Table of Contents
Malta Tax incentives: Reduced Rates of Income Tax
This incentive applies only to qualifying companies engaged in those particular activities listed under the Business Promotion Regulations. These activities include pharmaceuticals, plastics, biotechnology, electronic and electrical equipment.
Such qualifying companies benefit from the following highly favourable tax rates, as applicable and up to 31/12/2008:
(a) 5% for the first 7 years of operation;
(b) 10% for the next 6 years;
(c) 15% for the following 5 years.
This incentive will no longer be available after the 31st December 2008.
Malta Tax Incentives: Investment Tax Credits
This incentive, in terms of which the tax payable is reduced and even eliminated, may be availed of only by those qualifying companies that are entitled to benefit from reduced rates of income tax.
Investment tax credits are calculated as follows:
Either
(a) 50% of investment on capital equipment;
Or
(b) 50% of the first 2 year wage costs of new jobs created.
Note: For SMEs the applicable percentage is increased to 65%.
Tax credits unutilised during a particular year are carried forward to the following year and increased by 7%.
The combination of the above incentives would normally result in minimal or no taxes being paid for a number of years.
This incentive will continue to be available after the 31st December 2008.
Malta Tax Incentives: Value Added Incentive Scheme
This incentive is applicable to those qualifying companies that are not eligible for reduced rates of income tax, and consists of a scheme whereby such companies benefit from reduced rates of income tax according to the increase in value added derived from their activities.
The reduced rates of tax applicable are as follows:
(a) 5% for the first 7 years of operation;
(b) 10% for the next 6 years;
(c) 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 would be Nil, all the profits in the initial three years would be taxed at the reduced rate of 5%.
This incentive will no longer be available after the 31st December 2008.
Malta Tax Incentives: 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.
Malta Tax Incentives: Reduced Rates of Tax on Reinvested Profits
The tax on profits that are reinvested in projects approved by Malta Enterprise is reduced by 19.25% from 35%.
Malta Tax Incentives: Incentives for Job Creation
The creation of new jobs for particular persons, e.g. persons unemployed for more than two years, disabled persons, would entitle a company to an additional tax deduction based on the wage cost of such persons.
Malta Tax Incentives: Tax Treaties
Malta has concluded tax treaties with a number of countries (mainly European but including Canada and Australia) which 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.
