S.L. 325.6 Art. 38Special incentives for small and medium-sized enterprises.

(1) Where a qualifying company -

(a) qualifies as a small or medium-sized enterprise;

(b) satisfies the conditions set out in regulation 31(1)(b) or

(c), such company shall, subject to the approval of the Corporation, be entitled to the benefits provided by this regulation in lieu of the benefits provided by regulations 4, 5 or 6: Provided that a company that benefits from the provisions of this regulation shall not be entitled to the benefits provided by regulations 4, 5 or 6.

(2) A company which satisfies the conditions set out in sub-regulation (1) by virtue of it having been entitled to the benefit provided by article 4 of the Act shall, up to year of assessment 2012, be exempt from income tax due on its chargeable income, derived from its trade or business, for the consecutive years of assessment, forming part of the original ten consecutive years of assessment referred to in article 4(1) of the Act, subsequent to year of assessment 2003, subject to it satisfying the conditions of the said article 4 other than the condition set out in paragraph (b) of subarticle (1) of the said article 4.

(3) A company which satisfies the conditions set out in sub-regulation (1) by virtue of it having been entitled to the benefits provided by article 5 of the Act shall, for the remaining years of assessment the company is still entitled to benefit from the incentives provided by the said article 5 subsequent to year of assessment 2003, be entitled, up to year of assessment 2012, to a reduction of the whole or a proportion of the amount of income tax due on its chargeable income derived from its trade or business; and the "whole or a proportion of the amount of income tax due" shall be determined by multiplying the total income tax due on the company’s chargeable income, derived from its trade or business, by a percentage which shall be calculated by dividing the income tax due in any year of assessment, as may be determined by the company, between year of assessment 1995 and year of assessment 2003, in which the company qualified for the incentive provided by article 5 of the Act, by the income tax that would have been payable by the company in the absence of that incentive, and deducting the fraction so obtained from the integer one (1), and multiplying the result by 100:

Provided that where a company demonstrates to the satisfaction of the Corporation that the percentage as calculated in accordance with the above provision is materially different from that which the company reasonably expects, the Corporation may approve a different percentage based on the evidence provided by the company.

(4) A company which satisfies the conditions set out in sub-regulation (1) by virtue of it having been entitled to the benefits provided by article 5A of the Act shall, for the remaining years of assessment the company is still entitled to benefit from the incentives provided by the said article 5A subsequent to year of assessment 2003, be entitled, up to year of assessment 2012, to a reduction of the whole or a proportion of the amount of income tax due on its chargeable income derived from its trade or business; and the "whole or a proportion of the amount of income tax due" shall be determined by multiplying the total income tax due on the company’s chargeable income, derived from its trade or business, by a percentage which shall be calculated by dividing the income tax due in any year of assessment, as may be determined by the company, between year of assessment 1995 and year of assessment 2003, in which the company qualified for the incentive provided by article 5A of the Act, by the income tax that would have been payable by the company in the absence of that incentive, and deducting the fraction so obtained from the integer one (1), and multiplying the result by 100: Provided that where a company demonstrates to the satisfaction of the Corporation that the percentage as calculated in accordance with the above provision is materially different from that which the company reasonably expects, the Corporation may approve a different percentage based on the evidence provided by the company: Provided further that the entitlement to the said reduction shall be conditional on the company satisfying the conditions set out in subarticle (1) of the said article 5A for that year of assessment.

(5) For the purposes of sub-regulations (3) and (4):

(a) a company which would have been entitled to benefit for the incentives provided by the said articles 5 and 5A in any year of assessment between year of assessment 1995 to year of assessment 2003 but did not so benefit solely due to the fact that it did not have any chargeable income, shall be deemed to be a company which of the Act qualified for the incentive provided by article 5 or 5A of the Act as the case may require and its chargeable income for that year of assessment shall be deemed to be €232.94;

(b) for the purposes of determining the percentage referred to therein, the income tax due in any of the years of assessment between year of assessment 1995 to year of assessment 2003 shall be calculated on the basis that the base period profits referred to article 5(2) of the Act are deemed to be zero.

(6) A company which satisfies the conditions set out in sub-regulation (1) by virtue of it having been entitled to the benefits provided by articles 18 or 20 of the Malta Freeports Act -

(i) shall, up to the 31st December 2011, be exempt from the payment of duty chargeable in terms of the Duty on Documents and Transfers Act to the same extent as it would have been exempt from the payment of such duty in terms of article 20 of the Malta Freeports Act; and

(ii) shall, up to year of assessment 2012, be exempt from the payment of income tax due on its chargeable income, derived from its trade or business exercised in a freeport pursuant to the provisions of article 11 of the Malta Freeports

Act, for the years of assessment subsequent to year of assessment 2003: Provided that a company shall be entitled to the benefit provided by this sub-regulation for as long as it remains a company licensed to operate in a freeport in accordance with the Malta

Freeports Act and provided that it satisfies the conditions, as set out in that Act, it would have been required to satisfy in order for it to qualify for the exemptions provided by the said articles 18 and 20 of the Malta Freeports Act.

(7) The provisions of regulation 31(2) to (6) shall apply mutatis to this regulation as they apply to regulation 31. mutandis

(8) Profits which are relieved from tax in accordance with the provisions of this regulation shall, for the purposes of the Income Tax Act, be allocated to the Maltese Taxed Account and upon distribution shall be exempt from income tax to the same extent as dividends referred to in article 9 of the Act.

(9) The provisions of article 25 of the Act shall, as far as is applicable, apply to the incentive provided by this regulation.

(10) The benefit provided by this regulation shall cease to apply with respect to a company which ceases to qualify as a small or medium sized enterprise by reason of the fact that it was merged with another company or another company merged with it or as a consequence of the acquisition by it of another business.