Malta's New Tax And Incentive Regime For Foreign Investment Pays Dividends

by Robert Lee, Tax-news.com, London

26 April 2001

Malta's endeavours to attract more foreign investment appear to have paid off, with a whole raft of companies setting up operations on the island in recent weeks. Malta is particularly keen to entice companies operating in areas such as information technology, software development, electronics, pharmaceuticals, medical related products and precision mechanical engineering. Many companies choosing Malta hail from other locations within Europe, such as Germany and Italy, and have selected Malta for a number of reasons, not least the newly-enacted Business Promotion Act and a new incentive package which the government hopes to make available to both existing and prospective investors in the near future.

In March, Minister for Economic Services, Josef Bonnici, inaugurated the Maltese operation of Malta Moulds, which he deemed 'a quality addition to the more than 50 companies of Italian origin that are presently utilising Malta as part of their international or regional strategy producing a variety of goods for export.' Mr Bonnici said the company had been attracted to Malta due to its proximity to the European mainland, competitive production costs, the availability of a motivated work force, availability of factory space at very reasonable rates, attractive incentives for investment and the general understanding of the Italian language, amongst other reasons.

Earlier this month, Mr Bonnici inaugurated a new manufacturing facility for FAL Malta, part of German group Falcom, at the Mosta Technopark in Malta, which he said was 'another testimonial that reinforces Malta’s decision to continue intensifying its efforts on the identification and attraction to our island of companies that operate in sectors that have a high value added, not only in monetary terms but that also require a high level of technology and skills for their operation.'

Minister Bonnici said in a speech: 'Government is very much aware of the fact that we need to ensure Malta’s competitivity in order to be able to attract more foreign direct investment and facilitate the expansion of those companies already operating in Malta. For this reason the Industrial Development Act has been revised substantially in order to ensure that Malta will adhere to its international obligations while at the same time enhancing its competitivity.'

He continued: 'We have made sure that the new incentives available to industry encourage and reward ongoing investment in Malta. For this reason we have introduced a system of investment tax credits which when coupled with the favourable rates of tax being offered to companies operating in our target sectors, can result in minimal taxation for a number of years.'

The new incentive package, which will shortly be published in the form of a legal notice, will certainly serve as a boost to existing and new investment, primarily in the manufacturing sector which employs over 30,000 people and which, together with tourism and the services sector, is a key element of Malta’s economy.

The incentives on offer from the Maltese government no longer depend on whether a company exports or not. They are meant to promote productivity growth regardless of where the product is sold. Malta is not only offering new tax incentives, with reduced rates of corporate tax which start from five per cent and move up to 15 per cent over a 15-year period, but also investment tax credits, a value added incentive scheme, special provisions for small businesses, and other incentives related to training and job creation. These incentives will not only be available to prospective investors, but also to existing ones, thus ensuring that existing companies, already benefiting from incentives under the old Industrial Development Act, can retain and increase their investment in Malta.

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