L.S. 463.10 Regolamenti dwar Għajnuna għall-Investiment (Lulju 2014)

(1)The title of these regulations is the Investment Aid (July 2014) Regulations. Citation and commencement.

(2)These regulations shall apply in respect of qualifying activities for an initial investment or an initial investment in favour of new economic activity incurred on the 1st July, 2014 or after this date. 2. In these regulations, unless the context otherwise requires: "the Act" means the Malta Enterprise Act; Interpretation. Amended by: L.N.98 of 2018. Cap. 463. "company" shall have the same meaning as "undertaking"; "the Corporation" means the Malta Enterprise Corporation established under the Act; "Guidelines" means such guidelines as may be published by the Corporation from time to time in terms of the Act; "hotel" means a hotel as defined and licensed to operate as such in terms of the Malta Travel and Tourism Services Act and includes a resort hotel and an apartment hotel; "initial investment" means: (

1. a)an investment in tangible or intangible assets related to the setting-up of a new establishment, the extension of the capacity of an existing establishment, the diversification of the output of an establishment into products not previously produced in the establishment or a fundamental change in the overall production process of an existing establishment; or (
2. b)an 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 and excludes sole acquisition of the shares of an undertaking; "initial investment in favour of a new economic activity" means: (
3. a)an investment in tangible or intangible assets related to the setting up of a new establishment, or to the diversification of the activity of an establishment, under the condition that the new activity is not the same or a similar activity to the activity previously performed in the establishment; or (
4. b)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 Cap. 409. 1 2 [ S.L.463.10 INVESTMENT AID (JULY 2014) the seller, under the condition that the new activity to be performed using the acquired assets is not the same or a similar activity to the activity performed in the establishment prior to the acquisition; "intangible assets" means assets that do not have a physical or financial embodiment, such as patents, licences, know-how or other intellectual property: Provided that: (
5. a)they must be used exclusively in the establishment receiving the aid; (
6. b)they must be amortisable; (
7. c)they must be purchased under market conditions from third parties unrelated to the buyer; and (
8. d)they must be included in the assets of the undertaking receiving the aid and must remain associated with the project for which the aid is granted for at least five years or three years in the case of small, medium-sized and micro-sized undertakings; "large undertaking", "medium-sized undertaking", "small undertaking" and "micro undertaking" shall have the meaning attributed to them by Annex I of 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; "large investment project" means an initial investment with eligible costs exceeding fifty million Euro (€50,000,000) calculated at prices and exchange rates on the date of granting the aid; "start of works" means the earlier of either the start of construction works relating to the investment, or the first legally binding commitment to order equipment or any other commitment that makes the investment irreversible: Provided that buying land and preparatory works such as obtaining permits and conducting feasibility studies shall not be considered as start of works: Provided further that for take-overs, "start of works" means the moment of acquiring the assets directly linked to the acquired establishment; "tangible assets" means assets consisting of land, buildings and plant, machinery and equipment; "undertaking" means: Cap. 386. Cap. 386. (
9. a)a partnership constituted under the Companies Act, being a partnership en nom collectif, en nom commandite, or a limited liability company; (
10. 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 INVESTMENT AID (JULY 2014) [ S.L.463.10 (
11. c)a co-operative society duly registered as such under the Co-operative Societies Act. Cap. 442. 3. 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 the qualifying activities as specified in the relevant Guidelines. Qualifying activities. Amended by: L.N. 98 of

1. Cap.
3. An undertaking shall not qualify for any of the benefits provided by these regulations if it is engaged in a disqualifying activity as specified in the relevant Guidelines. Disqualifying activities. Amended by: L.N. 98 of
4. 5.

(1)To be considered as qualifying expenditure the assets acquired shall be new, except in the case of micro, small and medium-sized undertakings and in the acquisition of an establishment. Additional rules.

(2)Costs related to the lease of tangible assets may be taken into account under the following conditions: (

1. a)for land and buildings, the lease must continue for at least five years after the expected date of completion of the investment project for large undertakings or three years in the case of micro, small and mediumsized undertakings; (
2. b)for plant and machinery, the lease must take out the form of financial leasing and must contain an obligation for the undertaking to purchase the asset upon expiry of the term of the lease.

(3)In the case of the assets of an establishment in an initial investment or in an initial investment in favour of a new economic activity, only the costs of buying the assets from third parties unrelated to the buyer shall be taken into consideration. The transaction shall take place under market conditions. If the aid has already been granted for the acquisition of assets prior to the purchase, the costs of those assets shall be deducted from the eligible costs related to the acquisition of an establishment: Provided that where a member of the family of the original owner, or an employee, takes over a small undertaking, the condition that the assets be bought from third parties unrelated to the buyer shall be waived. The acquisition of shares does not constitute initial investment.

(4)The investment shall be maintained in Malta for at least five years, or at least three years in the case of micro, small and medium-sized undertakings, after completion of the investment: Provided that plant or equipment that has become outdated or broken within this period may be replaced as long as the economic activity is retained in Malta for the relevant minimum period.

(5)In the case of aid granted for a fundamental change in the production process, the eligible costs shall exceed the depreciation value of the assets linked to the activity to be modernised in the 3 4 [ S.L.463.10 INVESTMENT AID (JULY 2014) course of the preceding three fiscal years.

(6)In the case of aid granted for a diversification of an existing establishment, the eligible costs shall exceed by at least two hundred per cent (200%) the book value of the assets that are reused, as registered in the fiscal year preceding the start of works.

(7)An undertaking wishing to avail itself from the benefits of these regulations must provide a financial contribution of at least twenty-five per cent (25%) either through its own resources or by external financing, in a form which is free from any public support. Form of assistance. 6.

(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 initial investment or an initial investment in favour of new economic activity be calculated either (

1. a)as a percentage of the qualifying expenditure in tangible or intangible assets incurred by such undertaking in the year preceding the year of assessment in question; or (
2. b)as a percentage of wage costs for jobs directly created by the initial investment or for an initial investment in favour of a new economic activity in accordance with the provisions of regulation 8.

(2)In the case of an investment project that may make a substantial contribution to the economic development of Malta, the Corporation may approve a cash grant instead of the investment tax credit referred to in sub-regulation

(1)as may be prescribed in the Guidelines: Provided that any such cash grant may only be awarded if an official application form is submitted and approved by the Corporation prior to the start of works.

(3)(

1. a)A micro, small and medium-sized undertaking which qualifies for the benefit provided by this regulation shall be entitled to an investment tax credit with respect to an initial investment. (
2. b)A large undertaking which qualifies for the benefit provided by this regulation shall be entitled to an investment tax credit with respect to an initial investment in favour of new economic activity. Aid intensities. 7.

(1)Where the start of works of an initial investment or for an initial investment in favour of a new economic activity falls on the 1st July 2014 and before the 31st December 2017, the total amount of investment tax credits that may be granted in terms of this regulation for a specific investment project shall not exceed: (

1. a)thirty-five per cent of the qualifying expenditure in the case of an undertaking which qualifies as a micro or small undertaking; INVESTMENT AID (JULY 2014) [ S.L.463.10 (
2. b)twenty-five per cent of the qualifying expenditure in the case of an undertaking which qualifies as a medium-sized undertaking; (
3. c)fifteen per cent of the qualifying expenditure in the case of an undertaking which qualifies as a large undertaking; (
4. d)fifteen per cent of the qualifying expenditure in the case of a licensed hotel.

(2)Where the start of works of an initial investment or for an initial investment in favour of a new economic activity falls on the 1st January 2018 and before the 31st December 2020, the total amount of investment tax credits that may be granted in terms of this regulation for a specific investment project shall not exceed: (

1. a)thirty per cent of the qualifying expenditure in the case of an undertaking which qualifies as a micro or small undertaking; (
2. b)twenty per cent of the qualifying expenditure in the case of an undertaking which qualifies as a mediumsized undertaking; (
3. c)ten per cent of the qualifying expenditure in the case of an undertaking which qualifies as a large undertaking; (
4. d)fifteen per cent of the qualifying expenditure in the case of a licensed hotel qualifying as micro, small and medium-sized undertakings.

(3)The costs of intangible assets for large undertakings are eligible only up to a limit of fifty per cent (50%) of the total eligible investment costs for the initial investment.

(4)The maximum aid amount for a large investment project shall be calculated according to the following formula: Maximum aid amount = R x (A + 0,50 x B + 0 x C), where R is the maximum aid intensity applicable for a large undertaking carrying out an initial investment in favour of new economic activity, A is the initial fifty million Euro of eligible costs, B is the part of eligible costs between fifty million Euro and one hundred million Euro and C is the part of eligible costs above one hundred million Euro. 8. 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 derived from its trade or business for that year of assessment the amount of 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: Investment tax credit. 5 6 [ S.L.463.10 INVESTMENT AID (JULY 2014) 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. Investment tax credits calculated for jobs directly created for an initial investment or an initial investment in favour of new economic activity. 9.

(1)The amount of investment tax credits based on job creation which an undertaking may claim in a year of assessment in terms of regulation 6

(1)(b) shall be based on the wage cost incurred by the undertaking in the accounting period ending in the year preceding that year of assessment.

(2)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 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 micro, 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. INVESTMENT AID (JULY 2014) [ S.L.463.10 10.

(1)Where an undertaking has benefited from the provisions of regulations 6 and 7, 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 regulations 6 and 7; and that tax which has so been relieved shall not be available for refund for any purpose of the Income Tax Act.

(2)The chargeable income which is deemed to have been relieved from tax in accordance with sub-regulation

(1)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. 7 Distribution and dividends. Cap. 123. Cap. 123.

(3)Where a dividend referred to in sub-regulation

(1)is distributed to a member which is also a company (in this subregulation 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 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. 11. 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. Tax returns. 12.

(1)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. Tax credits under Business Promotion Act and Investment Aid Regulations and the Investment Aid Regulations. Cap. 325.

(2)Where for a year of assessment, an undertaking qualifies for a tax credit under the Investment Aid Regulations, and also under the provisions of these regulations, it shall avail itself of the tax credit due under the Investment Aid Regulations before any setoff is made in respect of the tax credit due under these regulations. S.L. 463.02