Exploring Malta Enterprise’s Fiscal Incentives

24 February 2023

Over the past years, Malta has established itself as an attractive hub for businesses looking to establish operations in a supportive and prosperous environment. The country boasts a stable economy, granting businesses access to the lucrative European Union market, as well as a highly regulated and reliable banking system. Its favourable tax regime and strong government support further enhance Malta’s appeal to entrepreneurs and investors.

Malta Enterprise is the country’s economic development agency tasked with attracting new foreign direct investment as well as facilitating the growth of existing operations. The agency offers a range of incentives to encourage investment and spur business growth. This article highlights a curated selection of fiscal incentives currently offered by Malta Enterprise, providing an overview of the funding programs available to businesses and employees.

Business Development Scheme

This scheme provides crucial support to businesses during their growth and expansion phases, covering a range of activities, from the establishment of an operational base in Malta to expansion projects, consolidation of activities, and other initiatives that contribute to the regional development of Malta. The Business Development scheme provides aid in the form of tax credits or a cash grant of up to €200,000. This aid supports various costs, including relocation costs of key personnel and tangible assets, payroll costs, lease and rental of real estate, advisory and support services, acquisition of rights, licenses and certifications, procurement of tangible assets and services and materials required for the construction and development of manufacturing facilities. This scheme is available to eligible businesses until 31st December 2023, making it a timely opportunity for those looking to grow and succeed in Malta.

Invest – Support for Initial Investment Projects

The process of obtaining initial funding when starting a business can be quite challenging. In this regard, Malta Enterprise has launched the ‘Support for Initial Investment Projects’ scheme providing initial investment support to eligible enterprises engaged in an array of activities, including, among others, manufacturing, pharmaceuticals, R&D, industrial services, computer programming and audio-visual productions. Such support which is aimed at facilitating access to funding and accelerating the return on investment may be granted through loan guarantees, interest rate subsidies, cash grants and tax credits. To take advantage of this scheme, eligible investment projects must commence on or after 1st May 2022 and must be completed by 31st December 2026. Applications close on 30th September 2023.

Micro Invest

The Micro Invest scheme provides a powerful incentive for self-employed individuals, micro-enterprises, and SMEs with up to 50 employees and audited turnover not exceeding €10M, to invest in their businesses. By doing so, a portion of their investment will be transformed into valuable tax credits. Depending on the location, businesses in Malta could receive 45% of eligible expenses as tax credits, while businesses in Gozo could receive up to 65% (or even 80% for startups). These tax credits can then be applied towards the taxes owed from their business activities for the relevant financial year, subject to certain limits. With a maximum eligible tax credit of €50,000 (or €70,000 for businesses in Gozo, family businesses, and female-owned undertakings) over any period of three consecutive fiscal years, this scheme is a valuable opportunity for SMEs to grow and thrive.

Patent Box Deduction

The Patent Box Regime (Deduction) Rules of 2019 establish a fiscal regime aimed at enhancing Malta’s competitiveness as a jurisdiction for holding and developing intellectual property (IP) rights. Effective since 1st January 2019, the rules entitle the taxpayer to a tax deduction in terms of Article 14 (1)(p) of the Income Tax Act against taxable income derived from patents and other eligible IP rights to be calculated as follows:

The tax deduction entitlement extends to activities such as research, planning, processing, experimenting, testing, devising, designing, development, or similar activity, leading to the creation, development, improvement, or protection of the Qualifying IP. Moreover, eligible activities shall be carried out wholly or in part by the beneficiary or solely or in collaboration with third parties. Cost-sharing arrangements with third parties, whether based in Malta or not, are also eligible under the scheme’s regulations.

Research and Development

The Research and Development scheme offered by the Malta Enterprise assists businesses looking to advance their services, products, and processes. The measure also encourages cooperation between undertakings by providing additional assistance for Industrial Research and/or Experimental Development projects. The aid comes in the form of a tax credit or cash grant of up to 45% of eligible costs, depending on the size of the undertaking. Undertakings that conduct industrial research receive even more support with an additional aid of up to 25% of eligible costs, with a maximum aid intensity of 70% of eligible costs. This scheme is applicable until 31st December 2023.

Qualifying Employment in Innovation and Creativity (Personal Tax)

The success and advancement of knowledge-based industries hinge on the availability of highly skilled human resources. While education and training play a role in developing these resources, hands-on experience and practical knowledge are also crucial. To bridge the gap in the local labour market and attract top talent to Malta, this fiscal incentive temporarily eases the tax burden on employees not domiciled in Malta and holding an eligible office with a legal employment contract entitling them to a minimum income of €52,000. The incentive offers a flat tax rate of 15%, which applies for up to four consecutive years, which may be extended for up to five additional consecutive years, starting from the year immediately preceding the year of assessment in which the eligible individual first becomes liable for tax in Malta. This measure not only lures highly skilled professionals but also drives the growth of Malta’s knowledge-based industry.

Repatriation of Persons established in a field of excellence rules

The ‘Repatriation of Persons Established in a Field of Excellence Rules’ offer a flat tax rate of 15% for Maltese professionals who return to work in Malta in designated fields of excellence. This comes as part of Malta’s strategy to retain its top talent and drive growth in multiple industries including ICT, iGaming and healthcare. To be eligible for the incentive, individuals must have been ordinarily resident in Malta for at least 20 years but not for the consecutive 10 years before their return and have a qualifying employment contract with a minimum annual taxable income of €75,000 (excluding fringe benefits). The flat tax rate of 15% will apply without any possibility of claiming any relief, deduction, reduction, credit or set-off of any kind.

At AE Business Advisors, we are dedicated to supporting the growth and success of your business. Our team of experts offer comprehensive services on Malta Enterprise Incentives. We will work with you to determine the most suitable investment strategy, assess eligibility, and assist in the application process with Malta Enterprise. Furthermore, we will provide ongoing support, including annual declaration requirements and updates on newly offered government incentives, ensuring your continued success.

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Michael Spiteri Bailey

Michael Spiteri Bailey