NEW Seed Investment Scheme rules

The “new” Seed Investment Scheme (Income Tax) Rules, 2022 have been published on the 20 December 2022. By virtue of this, the “old” Seed investment scheme rules have been repealed.

These rules can provide a tax credit equivalent to 35% of the investment made by an investor and shall apply to “qualifying investors” who subscribe  to  fully  paid  up  equity  shares  at  par  in  a  “qualifying company” on their own behalf. Any company that wishes to obtain the status of a "qualifying company" shall submit an application to the competent entity for a formal  determination  and  for  issue  of  the  relative  compliance certificate in terms of these rules, which application shall be made on such form or in such manner as the competent entity may require and shall contain the information and documents therein requested.

When is this applicable?

The applicability will be as from 1 January 2022 so they can be used from Year of Assessment 2023 but shall have effect until 31 December 2023 or any other date as published by the minister.

What is a qualifying company?

A "Qualifying  company" is defined as an SME  that  satisfies  the following cumulative conditions:

(a)  is  incorporated  in  Malta  or  controlled  and managed from Malta or has a place of business in Malta;

(b)  has been in existence and engaged in carrying out qualifying activities for a period not exceeding 3 years following its first commercial sale;

(c)  is not listed on any recognised stock exchange;

(d)  has a maximum of 10 employees;

(e)  has gross assets 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 entity in terms of these rules

Provided   that   undertakings   in   difficulty, undertakings which  are  subject to an outstanding recovery order,  other  undertakings  which  are  expressly excluded from receiving such aid  in  terms  of  the  Regulation,  as  well  as undertakings  which,  directly  or indirectly,  hold  shares  in  any company  which  carries  out  any excluded activities, do not fall within the scope of this definition;

What are qualifying investors?

A "qualifying  investor"  means  any  natural  person  who  is resident in  Malta  to 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 in relation to an investment in a qualifying company

A qualifying investor shall:

(a)  continue  to  hold  the  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

(b)  not be connected to the qualifying company prior to the subscription to the equity shares.

How is the tax credit calculated? 

Any qualifying investor shall benefit from a tax credit equivalent to a sum amounting to 35% of the aggregate value of the investments made by such investor in one or more qualifying companies, so however that the total tax credit applicable to any such investor 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.

Can the tax credit be carried forward?

Yes -  however any  tax  credit available  in terms of these Rules shall not give rise to a right for any tax refund

Is the process automatic?

No – There is an application process – the application should be filed with the Malta Investment  Management Company Limited

Are you eligible to apply for the Seed investment scheme? Contact us and we will be able to assist you!