S.L. 123.86 Art. 4Reinvestment tax credit.

(1) Where eligible profits derived by an eligible person have been set aside for the exclusive purpose of financing an eligible reinvestment project as shall have been approved by the

Corporation, and the eligible profits or part thereof have in fact been used for such purpose, that person shall be entitled to the benefit under sub-rule (2).

(2) The benefit available under these rules shall be in the form of a reinvestment tax credit equivalent to the tax chargeable on that part of the eligible profits that is reinvested in an approved project on the basis of the following formula: tax on total income for the base year less tax on total income after excluding that part of the eligible profits for the same base year that is being reinvested, calculated at the rates applicable for the base year.

(3) A person entitled to a reinvestment tax credit in respect of a year of assessment shall be entitled to deduct from the amount of tax which is due on qualifying profits for that year of assessment the amount of the reinvestment tax credit, calculated as a proportion of the qualifying expenditure to the eligible profits that are deemed reinvested and multiplied by the maximum tax credit entitlement derived by applying the formula in sub-rule (2): Provided that the amount of reinvestment tax credit allowable in terms of this sub-rule shall not exceed one hundred and sixteen thousand and five hundred euros (116,500) for any particular year of assessment: Provided further that the tax credit due to a company in respect of an approved reinvestment project shall not exceed, in the aggregate, fifty percent of the total cost of the project in question, in conformity with Article 4 of Commission Regulation (EC) No 70/2001 on the application of Articles 87 and 88 of the EC Treaty to State Aid to small and medium-sized enterprises (OJ L 10/33, 13.1.2001), as subsequently amended.

(4) (a) Where the reinvestment tax credit for any year of assessment exceeds the tax payable by such person for that year, the excess shall be added to the reinvestment tax credit, if any, for the following year: Provided that so much of the reinvestment tax credit which is not so utilised at the end of any year is carried forward up to the year of assessment 2015 and may not be set off against the tax due on any other source of income or to generate a refund of tax.

(b) The reinvestment tax credit shall only be deducted from the tax due on qualifying profits from the same source of the eligible profits and for the purpose of this sub-rule qualifying profits are deemed to be the last part of the total income.

(c) The reinvestment tax credit granted under these rules shall not be allowed if the eligible profits have not been reinvested, even if such profits had been set aside for reinvestment under an eligible reinvestment project.

(5) Where a person has benefited from the provisions of this rule, the reinvestment tax credit for any year of assessment shall be deemed to have relieved from tax so much of the qualifying profits for the year which when multiplied by the rate or rates of tax at which it was chargeable in that year, is equal to the reinvestment tax credit.

(6) The chargeable income which is deemed to have been relieved from tax in accordance with sub-rule (4) hereof, shall, for the purposes of the Act, be retained in the business for at least until the end of year of assessment 2014, and:

(a) in the case of an individual it shall be included in the capital account and the movements in such account shall be disclosed by way of a note to the audited financial statements;

(b) in the case of a limited liability company it shall be disclosed separately in the audited financial statements in a reserve entitled "Reinvestment Reserve".

(7) (a) In the case of a limited liability company the qualifying income which is deemed to have been relieved from tax is allocated to the Maltese Taxed Account and, upon distribution, shall be exempt from tax in the hands of the shareholders up to the ultimate shareholder.

(b) The company shall state in the dividend warrant pertaining to any such distribution that such income has been relieved by a reinvestment tax credit in accordance with these rules, and the tax which has so been relieved shall not be available for refund for any purpose of the Act.

(8) Where the benefit provided by these rules is due to a partnership, any such benefit shall be due to the partners of any such partnership:

Provided that the reinvestment tax credit is calculated separately for each partner on the share of qualifying profit attributable to such partner in the manner set out in sub-rule (4).