Industry Report: Financing
Tax Shelter - Malta
- The Malta Film Law, which entered into force on July 2005, is a turning point for film financing and production in Malta. In this dossier we present in detail the film incentives and opportunities offered by this little island in the middle of the Mediterranean.
In recent years, Malta has been increasingly selected as a film location by production companies from around the world. Recent credits include Troy, The Count of Monte Cristo, Julius Caesar, and many more. But what makes Malta so attractive to the film industry?
The strategic location of the Maltese Islands is not the only reason that has made them the object of attention from production companies. From 2005 Malta is offering tax incentive and tax relief schemes to audiovisual companies producing and investing in the Island. The Malta film incentive has been put in place to change Malta from being a mere location for the filming of movies to having a movie industry.
There are two kinds of incentives. The first scheme is a rebate system. Every movie shooting in Malta could apply to take back not more than 20% of the amount spent on what left added value for the Maltese, such as on hotels, restaurants and car hire.
The second incentive is in the form of substantial tax breaks for those who want to invest in facilities and equipment related to the film industry. Anyone who decided to invest in film-related projects, including film studios and sound stages, among others, would have advantages under the Business Promotion Act.
The plan is to invest in facilities, increase the technical capabilities of the locals and create employment.
The Malta Film Commission (MFC), officially inaugurated on the 4 February 2000, is the single governmental body vested with responsibility for promoting Malta as a film location and responsible for the tax schemes.
Financial Incentives for the Audiovisual Industry in MaltaThe incentives are in the form of a cash grant given to eligible productions on the qualifying expenditure incurred in Malta. Up to 20% of the eligible expenditure can be obtained as a cash rebate by a production company once filming is complete. Around 90% of production costs incurred in Malta are usually eligible for the rebate. The percentage to be rebated to a production is determined by a score sheet.
Who can apply?
Audiovisual production companies filming in Malta before 31 December 2008.
Which kinds of productions are eligible for support?
Feature film and television productions, mini-series, animation and documentaries are all eligible for the incentives, provided that they are at least partially produced in Malta.
Which are the procedures?
A qualifying production is required to present an application to the Malta Film Commission (MFC), including a detailed projection of the Malta budget for the production. The MFC would grant a provisional approval no later than 3 weeks after receipt of the application. The final approval would be granted upon a detailed analysis of the Maltese production expenditure, after shooting is completed. The cash rebate is forwarded to the production company no later than 5 months from the date of receipt of the final application.
Which are the Qualifying Expenditures?
The expenditure eligible for a cash rebate are labour costs, hotel bed nights, transportation equipment and hire, location fees, catering services, per diems, leasing of offices, computer equipment, props (sourced locally), property (owned locally), animals, equipment, vehicles, and boats, telecommunications, craft service, laundry and cleaning services and professional services.
Which element should be presented to the MFC?
1 A synopsis of the project or a script
2 A schedule of filming
3 Top sheet of the overall production budget
4 Detailed itemised estimate of expenditure in Malta
Companies or individuals investing in audiovisual infrastructure in Malta can qualify for tax credits of up to 50% of their investment on the islands. Tax credits constitute a deduction on tax owed on gains and profits derived from approved activities. See more
Who can benefit from the tax credit?
Any audiovisual company that invest on the following activities:
• the building and management of sound stages and other production facilities
• post-production services
• rental of filming, light and grip equipment
• investment in film laboratories
Who can benefit from the tax credits on infrastructure and labour costs?
Any company investing in infrastructure and services directly related to the audiovisual industry can claim a tax credit of 20% on the acquisition, construction, development or improvement of any industrial building or structure including a warehouse, and including related labour costs. An additional tax credit of 40% on expenditure on plant and machinery is obtainable.
Which is the maximum aid allowed?
The maximum aid allowed to small or medium sized enterprises is up to 50% of the total cost of an approved project. Larger firms are entitled to receive up to 40% of their total eligible investment. Each investment has to create at least four new jobs
Maltese companies producing and / or distributing feature films, television drama, documentaries and commercials can benefit from a reduced rate of tax at 5% as opposed to the 35% corporate tax rate. Companies Act in Malta allows for straightforward process of setting up Maltese companies.
Who can benefit from the incentive?
Maltese or foreign companies are eligible for the support scheme. A newly-formed Maltese company will be entitled to benefit from a substantial reduction in the tax payable on its taxable income. Up to 31st December 2008 such company will be taxable at the reduced rate of 5% up to maximum profits of Lm25,000 (€58,000) per employee. This is currently the lowest available corporate tax rate in the EU. ITC’s – until 31 December 2008 companies registered in Malta but operating overseas can avail of a lucrative corporate tax rate of 4.17%.
Malta has a Value Added Tax charge of 18% on all goods and services supplied in Malta and on all taxable importations. On the majority of goods and services supplied a VAT refund is given to the person/company acquiring the service or good.
Foreign film productions shooting in Malta can also claim refunds for hotel accommodation, restaurant bills, fuel, taxis, car hire and cost of materials used for the purpose of the film production which would not be otherwise recoverable.
The interaction of the above incentives would normally result in minimal or no taxes being paid for a number of years.