate issued by the Corporation

confirming that there has been no material change in the

activities of a qualifying company shall be conclusive

evidence of that fact.

The incentives provided by articles 6 and 7 of the

Limitation of

applicability

Act and by regulations 6, 8, 9, 10, 11 and 28 shall only be

available to enterprises whose trade or business consists of

farming, fishing and aquaculture, or ship repair or the

production of steel, motor vehicles, ships or synthetic fibres,

if the assistance is regarded by the State Aid Monitoring Board

2002. as being compatible aid in accordance with the provisions of

the State Aid Monitoring Regulations.

Where costs and expenditure are eligible in whole

expenditure.

or in part under different schemes, giving entitlement to a tax

credit under these regulations, the common expenditure shall

be considered only once under the scheme which provided

that most favourable benefit.

Where in these regulations or the Act, the

Corporation is to be notified by a certain date, the Corporation

may allow a different date for notification.