Seed Investment Scheme Rules 2022

 

The Incentive

With effect from 1^st January 2022, qualifying investors may benefit from a tax credit equivalent to 35% of the aggregate value of the investments made in one or more qualifying companies. Such tax credit, capped at €250,000 per annum, will be set off against the tax due by the qualifying investor in respect of any income or gains brought to tax, with any excess credit being carried forward  until fully absorbed, without giving rise to a right to any tax refund.

 

Tax treatment of any capital gains arising on the subsequent disposal of the investment will depend on the holding period by the qualifying investor.

 

Who is eligible?

‘Qualifying investor’ is defined as any natural person who is resident in Malta or is a national of an EU or EEA Member state with at least 90% of such investor’s worldwide income deriving from Malta, who subscribes to fully paid-up equity shares at par in a qualifying company on their own behalf. The investment made in a qualifying company shall, in aggregate, not exceed €750,000 per qualifying company and must be held for a minimum period of three years. Moreover, the investor shall not be connected to the qualifying company prior to the subscription to the equity shares.

 

What is a ‘qualifying company’?

The rules target SMEs that satisfy all of the following cumulative conditions:

• Are incorporated or controlled and managed from Malta or have a place of business in Malta;

• Have been in existence and carrying out qualifying activities for a period not exceeding three years following the first commercial sale;

• Are not listed on any recognised stock exchanges;

• Have a maximum of 10 employees;

• Have gross assets of not more than €250,000.

 

Furthermore, the Rules provide for list of specifically excluded entities which may not benefit under this Scheme.

 

How to apply?

Both the ‘qualifying investor’ and the ‘qualifying company’ must obtain formal determination by way of application. Applicants must self-assess whether they are eligible in terms of these Rules and any relevant guidelines.

 

Once compliance certificate is issued, a qualifying investor must invest in the qualifying company within a period of two years from when the qualifying company is first issued with the said compliance certificate.

 

How can BDO help?

BDO can help you understand how these rules can impact your business. For further information, please call on +356 2342 4230 or send us an email on directtaxation@bdo.com.mt.