Tax Credits for Micro enterprises and the Self-Employed

Source: MaltaEnterprise
Published 3rd June 2014

The scope of this scheme is to encourage undertakings to invest in their business¸ to innovate¸ expand¸ and implement compliance directives or to develop their operations. Such undertakings may include self-employed persons. Undertakings will be supported through a tax credit representing a percentage of the eligible expenditure and wages of newly recruited employees and/or apprentices.

A Tax credit is awarded by Malta Enterprise (hereinafter ‘ME’) to an undertaking which satisfies ME that it (i) it carries out a trade or business requiring assistance to expand¸ innovate or invest in its business in Malta.

The tax credit award is at ME’s absolute discretion¸ in fact the law uses terminology to reflect this in stating ‘the Corporation may provide’.

The extent of tax credit to be in accordance with ME guidelines and subject to 3 provisos:

  1. benefit in tax credit shall be calculated on eligible costs incurred from 1st January 2014 to 31st December 2020
  2. total tax credit award capped at €30¸000 over any three consecutive year period
  3. Gozo start ups have tax credit award capped at €50¸000 over any three consecutive year period

Eligibility criteria:

  1. not more than 30 full time employees
  2. turn over or annual balance sheet not exceeding €10¸000¸000

Tax credit shall operate as deduction from tax payable on chargeable income derived from trade of business for that y/a commencing 1st January of year immediately following year in which eligible costs are undertaken¸ and where tax credit for that y/a exceeds income tax payable by undertaking for that year¸ the excess tax credit may be carried forward to the subsequent y/a – NB tax credit shall not give right to tax refund.

  • Any dividend warrant related to tax credit must note down such association of relief by tax credit and no refund shall be available.
  • The chargeable income relieved from tax by tax credit shall be allocated to the FTA of the company and any dividends distributed from such income shall be exempted from income tax in the hands of the members.
  • Where dividend recipient is another company there shall again remain the exemption from income tax and so forth if the next recipient is again a company- ( Nota Bene this section mirrors wording verbatim from the Income Tax Act eg. art 12 (1) (v); deemed distribution under art 43)

Further Eligibility Criteria:

  • Tax credit must be