The Minister for the Economy, Investment and Small Businesses of Malta, after consultation with the Malta Enterprise Corporation and with the concurrence of the Minister for Finance and Financial Services of Malta on August 25th, 2020 has adopted:
It is useful to note that COVID-19 Regulations came into force on the 1
st April 2020 and R&D Regulations – on the 1
st March 2020.
The main authorized body for the implementation of both regulations is Maltese Enterprise Corporation (MEC), the national development agency established under the Malta Enterprise Act and responsible for promoting and facilitating of principal economic policies and objectives in the Maltese Islands.
COVID-19 Regulations
The Regulations were designed to provide measures to support the economy in the current COVID-19 outbreak. It sets up provisions of assistance to support eligible undertakings and utilisation of tax credits in any form allowed by the Malta Enterprise Act and in accordance with the Temporary Framework, as amended and as may be subsequently amended as published by the European Commission.
MEC may provide assistance (tax credits) in respect of following conditions:
(1) An undertaking benefiting from tax credits in terms of these regulations and the respective Guidelines shall be entitled to deduct from the amount of income tax which is due on its chargeable income derived from its trade or business in the years of assessment following the award of the benefit an amount equivalent to the tax credit awarded.
(2) An undertaking that in any year of assessment does not utilise any tax credit awarded or deducts a value from the amount of income tax which is due on its chargeable income derived from its trade or business that is less than the tax credit awarded shall carry forward the unutilised tax credit for the following years of assessment and so on for subsequent years.
(3) Tax credits awarded in terms of these regulations and the respective Guidelines shall not give rise to a right to a refund of tax.
It should be noted, that assistance set forth in COVID-19 Regulations extends to eligible undertaking in the meaning provided by Malta Enterprise Act that meets the parameters established in the Guidelines. Besides, COVID-19 Regulations doesn’t specify certain terms and conditions of aforementioned assistance as for example: limits of tax credits or terms of unutilized tax carrying forward. Nevertheless, MEC shall issue and publish guidelines to determine rules for the eligibility of undertakings to any benefits. As of the date of writing this article the Guidelines concerning COVID-19 Regulations was not published.
The deadline for submission of applications for assistance to the MEC is December 31
st, 2020.
R&D Regulations
R&D Regulations states that MEC may assist an undertaking to carry out a Research and Development Project. According to the regulations, “Research and Development Project” means the carrying out of an activity having a specific objective of developing or improving services, products or processes through experimental development and/or industrial research.
The MEC may assist by means of a tax credit or a cash grant (may only be approved prior to the commencement of the project) calculated as a percentage of the eligible costs and do not exceed the below aid intensities:
(a) forty-five per cent (45%) of the eligible costs in the case of an undertaking which qualifies as a small undertaking;
(b) thirty-five per cent (35%) of the eligible costs in the case of an undertaking which qualifies as a medium undertaking;
(c) twenty-five per cent (25%) of the eligible costs in the case of an undertaking which qualifies as a large undertaking.
The Corporation may provide additional assistance of up to fifteen per cent (15%) of eligible costs if the undertaking carries out a collaborative R&D Project involving effective collaboration with at least an independent undertakings and/or a Research and Knowledge-Dissemination Organizations (such as universities or research institutes, technology transfer agencies, innovation intermediaries, research-oriented physical or virtual collaborative entities) within the terms established in the Guidelines (
Incentive Guidelines R&D 2020).
In addition, R&D Regulations provides for a number of conditions related to tax credits. These prescriptions completely repeat the conditions previously outlined concerning COVID-19 Regulations. It is also established that the distribution of income that has been relieved from tax as a result of the R&D tax credit, including that dividends distributed from such income by a company are exempted from income tax in the hands of the members of the company on receipt of such distribution. Where a member is also a company, the exemption carries on to the subsequent distribution to the second company's members and so on. In case of a company, no tax credit shall be due to an undertaking under this regulation unless it is claimed in the appropriate section of a tax return submitted by electronic means by not later that the relative tax return date.
The Deadline for submission of applications for assistance to carry out a R&D project to the MEC is December 31
st, 2022.
