|
|
Tax Incentives for manufacturing
companies and other companies
The
new Business Promotion Act incentives are very attractive and cover tax
incentives, soft loans, investment allowances, training assistance and
others. Another very important aspect of the BPA is that it is proactive
in the sense that it allows flexibility in activities
|
The
Incentives Package in Brief
|
|
The new Business Promotion Act (BPA) amends the Industrial
Development Act of 1988. It introduces greater scope and
flexibility to the incentives available for the promotion of
business and covers a much wider range of qualifying sectors and
activities than before.
The
BPA as amended, provides incentives for those industries
demonstrating growth and employment potential that are engaged in
manufacture, repair, improvement or maintenance activities. New
provisions also provide attractive fiscal incentives for companies
engaged in certain qualifying activities that include:
-
Electronic
and telecommunications equipment, semiconductors and other
components and products.
-
Software
development including installation, implementation &
support and training.
-
Machinery
and engineering
-
Fabricated
metal products
-
Rubber
and plastic items
-
Pharmaceuticals
and medicinals
-
Medical,
precision and optical instruments and equipment
-
Production
of audio-visual productions including films, advertising
programmes or commercials and documentaries.
-
Jewellery
and related articles
-
Repair,
improvement and maintenance of aircraft, yachts, motor boats,
turbines, gantry cranes and their equipment
-
Biotechnology
-
Waste
treatment and recycling
-
Research
and development
Companies
carrying out the activities summarised above qualify for the
incentives listed in section A, in addition to the incentives set
out under sections B where applicable and C.
|
|
Section
A: Tax Incentives for qualifying companies carrying out specific
activities.
|
|
Reduced
rates of income tax
Qualifying companies benefit from a highly favourable tax
structure. The applicable rates of tax will be as follows:
(a) 5% for the first 7 years of operation;
(b) 10% for the following 6 years
(c) 15% for the following 5 years
Investment
tax credits
Tax payable can be reduced or eliminated by investment tax credits
calculated as the higher of:
(a) 50% of the amount invested; or
(b) 50% of the first 2 year wage cost of new jobs created
(c) For SMEs the percentage for both the above is increased to 65%
(d) Unutilised investment tax credits may be carried forward to
the following year and increased by 7%.
The
interaction of the above incentives would normally result in
minimal or no taxes being paid for a number of years.
|
|
Section
B: Tax incentives applicable to manufacturing and related service
companies.
|
|
Value
Added incentive scheme
A scheme whereby companies may benefit from reduced rates of tax
according to the increase in value added of their activities. The
reduced rates of tax are as follows:
· 5% for the first 7 years;
· 10% for the following 6 years
· 15% for the following 5 years.
The
reduced rates of tax apply to part or indeed a multiple of the
increased profit when compared to a base period. For new companies
since the base period will be NIL all the profits in the initial
three years will be taxed at the reduced rate of 5%.
Investment
allowances
Tax deductions in addition to normal tax depreciation are provided
as follows:
· Plant and Machinery - 50% of the investment.
· Industrial Buildings or Structures - 20% of the investment.
Reduced
tax rate for reinvested profits
Corporate tax in Malta is normally 35%. However, the tax on
profits re-invested in projects approved by the Malta Development
Corporation is reduced by 19.25% to 15.75%.
Tax
Treaties
Malta has concluded tax treaties with a number of countries
(mainly European and including Canada and Australia) which
treaties enhance the incentives provided by Maltese domestic
legislation. Most of these treaties ensure that profits generated
in Malta are either exempt from tax in the country of residence of
the investor, or that such a country will provide a tax credit for
the Malta tax spared as a consequence of the incentives Malta
provides.
|
|
Section
C: Other non-tax incentives applicable to manufacturing and
related service companies.
|
|
Provision
of immovable property
The Corporation also provides industrial buildings at competitive
rates of rent.
Financial
Incentives
· Soft loans - Companies may benefit from loans up to 75% of the
qualifying expenditure at favourable interest rates.
· Loan interest rate subsidies - Alternatively, companies may
also qualify where applicable for a subsidy on the interest rate
payable on loans required to acquire additional assets.
Loan
guarantees
The Malta Development Corporation may guarantee loans taken by the
company from commercial banks to finance investments on qualifying
expenditure.
Incentives
for job creation in certain categories
The creation of a new job for certain categories of persons would
entitle a company to write off a percentage of the wage costs of
the said new job, as a further tax deduction.
Training
assistance
Qualifying companies may benefit from substantial training
assistance. Depending upon whether a company is classified as a
"large", or a "small or medium" enterprise,
such assistance may vary from 35% to 80% of costs involved.
Work
Permits
Indefinite work permits are granted to shareholders (or their
nominees) holding more than 40% of the equity. Definite work
permits for specialists are granted according to company
requirements
|
Should
you have any queries, please do not hesitate to contact
us.
Page last updated on
Copyright 2000: Griscti & Chetcuti, Advocates
|
Residence