Investment Aid Regulations, 2008

L.N. 68 of 2008

MALTA ENTERPRISE ACT

(CAP. 463)

Investment Aid Regulations, 2008

IN exercise of the powers conferred upon him by article 5 of

the Malta Enterprise Act, the Prime Minister and Minister of Finance

and the Minister for Investment, Industry and Information

Technology have made the following regulations

(1) The title of these regulations is the Investment Aid

Regulations, 2008.

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

force with effect from 1 st January 2008.

In these regulations, unless the context otherwise requires

“the Act” means the Malta Enterprise Act;

“the Corporation” means the Malta Enterprise Corporation

established under the Malta Enterprise Act;

“disadvantaged or disabled person” has the meaning

assigned to it by the Guidelines;

“Guidelines” means such guidelines as may be published

by the Corporation from time to time in terms of the Act;

“large undertaking”, “medium-sized undertaking”, “small

undertaking” and “micro undertaking” shall have the meaning

attributed to them by Commission Recommendation 2003/361/

EC;

“qualifying expenditure” means that expenditure that may

qualify for assistance in terms of these regulations and in

accordance with the Guidelines;

“undertaking” means an undertaking as defined in the Act

except for the purposes of regulations 4 and 6 where undertaking

shall mean

(a) a partnership constituted under the Companies

Act, being a partnership en nom collectif, en nom Cap. 386.

commandite or a limited liability company; or

(b) a body of persons constituted, incorporated or

registered outside Malta, and of a nature similar to the

aforesaid partnerships and registered as an oversea

company in accordance with the Companies Act; or

(c) a co-operative society duly registered as such Cap. 442.

under the Co-operative Societies Act.

(1) A qualifying activity in terms of these regulations Qualifying

activities.

shall be an economic activity consisting of a trade or business the

profits or gains from which are chargeable to tax pursuant to article

4(1)(a) of the Income Tax Act, carried on or intended to be carried Cap. 123.

out by an undertaking in Malta which consists solely of any one of

the following activities –

(a) (i) the production, manufacture, improvement,

assembly, preservation, processing of any goods, materials,

commodities, equipment, plant, machinery;

(ii) the rendering of any industrial services

analogous to the activities referred to in paragraph (i) of

this subregulation;

(iii) the repair, overhaul or maintenance of pleasure

crafts, yachts not having more than thirty berths, aircraft,

engines or equipment incorporated or used in such vessels

or aircraft;

(b) Information and Communications Technology (I.C.T.)

developmental activities, software development, Information

Technology (IT) enabled services including call centres and

Information Technology (IT) solutions as may be prescribed

in the Guidelines, but excluding telecommunications service

providers;

(c) research and development, and innovative start-ups

as may be prescribed in the Guidelines;

(d) eco-innovations,

waste

treatment

and

environmental solutions as may be prescribed in the

Guidelines;

(e) biotechnology, comprising the production or

development of intellectual property or goods or the

rendering of services resulting from, or related to, the study,

research, discovery application, modification or development

of living organisms or materials derived from them as may

be prescribed in the Guidelines;

(f) the provision of facilities directly required in the

development or production of feature films, television

programmes or commercials as may be prescribed in the

Guidelines;

(g) the provision of science and technology private

tertiary education as may be prescribed in the Guidelines;

(h) the provision of private health-care services through

the setting up of new projects carrying out an investment of

not less than 2.5 million Euro in medical equipment, excluding

land or buildings as may be prescribed in the Guidelines;

(i) the provision of logistics services that include part-

transformation that adds value by undertakings employing not

less than 250 full-time employees or their equivalent as may be

prescribed in the Guidelines;

(j) activities set out in Article 11 of the Malta Freeports

Act and carried on mainly in a freeport as defined by that Act

by an undertaking licensed under that Act

Provided that an undertaking shall not qualify for any of

the benefits provided by these regulations if –

a) the undertaking sells by retail and, for this

purpose, an undertaking shall be deemed not to sell by retail

if its sales of goods or services are made to -

(i) a person who carries on a trade and the goods

or services so sold to such person are either resold by

such person or are used by such person for the purpose

of his trade; or

(ii) a person, other than an individual, who uses

those goods or services for the purpose of an

undertaking carried on by such person;

(iii) a person through e-commerce activities

resulting in online transactions effected by means of

a secure payment system;

b) the undertaking’s trade or business includes any

one of the following activities

(i) dividing, sorting, packaging, mixing without

changing the character of the good, drying, labelling,

or other similar processes or any combination of such

processes to goods which are acquired in bulk merely

to prepare those goods for sale or distribution,

excluding goods in respect of which the said

undertaking carries on any other activity referred to

in subregulation (1)(a);

(ii)

the assembly of any goods where–

1. the final assembled good is clearly

recognisable from the individual components or

parts from which it is assembled without regard

being had to any exterior casing of the good; and

2. the components and parts from which

the good is assembled are such that the good is

nearly complete and the assembly work and the

supervision of such assembly work only require

the employment of almost exclusively unskilled

workers, such that the assembly operation is of a

spurious nature when considered in the light of

manufacturing activities;

(iii) without prejudice to any exception as may

be provided in the Guidelines, the installation,

commissioning or assembly of goods on site, where

the said goods have not been manufactured by the

undertaking which is installing, commissioning or

assembling the goods on site

Provided that the provisions of this paragraph

shall not be applicable to an undertaking which carries

on only any one or more of the activities set out in

subregulation (1)(b) to (j);

(c) the trade or business of the undertaking includes

the preparation or production of “food in the course of

catering” including -

(i)

meals or snacks including -

(1) hot and cold dishes including antipasto

and dessert;

(2) sandwiches, toast, potato chips,

sausage rolls, pizza, pastizzi, qassatat and similar

snacks;

(3) biscuits, cakes, confectionery and

similar items but excluding those sealed in a

package by the manufacturer and supplied in that

original sealed package, and those items which

individually weigh 500 grams or more;

(4) food supplied in restaurants, cafeterias,

canteens, bars and other similar establishments;

(5) food prepared or produced for parties,

functions, weddings and similar events;

(6) food prepared or produced for

consumption by persons pertaining to a particular

location or organisation, including patients in

hospitals or homes, residents of hotels or guest

houses, workers in a particular workplace and the

preparation or production of food in similar

circumstances.

(ii) milk, milkshake, tea, coffee and chocolate

supplied in liquid form, excluding milk and milkshake

supplied by the manufacturer thereof in bottles and

containers for distribution to retail outlets but

including any form of drink which is merely produced

by adding liquid to powder or substance and where

such drink is produced in order that it may be served

in a bar, restaurant, canteen, cafeteria or other

establishment or place to individuals for

consumption.

(1) An undertaking carrying on or intending to carry out Investment

credit.

a qualifying activity in terms of Regulation 3 that may contribute to

the economic development of Malta shall, subject to the terms and

conditions of the Guidelines, be entitled to an investment tax credit,

which tax credit shall, with respect to an investment project be

calculated either –

(a) as a percentage of the qualifying expenditure incurred

by such undertaking in the year preceding the year of assessment

in question; or

(b) as a percentage of wage costs for jobs directly created

by the investment project in accordance with the provisions of

subregulations (4) to (7)

Provided that the total amount of investment tax credits

that may be granted in terms of this regulation for a specific

investment project shall not exceed

(i) in the case of an undertaking which qualifies as

a small undertaking, fifty per cent of the qualifying

expenditure;

(ii) in the case of an undertaking which qualifies as

a medium undertaking, forty per cent of the qualifying

expenditure;

(iii) in the case of an undertaking which qualifies

as a large enterprise, thirty per cent of the qualifying

expenditure

Provided further that in the case of large investment

projects, the investment tax credit to be granted in terms

of this subregulation shall never exceed

(i) fifteen per cent (15%) of the qualifying

expenditure for that amount in excess of 50 million

Euro; and

(ii) ten point two per cent (10.2%) of the

qualifying expenditure for that amount in excess of

100 million Euro.

(2) In the case of an investment project that may make a

substantial contribution to the economic development of Malta, the

Corporation may convert the investment tax credit referred to in

subregulation (1) into other forms of assistance, including cash

grants.

(3) For the purposes of this regulation the terms ‘tangible

assets’ and ‘intangible assets’ shall have the meaning attributed to

them in the Guidelines.

(4) The amount of investment tax credit based on job

creation which an undertaking may claim in a year of assessment in

terms of subregulation (1)(b) shall be based on the wage cost incurred

by that undertaking in the accounting period ending in the year

preceding that year of assessment.

(5) An undertaking shall, subject to the terms and

conditions of the Guidelines, be considered to have created a job as

a result of an investment project for those individuals who are

employed by the undertaking, if the job is directly connected with

the activity to which the investment project relates and is created

within three years from the completion of the investment project

and as long as the employment of any such individual is not in

replacement of another individual and provided that such

employment is not terminated before the lapse of five years from

the date of employment in the case of large undertakings and not

before the lapse of three years from the date of employment in the

case of small and medium sized undertakings

Provided that for the purpose of determining whether jobs

have been created, individuals who are employed by the undertaking

on a part-time basis shall be deemed to be a number of full-time

employees as is produced by dividing the number of hours worked

by such part-time employees by one thousand and seven hundred

and sixty

Provided further that where the accounting period ending

in the year preceding a year of assessment is more or less than twelve

months, the number of hours worked by part-time employees shall

be divided by an amount which shall be arrived at by dividing the

amount of one thousand and seven hundred and sixty, by three

hundred and sixty-five, and then multiplying the result by the number

of days comprised in that accounting period.

(6) An undertaking which is entitled to an investment

tax credit in respect of a year of assessment 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 that year of assessment the

amount of the investment tax credit and, where the investment tax

credit, for any year of assessment, exceeds the income tax payable

by such an undertaking for that year, the excess shall be added to

the investment tax credit for the following year and deemed to be

part of that investment tax credit, or if there is no such investment

tax credit for that year, be deemed to be the investment tax credit for

that year and so on for subsequent years

Provided that so much of the investment tax credit which

is not so utilised at the end of any year and which is therefore carried

forward to be added to the investment tax credit of the following

year of assessment and deemed to be the investment tax credit for

that year, shall be increased by such rate as may be prescribed in the

Guidelines; and where any part of the investment tax credit as so

increased is again not utilised, so much of it as is not utilised shall

be further increased by the said percentage and carried forward to

the following year, and so on for subsequent years

Provided further a tax credit shall not give rise to a right to

a refund of tax.

(7) Where an undertaking has benefited from the

provisions of this regulation, the investment tax credit shall be

deemed to have relieved from tax so much of that undertaking’s

chargeable income which, when multiplied by the rates of tax at

which it was chargeable in that year, is equal to the investment tax

credit; and where the undertaking or any subsequent undertaking

distributes the income which is so deemed to have been relieved

from tax, such undertaking or undertakings shall state in the dividend

warrant pertaining to any such distribution that such income has

been relieved from tax by an investment tax credit in accordance

with this regulation; and the tax which has so been relieved shall

not be available for refund for any purpose of the Income Tax Act. Cap. 123.

(8) (a) The chargeable income which is deemed to have

been relieved from tax in accordance with sub-regulation

(7) shall, for the purposes of the Income Tax Act, be allocated

to the Final Taxed Account of the company in question and any

dividends (or part thereof) distributed from such income shall

be exempted from income tax in the hands of the members of

the company on receipt of such distribution.

(b) Where a dividend referred to in sub-regulation (1) is

distributed to a member which is also a company (in this sub

regulation is referred to as “the second company”), the said

dividend shall likewise be distributed by the second company

to its members in the form of dividends exempt from income

tax in the hands of the recipients, and where a member of the

second company is again a company, the preceding provisions

shall apply mutatis mutandis as though references to the first

company were references to the second company, and as though

references therein to the second company were references to

that member, and the principle set out in this sub-regulation

shall continue to be applied for as long as such income or part

thereof to which this regulation applies are distributed by way

of dividends.

(9) Where for a year of assessment, an undertaking

qualifies for a tax credit under the Business Promotion Act and also

under the provisions of these regulations, it shall avail itself of the

tax credit due under the Business Promotion Act before any set-off

is made in respect of the tax credit due under these regulations.

(10) No tax credit shall be due to an undertaking under

these regulations for a year of assessment unless it is claimed in the

appropriate section of a tax return submitted by electronic means by

not later than the relative tax return date.

Where an undertaking carrying out or carrying on a

qualifying activity in Gozo that may contribute to the regional

development of Gozo recruits in its employment on a full time basis

a disadvantaged or disabled person or persons, such an undertaking

may subject to its compliance with the Guidelines be provided with

a cash grant equivalent to a percentage of the wage costs incurred in

the employment of such disadvantaged or disabled workers.

(1) Where the Corporation is satisfied that an undertaking

carrying out or carrying on a qualifying activity in Gozo may

contribute to the regional development of Gozo and such an

undertaking qualifies for investment tax credits in terms of

Regulation 4, such an undertaking may, subject to its compliance

with the guidelines published by the Corporation, be awarded a cash

grant equivalent to a percentage of the wage costs incurred by the

undertaking, but in any case not exceeding the sum of Euro11,650

per new job created by the undertaking.

(2) The cash grant to be provided in terms of

subregulation (1) shall only be available to such undertakings

established in Gozo that recruit at least five or more new

employees.

(3) The cash grant to be provided in terms of

subregulation (1) shall be in lieu of equivalent tax credits granted in

terms of these regulations.

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