RESEARCH AND DEVELOPMENT REGULATIONS

RESEARCH AND DEVELOPMENT

SUBSIDIARY LEGISLATION 463.35

RESEARCH AND DEVELOPMENT REGULATIONS

1st March, 2020

LEGAL NOTICE 345 of 2020, as amended by Legal Notice 433 of

2020.

The title of these regulations is the Research and

Development Regulations.

In these regulations, unless the context otherwise

requires: -

"the Act" means the Malta Enterprise Act;

"aid intensity" means the gross aid amount expressed as a

percentage of the eligible costs, before any deduction of tax or other

charge;

"the Corporation" means Malta Enterprise established under the

Act;

"eligible costs" means that expenditure that may qualify for

assistance in terms of these regulations and as shall be further

established in the Guidelines;

"Research and Development Project" means the carrying out of

an activity having a specific objective of developing or improving

services, products or processes through experimental development

and/or industrial research;

"Small and Medium Sized Enterprises" "Large Enterprises",

"Experimental Development", "Industrial Research", "Effective

Collaboration" and "Research and knowledge dissemination

organisation" shall have the same meanings as assigned to them by

Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring

certain categories of aid compatible with the internal market in

application of Articles 107 and 108 of the Treaty;

"the Guidelines" means such guidelines as may be published by

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

"undertaking" shall have the same meaning as assigned to it in

the Act.

Where the Corporation is satisfied that an undertaking

requires assistance to carry out a Research and Development Project,

the Corporation may assist such an undertaking by means of a tax

credit or a cash grant calculated as a percentage of the eligible costs in

accordance with the terms and conditions set out in the Guidelines

RESEARCH AND DEVELOPMENT

Provided that cash grants may only be approved prior to

the commencement of the project.

Assistance being provided in terms of these regulations

shall not exceed the below aid intensities

(a)

forty-five per cent (45%) of the eligible costs in

the case of an undertaking which qualifies as a small

undertaking;

(b)

thirty-five per cent (35%) of the eligible costs in

the case of an undertaking which qualifies as a medium

undertaking;

(c)

twenty-five per cent (25%) of the eligible costs in

the case of an undertaking which qualifies as a large

undertaking.

(1)

The Corporation may provide additional assistance

of up to twenty-five per cent (25%) of eligible costs if the undertaking

carries out an industrial research project.

(2)

A project may receive additional assistance of not more

than fifteen per cent (15%) of eligible costs of up to a maximum aid

intensity of eighty per cent (80%) of eligible costs, if one of the

following conditions is fulfilled

(a)

the project involves effective collaboration as

outlined in the Guidelines;

(b)

the results of the project are widely disseminated

through conferences, publications, open access

repositories, or free or open source software within

one (1) year of completion of the project and such

intention is declared at application stage..

(1)

An undertaking benefiting from tax credits in

terms of these regulations and the respective Guidelines shall be

entitled to deduct from the amount of income tax which is due on its

chargeable income derived from its trade or business in the years of

assessment following the award of the benefit an amount equivalent to

the Tax credit awarded.

(2)

An undertaking that in any year of assessment does not

utilise any tax credit awarded or deducts a value from the amount of

income tax which is due on its chargeable income derived from its trade

or business that is less than the tax credit awarded shall carry forward

the unutilised tax credit for the following years of assessment and so on

for subsequent years.

(3)

Tax credits awarded in terms of these regulations and the

RESEARCH AND DEVELOPMENT

respective Guidelines shall not give rise to a right to a refund of tax.

(4)

Where an undertaking has benefited from the provisions

of this regulation, the 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 tax credit; and where the undertaking is a company and

such undertaking or any subsequent company 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 a tax

credit in accordance with this regulation.

(5)

(a)

In the case of an undertaking which is a company,

the chargeable income which is deemed to have been relieved from tax

in accordance with sub-regulation (4) shall, for the purposes of the

Income Tax Act, be allocated to the respective tax accounts of the

company in question in accordance with the Tax Accounts (Income

Tax) Rules 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 paragraph (a) 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.

(6)

In case of a company, no tax credit shall be due to an

undertaking under this regulation unless it is claimed in the

appropriate section of a tax return submitted by electronic means by

not later that the relative tax return date.

The provisions of Research and Development Activities

Regulations shall remain applicable for assistance awarded by the

Corporation prior to the coming into force of these regulations.

No aid will be granted under these regulations by the

Corporation after 31 st December, 2023.