The Industrial Development Act : an indepth study

Abstract

This thesis is mainly a study of the fiscal incentives that the Maltese legislation offers to both local and foreign investors. In order to scan the legislation itself a theoretical basis of the Industrial Development Act is given, together with the history of legislation regarding incentives granted for industrial development in Malta. Before dealing with each incentive per se, a general overview of all the benefits granted under the Act is given. This overview includes a consideration of who the beneficiaries are; then there is a classification of the incentives into four different categories, that is, automatic or discretionary, and fiscal or non-fiscal. Since each beneficiary needs certainty when being granted a benefit, the guarantees as offered by the Act are compared to guarantees offered by other local legislation. Each fiscal incentive is dealt with in detail by first examining the provision of the law, then compruing it, where possible, to the provisions of the Aids to Industries Ordinance (that is, the previous prevailing legislation on the matter), and examining the u·ain of thought underlying the incentive, thus examining its scope and the facts that surround it. Then, finally, the incentive is compared to what is similru·ly offered in vru·ious other countries. The followiilg four chapters group the incentives as follows: Tax Holidays, Export Incentive Scheme, and the Reduced Rate of Tax; the Investment Allowance and the Accelerated Depreciation; the Tax Free Dividends together with the implications of Double Taxation Agreements; finally, we have the minor incentives, that is, the Training Costs Allowance, the Export Promotion Allowance, the Research and Development Allowance, the Tax Liability of Expatriate Employees, and the Feasibility Studies Allowance. Other fiscal implications under the Act are also taken into consideration. The whole legislation is then examined in the light of eventual European Union accession. This study is preceded by an overview of Malta's relationship with the Union, and European Law and Policy with regard to State Aids, and Grants and Loans. Finally, I conclude by examining the importance or otherwise of having a good incentives package.