The concept of state aid under EU law in the field of taxation by reference to its impact on FDI in Malta

Abstract

This dissertation examines the impact of the EU State Aid rules, in particular the National Regional Aid Guidelines, on Foreign Direct Investment (FDI) in Malta, with respect to tax incentives. FDI is an important economic contributor to the Maltese economy. State Aid, in fiscal and monetary terms, is an important factor to attract investment to the island. However, since Malta must abide by EU laws, the country is limited as to what forms of aid it can offer. In fact the State Aid rules have led to lower levels of aid intensities, including reduced amounts of Investment Tax Credits, as well as the prohibition of reduced rates of corporate tax in Malta's tax regime. Although tax incentives are an important factor for further investment, tax benefits are only part of a whole package which investors consider when determining where to invest. Skilled labour and high-quality infrastructure are other important attributes to attract FDI. Therefore, one must create new incentives and measures to compensate for the reduction in fiscal incentives, including improvements to the general economic environment to attract potential FDI to Malta.