26 February 2021
The Investment Aid Scheme aims to facilitate initial investments by encouraging the setting up of certain new establishments as well as the expansion and development of certain existing businesses. This measure provides aid to undertakings engaged in qualifying activities in respect of qualifying expenditure incurred on an initial investment project (as defined).
The aid awarded under the Investment Aid Scheme is in the form of tax credits, or cash grants subject to specific criteria, that are calculated as a percentage of qualifying expenditure, depending on the size of the qualifying undertaking as set out in the following table:
|Size of the undertaking||Aid Intensity (%)|
10% - Large
In the case of large undertakings, investment aid is permissible only in respect of ‘initial investments in favour of a new economic activity or activities’ as long as such activity is not the same or a similar activity to the activity previously performed by the undertaking. This essentially means that large undertakings can only qualify for investment aid in respect of an activity falling under a different class of the NACE statistical classification of economic activities.
Some highlights on some of the changes to the Investment Aid Scheme resulting from the new guidelines are set out below.
The new guidelines have widened the scope of eligible activities in certain economic sectors, while easing some conditions previously applicable in other sectors.
More specifically, some of the changes include:
Eligible undertakings operating in call centre activities are no longer required to have at least 20 full time equivalent employees in order to qualify for investment aid.
Eligible activities relating to the production of feature films, television films, advertisements, documentaries and similar audio-visual productions now also include:
the operation and provision of immovable property (such as sound stages and studios) specifically designed and equipped for the production of audio and audio visual products;
the provision for lease and rental of equipment, services and machinery for the production of audio and audio visual products;
activities for the production of audio recording in specifically designed structures.
This activity has been broadened to include widely accepted qualifications and certifications considered industry standards in the respective sector. New investments are now no longer required to be implemented within a thirty-six month period or to comprise a minimum spend of €1 million.
The provision of healthcare services has been widened to include the operation of an immovable structure which provides human inpatient and/or day care services (including hospitals, homes for elderly persons and day care clinics). Furthermore, certain minimum employment and expenditure thresholds, and other conditions, previously applicable for projects in prescribed circumstances have been removed.
Logistics services now qualify for this scheme to the extent that such services include the operation of a logistics facility of at least 2000sqm. There are no longer any conditions attributed to the minimum amount of total investment and the period within which the project should be implemented for eligibility purposes.
Eligibility of knowledge intensive services is no longer limited to entities undertaking new investment projects with a total investment of at least €1 million and the employment, in Malta, of at least 30 Full Time Equivalents.
These activities have been broadened to include the operation of temporary or permanent facilities for trade shows, concerts, festivals, exhibitions and film projections. Eligibility for investment aid is no longer tied to a minimum spend of €1 million on a new investment project.
Activities related to electronic and mobile platforms that enable clients to conduct commerce, financial transactions and electronic payments with third parties are not listed as qualifying activities under the new guidelines.
The recently-issued Investment Aid Guidelines have also contributed to other positive amendments including:
The previous set of Guidelines listed a number of activities that were considered as disqualifying for investment aid purposes, including (i) sale by retail; (ii) catering and (iii) gambling. The Investment Aid 2021 Guidelines have removed reference to such disqualifying activities, focusing on the initial investment project that an undertaking will be undertaking and how this is linked to the qualifying activity of the entity.
Undertakings that were considered to be ‘undertakings in difficulty’ (as defined) were not eligible for investment aid under the preceding Investment Aid Guidelines. However, the definition of an undertaking in difficulty in the new Guidelines has been relaxed in such a way that an undertaking in difficulty may still be eligible for Investment Aid if it was not in difficulty on 31 December 2019 but became an undertaking in difficulty during the period 1 January 2020 to 30 June 2021.
The eligible costs on qualifying tangible assets has been widened to include costs relating to land and other eligible preparatory works made for the purpose of the investment project, if these are incurred not earlier than 24 months preceding the start of works date. Very broadly, the start of works date (which is defined in the Guidelines) refers to the date on which investment project became irreversible;
Eligible costs related to the construction of immovable property can now also include the construction of showrooms, retail outlets, restaurants, cafeterias and similar permanent facilities directly serving the general public to the extent that such investments are an integrated amenity of a hotel investment project or part of permanent facilities used for cultural events, trade shows, concerts, festivals, exhibitions or sporting activities and film projection. Such costs are however capped at 10% of the value of the approved investment project.
These Guidelines clarify that the qualifying economic activity upon which the aid has been approved and granted, should be retained in Malta for a minimum period of at least 5 years (or 3 years in the case where the beneficiary is an SME) after completion of the investment project.
The application process under these Guidelines is the same as that applicable under preceding investment aid schemes. Very broadly, this includes the submission of an application form giving details on the investment project to be undertaken and the expenditure to be incurred. Upon approval, the Corporation will issue a letter of intent to the undertaking following which the undertaking is required to submit periodic claim forms reporting the actual capital expenditure incurred on the project. Once such claim forms are duly processed, the Corporation will issue an incentive entitlement certificate confirming the amount of tax credits awarded to the undertaking.
The system allows the possibility for beneficiaries to make submissions to the Corporation in respect of required changes to the implementation of their approved investment projects should the need arise.
Although this Scheme shall be applicable from 1 January 2021 until 31 December 2021, initial investment projects commencing between 1 January 2022 and 31 December 2023 (or later if the start of works are delayed due to factors beyond the beneficiary’s control) may still qualify for aid. In any case, application forms should be submitted to the Corporation by not later than 31 October 2021.
For more information regarding the Investment Aid 2021 Guidelines and other incentive schemes, visit our Tax Incentives landing page.
Head of Tax, PwC Malta
Tel: +356 2564 6791
Tax Partner, PwC Malta
Tel: +356 2564 6726
Senior Manager, Tax, PwC Malta
Tel: +356 2564 6739
Tax, PwC Malta
Tel: +356 2564 6789
Tax, PwC Malta
Tel: +356 2564 2526