S.L. 325.6 Art. 5Investment tax credits.

(1) A company which qualifies for the benefit provided by regulation 4 or which would have so qualified, but for the fact that the years of assessment in respect of which it may so qualify have not, as elected for by the said company, yet commenced or have elapsed, shall, in respect of year of assessment 2002 and subsequent years of assessment, be entitled to an investment tax credit which tax credit shall, with respect to an investment project approved in writing by the Corporation before its setting up, be calculated either -

(a) as a percentage of the qualifying expenditure incurred by such company in the year preceding the year of assessment in question; or

(b) in accordance with the provisions of sub-regulations

(3) to (11): Provided that the total amount of the investment tax credit that may be claimed in terms of this regulation for a given investment project shall be such that the conditions set out in regulations 12 and 18 are satisfied.

(2) The percentage referred to in sub-regulation (1)(a) shall, in the case of a company which qualifies as a small-sized enterprise, not exceed 50%, in the case of a company which qualifies as a medium sized enterprise the said percentage shall not exceed 40%, and in the case of any other company the said percentage shall not exceed 30%.

(3) A company may claim an investment tax credit by reference to the wage costs pertaining to the jobs created, in Malta, as a result of an investment project the expenditure on which constitutes qualifying expenditure.

(4) For the purposes of sub-regulation (3), the investment tax credit based on job creation shall be a percentage of the wage cost for the first twenty-four month period of the employment of an individual in respect of whom the job was created.

(5) In the case of a company which qualifies as a small-sized enterprise, the percentage referred to in sub-regulation (4) shall not exceed 50%, in the case of a company which qualifies as a medium sized enterprise the said percentage shall not exceed 40%, and in the case of any other company the said percentage shall not exceed 30%.

(6) The amount of investment tax credit based on job creation which a company may claim in a year of assessment shall be based on the wage cost incurred by that company in the accounting period ending in the year preceding that year of assessment.

(7) A company shall be considered to have created a job as a result of an investment project for those individuals who are employed by the company during the employment qualifying period as defined in sub-regulation (9), as long as the employment of any such individual is not in replacement of another individual and provided that such employment is not terminated before the lapse of five years from the date on which they were employed:

Provided that for the purpose of determining whether jobs have been created, individuals who are employed by the company on a part-time basis shall be deemed to be a number of full-time employees as is produced by dividing the number of hours worked by such part-time employees by one thousand and seven hundred and sixty: Provided further that where the accounting period ending in the year preceding a year of assessment is more or less than twelve months, the number of hours worked by part-time employees shall be divided by an amount which shall be arrived at by dividing the amount of one thousand and seven hundred and sixty by three hundred and sixty-five and then multiplying the result by the number of days comprised in that accounting period.

(8) For the purpose of determining whether an individual has been employed by a company for the required five year period referred to in sub-regulation (7), it shall be deemed that the date of commencement of employment of an individual who has been employed by that company in replacement of another individual, whose employment was terminated for whatever reason, shall be the date of commencement of employment of the individual whose employment was replaced; provided that any such individual is employed within six months of the date of termination of employment of the individual whose employment is replaced.

(9) For the purposes of this regulation, the employment qualifying period shall be the period commencing on the day which precedes the day on which the assets pertaining to the investment project are first employed by the company by one hundred and eighty-three days, up to the third anniversary of the date of completion of the investment project.

(10) A company wishing to claim an investment tax credit for a year of assessment based on job creation in accordance with sub-regulations (3) to (9) shall submit details of its investment project and of the individuals employed as a result of that investment project to the Corporation for its approval and shall, for each year comprised in the employment qualifying period, submit further details with respect to the same investment project consisting of further amounts invested, termination of employees previously detailed as having been employed and new employees distinguishing between employees in respect of whom new jobs have been created and employees employed in replacement of employees whose employment has been terminated as well as the wage costs in respect of which a credit is to be claimed in terms of this regulation for that year of assessment.

(11) The Corporation, on being satisfied with the submissions referred to in sub-regulation (10), and within sixty days from the receipt of all relevant information it may request, shall issue a certificate setting out the investment tax credits to which the company is entitled to.

(12) A company which is entitled to an investment tax credit in respect of a year of assessment shall be entitled to deduct from the amount of income tax which is due on its chargeable income derived from its trade or business for that year of assessment the amount of the investment tax credit and, where the investment tax credit, for any year of assessment, exceeds the income tax payable by such a company for that year, the excess shall be added to the investment tax credit for the following year and deemed to be part of that investment tax credit, or if there is no such investment tax credit for that year, be deemed to be the investment tax credit for that year and so on for subsequent years:

Provided that so much of the investment tax credit which is not so utilised at the end of any year and which is therefore carried forward to be added to the investment tax credit of the following year of assessment and deemed to be part of that investment tax credit or to be deemed to be the investment tax credit for that year, shall be increased by seven per cent or by such other per annum rate as may be prescribed by the Minister by notice in the Gazette; and where any part of the investment tax credit as so increased is again not utilised, so much of it as is not utilised shall be further increased by the said percentage and carried forward to the following year and so on for subsequent years:

Provided further that an investment tax credit may only be deducted from the tax due on chargeable income which is derived from one or more of the activities referred to in regulation 4(3).

(13) The provisions of article 25 of the Act shall, as far as is applicable, apply to the incentive provided in terms of this regulation and for this purpose references in that article to a qualifying company shall include references to a company qualifying for the benefit provided by this regulation.

(14) Where a company has benefited from the provisions of this regulation, the investment tax credit shall be deemed to have relieved from tax so much of that company’s chargeable income which, when multiplied by the rates of tax at which it was chargeable in that year, is equal to the investment tax credit, and where such chargeable income has been taxed at different rates of tax the investment tax credit shall first be deemed to have relieved that part of the income which has been taxed at the lowest rate; and where the company or any subsequent company distributes the income which is so deemed to have been relieved from tax, such company or companies shall state in the dividend warrant pertaining to any such distribution that such income has been relieved from tax by an investment tax credit in accordance with this regulation; and the tax which has been so relieved shall not be available for refund for any purpose of the Income Tax Acts.

(15) The chargeable income which is deemed to have been relieved from tax in accordance with sub-regulation (14) shall, for the purposes of the Income Tax Act, be allocated to the Maltese

Taxed Account of the company in question and upon distribution shall be exempt from income tax to the same extent as dividends referred to in article 9 of the Act, and for this purpose references in that article to a qualifying company shall include references to a company qualifying for the benefit provided by this regulation.