The 2016 Seed Investment Scheme

Malta is currently witnessing a game-changing wave of start-ups that are invigorating the business landscape. With business incubators such as TAKEOFF and the annual ZEST conference, where like-minded entrepreneurs meet, discuss and mould the future of their businesses, it goes to show that start-ups are indeed an important ingredient in this ever changing economy.

In a collaboration between the Ministry for Finance, Ministry for the Economy and MIMCOL have issued The Seed Investment Scheme that provides start-ups with the support they need for them to become the future businesses of Malta. Launched in August 2016 under Legal Notice 232 of 2016, the Seed Investment Scheme incentivises people residing or operating in Malta to invest in start-up businesses. The rules under this scheme apply towards start-up investments made as from basis year 2016.

Firstbridge has proudly established itself as a keen supporter and advisor to start-up organisations and following the developments within the local scenario, as an organisation we are pleased to see the launch of this scheme.


The Benefit of the Seed Investment Scheme

Any qualifying investor to which the above rules apply 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. The total tax credit applicable to any such investor shall not exceed €250,000 per annum.


Who is Eligible for the Seed Investment Scheme?

The rules apply to ‘qualifying investors’ who subscribe to fully paid up equity shares at par in a ‘qualifying company’.

A ‘qualifying company’ means a small and medium enterprise (SME) that satisfies the following cumulative conditions:

  • Is incorporated in Malta or controlled and managed in 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 three years following its first commercial sale
  • Is not listed on any recognised stock exchange
  • Has a maximum of ten employees
  • Have gross assets of not more than €250,000 immediately preceding the issue of equity shares to the qualifying investment


How to apply for the scheme?

A company wishing to obtain the status of a ‘qualifying company’ must lodge an application to the competent entity for a formal determination and to have a compliance certificate issued.

‘Qualifying activities’ mean any activity the income is derived from which generally include income derived from trade, business, profession or vocation, other than the carrying out of any one of the following cumulative conditions:

  • Dealing in immovable property, shares, securities and/or other financial instruments
  • Dealing in goods other than those in the normal course of business
  • Carrying out 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
  • Carrying out activities related 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
  • Holding shares, whether directly or indirectly, in any company which carries out any of the activities listed in any one or more of the above

‘Qualifying investors’ means any natural person:

  • Who is a resident in Malta, or
  • Who is a national of an EU or EEA State, where the Director General of Revenue is satisfied with at least 90% of the said individual’s worldwide income being derived from Malta

Any natural person wishing to obtain the status of a ‘qualifying investor’ in relation to an investment in a qualifying company must lodge an application to the competent entity for a formal determination and to have a relative compliance certificate issued.
To be eligible for the compliance certificate a qualifying investor must:

  • 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
  • Not be connected to the qualifying company prior to the subscription to the equity shares

The qualifying investor must also ensure that investments in a qualifying company are to be made within a 2-year period from when the qualifying company is first issued with its compliance certificate for the status of a ‘qualifying company’ by the competent authority.