Seed Investment Scheme
The Seed Investment Scheme, launched by the Prime Minister at the end of July 2016, is the fruit of collaboration between the Ministry for Finance, the Ministry for the Economy and MIMCOL, the Malta Investment Management Company Limited. It shall apply to qualifying investors who subscribe to fully paid up equity shares at par in a qualifying company on their own behalf. Investments made in a qualifying company shall, in aggregate, NOT exceed €750,000 per qualifying company.
What is the benefit granted?
Qualifying investor shall benefit from a tax credit amounting to 35% of the aggregate value of the investments made by such investor in one or more qualifying companies. However: total tax credit shall NOT exceed €250,000 per annum.
Such tax credit shall be set off against the tax due by the qualifying investor in respect of any income or gains brought to charge to tax in the year of assessment immediately following the basis year during which the investment is made.
Who is eligible? Who is a qualifying investor?
Qualifying investor is any natural person who is resident in Malta ornon-resident EU/EEA nationals whoat least 90% of their worldwide income is derived from Maltato the extent that he bears the full risk in respect of his investment, and who has been duly issued with the relative compliance certificate by the competent entity.
Qualifying investor shall:
- Continue to hold investment in the qualifying company for a period of NOT less than 3 years subsequent to the subscription by the qualifying investor to such equity shares; and
- NOT be connected to the qualifying company prior to the subscription to the equity shares.
Qualifying investor shall invest in the qualifying company within a period of 2 years from when the qualifying company is first issued with a compliance certificate for the status of a ‘qualifying company’. Nonetheless, investment in a qualifying company may be made in installments over a period of more than 1 year, as long as the commitment to invest is made within the 2 year period.
What is a qualifying company?
An SME that: (satisfies the following cumulative conditions)Is incorporated in Malta or controlled and managed from Malta or has a place of business in Malta;
- Has been in existence and engaged in carrying out qualifying activities for a period not exceeding 3 years following its first commercial sale;
- Is not listed on any recognised stock exchange;
- Has a maximum of 10 employees;
- Has a gross asset of not more than €250,000 immediately preceding the issue of equity shares to the qualifying investor, and that has been duly issued with the relative compliance certificate by the competent authority.
What are the qualifying activities?
Any activity relating to any trade, business, profession or vocation, excluding the following:
- dealing in immovable property, shares, securities and, or other financial instruments;
- dealing in goods other than in the normal course of business;
- carrying on banking, insurance or any other activity covered by the Investment Services Act, the Banking Act, and the Financial Institutions Act;
- providing legal, accounting or other professional services;
- activities relating to the development of immovable property;
- receiving royalties or licence fees;
- operating or managing hotels, hostels, guest houses or residential care homes;
- carrying on activities in connection with the generation of electricity and other energy sources;
- the holding of shares, whether directly or indirectly, in any company which carries out any of the aforementioned activities.
What is excluded?
Undertakings in difficulty, undertakings which are subject to an outstanding recovery order and other undertakings expressly excluded from receiving such aid. Undertakings which, directly or indirectly, hold shares in any company which carries out any excluded activities, are excluded from becoming a qualifying company.
Any loss incurred by qualifying investor from disposal of an investment or from liquidation of qualifying company shall NOT be allowed as a deduction in respect of income/chargeable gains.
Where investment in qualifying company is disposed of within 3 years from date of subscription to equity shares the tax due in respect of the income derived from such disposal shall be calculated on the basis of the higher of the market value of such investment and the consideration received by the qualifying investor.
Where investment in qualifying company is disposed of after lapse of 3 years from date of subscription to equity shares by qualifying investor any gains/profits derived from such disposal shall be exempt from any tax otherwise due.
 Provisos (i) and (ii) to article 56(1)(c) of the Income Tax Act
In terms of Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty as may be amended from time to time.