Fiscal measures promote investment in Malta
Date: 24th February, 2010
Rosanne Bonnici's article highlighting the most salient and interesting budgetary measures introduced in the Government of Malta's budget for 2010 has been published in International Tax Updates.
2010 Malta Budget
In the 2010 Budget Speech, delivered on November 9 2009, the Minister of Finance announced a number of fiscal measures aiming at incentivising investment and businesses.
These measures were included:
• the promotion of investment, research and development and environmental protection,
• the tightening of anti-abuse provisions aimed at attacking certain aggressive tax planning schemes,
• ensuring compliance
• implementing a process of consolidation of the Inland Revenue,VAT and Customs Departments.
The various fiscal incentives to be introduced further to the 2010 Budget shall supplement Malta’s existing attractive fiscal regime. The corporate tax regime, in particular, operates the full imputation system in terms of which dividends are generally not taxed further in the shareholder’s hands and a credit for the tax paid by the distributing company is available to the shareholders; in addition, distributions of profits allocated to certain tax accounts by resident companies trigger a right to refund of Malta tax paid by the company in the shareholder’s hands, with the effective Malta tax rate after refund generally ranging from 0% to 5%.
Some of the more interesting fiscal measures announced in the 2010 Budget speech and directed at the business community include:
Investment incentives
A number of new incentives will be provided to encourage foreign direct investment in Malta. On such incentive is to encourage new foreign companies setting up shared services centres in sectors such as software development, digital gaming, human resources, market research, internet publication and call centres. A further incentive is to target existing foreign investors operating locally to expand their existing operations in areas such as legal, financial, logistical, R&D, back office, sales and marketing, and prototyping services.
Research & development
These incentives include a tax exemption on royalties and similar income accruing from patents on inventions payable to the developers of such patents, subject to certain conditions being met.
Incentives to small businesses and the self-employed
The Government announced a number of fiscal measures intended to encourage small businesses and the self-employed to invest in efficiency. Included therein is a 40% tax credit (increased to 60% for certain investments) – up to a maximum €25,000 ($34,000) – to be granted to self-employed persons and small businesses employing a maximum of 10 persons and to sole traders making a qualifying investment in the next two years. In addition, micro credit of up to €25,000 ($34,000) will be granted to provide liquidity for investment.
Focus on ‘creative’ sectors of the economy
A number of measures announced in the 2010 Budget speech target the creative sectors of the economy, with said measures being intended to incentivise areas such as ICT, film, arts and design, the performing arts and others. The government will provide:
• fiscal benefits for qualifying costs spent on interactive digital media products as well as on sound recording houses, said costs to include those incurred in bringing productions over to Malta;
• fiscal benefits for qualifying costs to support eligible Maltese authors in the publication of their literary works; and
• tax credits for qualifying costs spent on special effects, computer animation, films, television programmes and production services.
Tax on property transfers
The existing possibility to opt out of the 12% final withholding tax applicable to immovable property transfers will be extended from five to seven years in relation transfers taking place in 2010 and 2011.
http://www.internationaltaxreview.com/default.asp?Page=10&PUBID=35&SID=724770&ISS=25580&LS=EMS369499
