Malta Enterprise Corporation have recently issued the Investment Aid Guidelines for 2021, applicable from January 1, 2021 and shall remain in force until December 31, 2021.
This measure – which is applicable to SMEs and large enterprises – encourages the setting up of new establishments as well as the expansion and development of existing businesses.
The aid awarded may take the form of a cash grant which is awarded only to eligible projects for which an application is submitted and approved before works start. It could also take the form of a tax credit which is awarded to two types of projects – either those starting before 1 January 2021 or kicking off before obtaining approval or those starting after December 31, 2021 but not later than December 31, 2023 or later if the delay is justified. Such projects need to be approved by December 31, 2021.
With respect to SMEs, the initial investment in tangible and intangible assets should result in:
a. The setting-up of a new establishment or the extension of an existing one
b. A fundamental change in the overall production process of the existing establishment
c. A diversification of the output of an establishment into new products sectors, or
d. The acquisition of assets belonging to an establishment that has closed or would have closed had it not been purchased, and is bought by an investor unrelated to the seller.
With respect to large enterprises, the initial investment in favour of a new economic activity or activities should have either of two characteristics. It could be tangible and intangible assets related to the setting up of a new establishment or to the diversification of the activity of an establishment on condition that the new activity is not the same or similar to the existing one. Alternatively, the acquisition of the assets belongs to an establishment that has closed or would have closed had it not been purchased and bought by an investor unrelated to the seller.
The aid itself is then awarded as a percentage of the qualifying expenditure as follows:
a. 30 per cent of the qualifying expenditure for small enterprises;
b. 20 per cent of the qualifying expenditure for medium enterprises;
c. 15 per cent for those small and medium enterprises in the development of hotels, guest houses and their amenities as licensed by the MTA; and
d. 10 per cent of the qualifying expenditure for large enterprises.
In order to benefit from this scheme, a separate application for each project has to be submitted. Once approved, tax credits can only be utilised by the enterprise for as long as the activity supported is being carried out.
Malta Enterprise Corporation also administers the Micro Invest Scheme, applicable to self-employed and micro enterprises. For costs incurred in 2020 the primary deadline for self-employed individuals is March 24, 2021, whilst the primary deadline for companies is the May 26, 2021. Applications can still be submitted after the primary deadline, but not later than December 15, 2021.
The maximum aid is set at €70,000 for those operating in Gozo, registered as family businesses, and being more than 50 per cent owned by females. The maximum aid for the other enterprises/self-employed is set at €50,000.
The approved tax credit is equivalent to 45 per cent of the following eligible costs:
a. Increase in wage costs exceeding three per cent
b. Furbishing and refurbishing of the premises
c. Investment in acquiring machinery, technology, apparatus and instruments, systems intended to produce alternative energy and tangible/intangible assets required for digitisation of the business operations
d. Commercial motor vehicles.
It is important to note that applicants who have applied for investment aid measures may not apply for this incentive and for any investments carried out within the same year.
Both schemes will assist businesses to innovate, expand and develop their operations. The money saved in taxes can be re-invested in the company, giving a greater opportunity for growth.
Kristine Attard is director, Tax & Immigration at KSi Malta.