INVESTMENT AID REGULATIONS

INVESTMENT AID

SUBSIDIARY LEGISLATION 463.02

INVESTMENT AID REGULATIONS

1st January, 2008 *

LEGAL NOTICE 68 of 2008, as amended by Legal Notices 169 of 2012

and 212 of 2015.

The title of these regulations is the Investment Aid

Regulations.

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 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

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 under

the Co-operative Societies Act.

(1) A qualifying activity in terms of these regulations 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

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

more of the following activities

(a)

(i)

the production, manufacture, improvement,

assembly, preservation, processing of goods,

*see regulation 1(2) of these Regulations as originally promulgated.

INVESTMENT AID

materials, commodities, equipment, plant,

machinery;

(ii) the rendering of industrial services analogous to

the activities referred to in subparagraph (i);

(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 and related activities as may be

prescribed in the Guidelines, but excluding

telecommunications service providers and operators of

online casinos and similar activities;

(c)

call centres activities as may be prescribed in the

Guidelines;

(d)

research, development, and innovation of products and

processes as may be prescribed in the Guidelines;

(e)

eco-innovations, waste treatment and environmental

solutions as may be prescribed in the Guidelines;

(f)

biotechnology as may be prescribed in the Guidelines;

(g)

formulation,

development,

manufacturing

and

preparation and packaging of pharmaceuticals as may

be prescribed in the Guidelines;

(h)

the development and production of audiovisual

products and, or the operation and provision of

facilities directly required for the development and

production audiovisual products as may be prescribed

in the Guidelines;

(i)

the provision of private tertiary education as further

defined in the Guidelines where the investment and

number of jobs created exceeds the minimum

parameters as may be prescribed in the Guidelines;

(j)

the provision of private health-care services as further

defined in the Guidelines where the investment and

number of jobs created exceeds the minimum

parameters as may be prescribed in the Guidelines;

(k)

the provision of logistics services that include part

transformation that adds value by an undertaking

employing not less than two hundred and fifty full-

time employees or their equivalent as may be

prescribed in the Guidelines;

(l)

activities set out in article 11 of the Malta Freeports

Act;

(m) the provision of shared regional or global management

and services as may be further defined in the

Guidelines. Provided that such undertaking

(i) is established in Malta after 1st January 2012;

(ii) exceeds the minimum value of investment and

jobs created as may be prescribed in the

INVESTMENT AID

Guidelines;

(n) the provision of knowledge intensive business services

as may be further defined in the Guidelines. Provided

that the undertaking

(i) is established in Malta after 1st January 2012;

(ii) exceeds the minimum value of investment and

jobs created as may be prescribed in the

Guidelines;

(o) the operation or management of a hotel or group of

hotels as may be be prescribed in the Guidelines

Provided that notwithstanding the provisions of any other

regulation, investment aid

(a) shall only be granted with regards to investment

projects approved by the Corporation after 1st January

2012;

(b) shall not exceed 15% of the qualifying expenditure

incurred on an approved investment project

Provided also 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

(i) to 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) to a person, other than an individual, who uses

those goods or services for the purpose of an

undertaking carried on by such person; or

(iii) to a person through e-commerce activities

resulting in online transactions effected by

means of a secure payment system; or

(iv) such undertaking is a small sized undertaking

that sells solely goods manufactured by the same

undertaking;

(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 paragraph (a)

of this regulation;

(ii) the assembly of any goods where the

Corporation determines that

INVESTMENT AID

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 manu-

factured 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 paragraphs

(b) to (j) of this regulation;

(c) the trade or business includes the preparation or

production of "food in the course of catering" which is

directly supplied to the final consumer.

(1) An undertaking carrying on or intending to carry out 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 sub-regulations (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

INVESTMENT AID

Provided further that in the case of large

investment projects, the investment tax credit to

be granted in terms of this sub-regulation shall

never exceed

1. fifteen per cent (15%) of the qualifying

expenditure for that amount in excess of 50

million euro; and

2. 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

sub-regulation (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

sub-regulation (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

INVESTMENT AID

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.

(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

INVESTMENT AID

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.

(Deleted by Legal Notice 169 of 2012).

(Deleted by Legal Notice 169 of 2012).

Applications for assistance under these regulations shall

reach the Corporation by not later than the 30 th June, 2014.