Author: Lucy Beard

What are Free Trade Agreements, and why do they exist?

This is the first of a series of posts introducing the new United Kingdom – Australia Free Trade Agreement (which is yet to come into force) and how it may be relevant to you.

What is a Free Trade Agreement?

A Free Trade Agreement (FTA) is a set of policies agreed to between two or more countries removing some barriers faced by companies when trading goods and services: barriers which otherwise exist by default.

By default, all World Trade Organisation Member states (nearly all countries) trade with one another on ‘Most Favoured Nation’ terms. In practice, this means companies face tariffs (taxes on imports and exports) of up to 20% on specified products, and around 5% for the majority of internationally traded goods.

FTAs not only reduce these tariffs but can also provide benefits in other ways, such as:

  • Raising/removing import quotas
  • Prioritising relevant transport
  • Reducing red-tape, and
  • Easing the movement of individuals and the hiring of workers.

FTAs in the context of international treaties / conventions

The United Kingdom and Australia are both parties to The Vienna Convention on the Law of Treaties 1969 (the ‘VCLT’). The VCLT governs the observance, application and interpretation of ‘treaties’. A treaty is defined by the VCLT as ‘an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments’.

Where potential conflicts with other agreements may arise following the introduction of this FTA, the VCLT will govern these – informing a clear interpretational ‘pull’ to ensure coherence and minimising divergence from pre-existing obligations to third parties.[1]

Economic Theory behind FTAs

In his 1817 book ‘On the Principles of Political Economy and Taxation’, economist David Ricardo laid out the foundational arguments for laissez-faire (free) trade, including that,

‘Under a system of perfectly free commerce… each country reward(s) ingenuity… and distributes labour most effectively and most economically… (to the) general benefit… of the universal society of nations.’[2]

Following this line of thought, countries that find similar interests but have different strengths stand to benefit from agreements which liberalise trade. For example, a country that produces more tech devices than its population needs but does not have enough natural materials for clothing could well benefit from entering a targeted free trade agreement with a country that produces excess cotton and wool but needs more mobile phones.

Which countries use FTAs?

The EU has around 42 free trade agreements with over 70 different countries, more than any other country or political union. Besides the UK, the next most FTAs are active with Iceland, Switzerland, Norway and Chile: countries which participate in more than 30 FTAs each. By comparison, the US has only 14 FTAs.

After Brexit, the UK has signed many agreements with countries around the world on similar terms as existed while it remained in the EU, making the UK second only to the EU in its use of FTAs.

UK-Australia FTA

Among post-Brexit agreements, the UK’s FTA with Australia (which is yet to be formally ratified, and as such is not yet in force) stands out as initiating particularly strong efforts to encourage business opportunities, some of which may directly advantage you.

 

This blog series will introduce the ‘how’, ‘when’ and ‘why’ of changes that the UK-Australia FTA proposes.

Courtney Gleeson
Lawyer
Sheltons Group Legal (London and Sydney)
C.Gleeson@SheltonsGroup.com

Matthew Thorn
Law Graduate
Sheltons Group Legal (London and Sydney)

 

[1] Professor Albert Sanchez-Graells. 2022. Written Evidence submitted to the House of Commons International Trade Committee, following up on the Oral Evidence provided during the session of 9 March 2022 on “UK trade negotiations: Agreement with Australia” (HC 1002). London: The House of Commons.

[2] Ricardo, David., 2002. The principles of political economy and taxation. Cambridge: Janus Publishing Company Lim, p.83.

Are you moving to Australia and renting out your UK property? If so, you will be classified as a ‘non-resident landlord’ by HM Revenue and Customs (HMRC).

Below we have covered some of the popular UK tax issues and questions that arise when becoming a non-resident landlord:

How do I stop my estate agent or tenant from deducting UK tax at source?

If you have been determined as a non-resident landlord of the UK, your letting agent or tenant will deduct basic rate tax (20%) from your rent. Once the tax year is complete, your estate agent or tenant will provide you with a certificate certifying how much tax they have deducted in the relevant tax year.

As a landlord, cash flow is important, therefore it’s likely you would prefer to receive your rent in full and pay any tax due through your UK self-assessment tax return.

The way in which you can receive your rent in full, prior to any taxation, is to file a non-resident landlord form (NRL1). Once the form has been approved, HMRC will inform your letting agent or tenant to stop deducting tax from your rent. From there on, you will receive your rent in full without UK taxation. Any tax deducted earlier in the year will be refunded on your next rental statement.

However, it is worth noting that HMRC will only approve your NRL1 application if your taxes are up to date. For example, you have no outstanding tax or tax returns due.

What expenses can I claim on my UK property income?

If this is your first experience of being a landlord, you may be unsure about what expenses are tax deductible. HMRC iterate that for an expense to be allowable for tax purposes, it should be incurred wholly and exclusively as a result of renting out your property. Typical expenses include buildings insurance, estate agent fees and utility bills (only if not reimbursed by tenants).

In some instances, what you assume are revenue expenses may in fact be ‘capital expenses’ for example, improving or upgrading something that was existing. Capital expenses are not allowable and cannot be claimed against rental income, however you might be able to set them against capital gains tax if you sell the property in the future. You should seek professional advice if you’re unsure on the tax treatment of your property expense.

Since April 2020, you have no longer been able to deduct any mortgage expenses from taxable rental income. Instead, mortgage interest is used as a tax reducer, where you receive a tax credit based on 20% of mortgage interest payments. For example, if you make mortgage interest payments of £5,000 per year, you will receive a tax credit of £1,000 to deduct from the liability incurred on your property income.

Will I be taxed on my UK rental income in Australia?

Whether you’re taxed on your UK rental income in Australia will depend on the type of tax resident you are. There are three main types of residents in Australia: Australian resident, foreign resident and temporary resident.

If you’re classified as a ‘foreign resident’ or ‘temporary resident’ working in Australia, you generally don’t need to declare income you receive from outside Australia in your Australian tax return. Therefore, as long as you remain a ‘foreign resident’ or ‘temporary resident’, you will not be taxed on your UK rental income in Australia.

However, in the event that you’re an ‘Australian resident’ for tax purposes, you must declare all income you earned both in Australia and overseas. In this instance, UK property income must be added to your Australian tax return. If you’ve paid tax in the UK on your UK property income, you may be entitled to an Australian foreign income tax offset.

Where an ‘Australian resident’ has property income from the UK, the Australia-UK double tax treaty becomes relevant.

Will I receive my UK personal allowance as resident of Australia?

When non-resident of the UK, it’s only in certain circumstances that you will get a personal allowance of tax free UK income each year. These include the following:

• you hold a British passport
• you’re a citizen of a European Economic Area (EEA) country, or
• you’ve worked for the UK government at any time during that tax year.

However, under the double tax treaty between the UK and Australia, it’s likely as a resident of Australia that you will be entitled to the UK personal allowance. Thus, only the rental income over the UK personal allowance will be taxable in the UK.

How do I file my UK self-assessment tax return from Australia?

Regardless of whether you’re a resident of Australia, renting out a UK property automatically enters you into the UK self-assessment regime. The return will be used to calculate any tax liability arising from your UK property income and any additional UK taxable income.

The same Tax Return deadlines apply to non-residents as they do to UK residents – 31st January following the tax year end (31st October for paper returns). Automatic late filing penalties will apply after the deadlines have passed.

As a non-resident you are unable to use HMRC’s online services to file your return. Instead, you need to:

• Send your tax return by post
• Use commercial software
• Get help from a professional

Contact Us

If you need advice or assistance with your UK or Australian tax obligations, we are here to help. Simply send us an email at the address below to arrange a free initial consultation.

Christian Iles
Tax Manager
Sheltons Accountants (London and Sydney)
C.Iles@SheltonsGroup.com

Click here to read our blog where we compare the UK and Australian Tax systems

Are you considering expanding your business to Australia? Join our free webinar on Tuesday 31 July at 10am for a review of the questions you should be asking yourself.

Your expert speakers

Richard Harper, now the owner of Keyway Trade Services in Sydney, shares his decades of experience in Australia with UKTI/Department for International Trade working with UK businesses entering Australia.

Ned Shelton, Managing Partner of the independent specialist firm Sheltons Accountants, makes available his many years of experience with working with UK businesses exporting to and setting up in Australia.

Who is the webinar for?

The webinar has been designed for any business that has been considering expanding from the UK to Australia. Ned Shelton and Richard Harper will discuss the key issues to consider before your business expansion.

What does the webinar cover?

The webinar will provide guidance on everything from Australian tax rules on exporting and on running a business in Australia to selling on-line, and from special considerations on selling in Australia to understanding Australia, Australians – and the Australian market.

Ned Shelton touches on

  • Company law – differences (to the UK)
  • Company tax
  • Fringe Benefits Tax (FBT
  • Superannuation
  • State taxes
  • When you need to register with ASIC (as a branch)
  • When you might have to pay company tax (the ‘permanent establishment’ issue)
  • ABNs, domain names and trademarks,
  • And especially: GST on sales (export) to Australia

Richard Harper addresses

  • Australia – the country in context
  • Agents and distributors and ways to market
  • Registration – prohibitions and restrictions
  • Resonating with Australians
  • Specifics on food and drink
  • The supermarket dominance
  • Key elements for success
  • The importance of market visits
  • Dealing with Aussies

Why join the webinar?

  • Explore the benefits of setting up a physical presence in Australia vs exporting to Australia
  • Learn about the various tax rates and rules
  • Find the most tax efficient ways to expand into the Australian market
  • Learn about the special features of Australia
  • Find out about the key actions prior to market entry
  • Hear about the traps and opportunities of selling to the Australia market
  • Put your questions to an expert panel

Reserve your place in seconds – for free

The webinar takes place on Tuesday 31 July at 10am. You can reserve your place in seconds here. It’s free! Can’t make it? No problem. We will send you a link to the full recording of the webinar so you can learn from the experts’ views at a more convenient time. Don’t miss out.

Bloomberg Tax Honours Sheltons Group Partner, Ivan Zammit, with International Tax Contributing Author of the Year Award

7 December 2020

Sheltons Group partner, Ivan Zammit, has been awarded International Tax Contributing Author of the Year Award from Bloomberg Tax & Accounting in recognition of the contributions made by him and our colleagues at Sheltons Malta to Bloomberg Tax & Accounting.

“We at Sheltons are firm believers that knowledge, gained through experience and practice, be shared with fellow practitioners. We are proud to be associated with such an outstanding organisation, which shares the same values.” – Ivan Zammit

The official press release can be found here:

https://www.bloombergindustry.com/press-releases/bloomberg-tax-accounting-recognizes-authors-of-the-year/

Ivan Zammit joined Sheltons in 2006 and is the partner in charge of the Sheltons offices in Malta, as well as being heavily involved in the Sheltons office in Denmark.

Ivan advises both corporate and individual clients. His experience includes advising on expat relocation as well as a wide variety of European cross-border activities, re-domiciliation and investment within the European Union.

Originally from Malta, Ivan moved to Copenhagen in 2006, where he joined Sheltons working directly with Ned Shelton on international clients, primarily with Danish company law, IFRS and Danish accounting as well as Maltese, Danish and international tax and VAT law.

After receiving his Adv. LLM in international tax law, Ivan accepted a position as a teaching assistant at the International Tax Centre (ITC Leiden) at Leiden University (The Netherlands). He continues to lecture on a regular basis on courses organised by ITC Leiden in particular in the area of Transfer Pricing.

In 2018, Ivan co-authored a book published by Thomson Reuters, entitled ‘Transfer Pricing in Ibero America, USA and UK’, where he wrote the chapter on UK transfer pricing.

During 2019 and 2020, Ivan authored (with the help of colleagues in our Malta office) the Bloomberg country tax guide for Malta, a publication available to subscribers of Bloomberg Tax, which is continuously updated with the latest developments.

Apart from his native English and Maltese, Ivan speaks fluent Danish and Italian and reads Spanish and French.

For more information about the award winners, please visit:

https://pro.bloombergtax.com/2020-tax-author-awards.

About Bloomberg Tax & Accounting

Bloomberg Tax & Accounting provides comprehensive global research, news and technology services enabling tax and accounting professionals to get the timely, accurate, and in-depth information they need to plan and comply with confidence. Our flagship Bloomberg Tax platform combines the proven expertise and perspectives of leading practitioners in our renowned Tax Management Portfolios™ with integrated news from the industry-leading Daily Tax Report®, authoritative analysis and insights, primary sources, and time-saving practice tools. Bloomberg Tax technology solutions help practitioners simplify complex processes to better mitigate risk and maximize profitability. For more information, visit https://pro.bloombergtax.com/

Doing Business with Australia guide

Doing Business with Australia

The ‘Doing Business with Australia Guide’ website is now live and the hard-copy brochures are currently being distributed.

12th November 2020 – The ‘Doing Business with Australia Guide’ is now officially live and can be accessed via: www.Australia.DoingBusinessGuide.co.uk

The main objective of this Doing Business with Australia Guide is to provide you with basic knowledge about Australia; an overview of its economy, business culture, potential opportunities and to identify the main issues associated with initial research, market entry, risk management and cultural and language issues. We do not pretend to provide all the answers in the guide, but novice exporters in particular will find it a useful starting point. Further assistance is available from the Department for International Trade (DIT) team in Australia. Full contact details are available in the guide.

To help your business succeed in Australia we have carefully selected a variety of essential service providers as ‘Market Experts’; Commonwealth Bank of Australia, Dentons Australia Ltd, Informed Solutions, Quest Apartment Hotels, Radisson Blu Plaza Hotel and Sheltons Accountants Australia.

The guide has been produced by International Market Advisor, in partnership with the Institute of Export & International Trade, and with support from the British High Commission Canberra and the Australian British Chamber of Commerce.

Five things to know about exporting to Australia:

  • The UK and Australia are very similar. Therefore, if your product or service is successful in the UK, there is a high chance that it will be successful in Australia.
  • The UK is Australia’s tenth-largest source of goods imports and second-largest in terms of services, showing that trade and investment between the two countries remains strong.
  • Australia has avoided recession for 28 years, making it, in recent decades, one of the most resilient and best performing advanced economies worldwide.
  • There are numerous opportunities for UK companies wishing to do business with Australia, such as in the education, energy, healthcare, creative industries, ICT, professional and financial services, and transport and infrastructure sectors.
  • Australia ranks 14th out of 190 countries in the World Bank’s 2020 Ease of Doing Business Index.

 

Source: Institute of Export & International Trade

Institute of Export & International Trade

This article was published on 22 July 2020 in Corriere di Malta newspaper

Grants for businesses to provide training

Enabling business training processes means investing in its people to increase the skills of both the individual employee and the work group. The result is not only the professional development of people, but also the growth of the business. In addition, by motivating and rewarding human resources, training has the advantage of acquiring knowledge and new skills filling some internal gaps, enhancing and discovering talents.

But training has a cost that needs to be assessed before setting up a plan. And it must be absolutely checked whether there are grants or incentives, even non repayable investments, that can facilitate this path and in some way reduce programming costs.

In Malta, entrepreneurs and public authorities are fully aware of the important value of human resources and employee training is a priority for both manufacturing companies and service providers. For this reason, the Government takes this issue in high regard and has studied some measures that help the entrepreneur to reduce the costs.

One of these measures provides a specific incentive for small and medium-sized enterprises, but also for large ones, those outside the European definition, and also for self-employed people.

The assumption is that they are carrying out an economic activity.

The incentive is directed to training and knowledge transfer initiatives that will support employees to acquire skills, know how and knowledge, provided that these skills are not mandatory for the exercise of a given activity.

In principle, the grant is made in the form of the tax credit, but the competent authority may also decide to grant the relief in the form of a non repayable contribution and a mix can also be decided, a part non refundable and the rest in the form of the tax credit.

The amount of the aid varies depending on the size of the applicant. This ranges from a maximum of 70% in the case of small business to a percentage of 50% in the case of large enterprises.

Contributions provided by this measure are directed to the support of the training provided to one or more employees of the company through:

(a) other employees of the company itself (e.g. a senior who trains junior staff);

(b) employees of companies linked to the beneficiary company;

(c) external experts;

(d) private training companies (with an NCFHE license).

The costs eligible for training projects are as follows:

(a) consulting costs for the development of the training programme;

(b) wage costs of those involved in the training activity, calculated on the basis of the actual hours of training;

(c) wage of trainers, covering the hours directly devoted to the provision of training;

(d) hourly costs covering direct hours of training service providers engaged to deliver training;

(e) air travel expenses incurred for participation in training courses abroad, if the training is not available locally and it is more economically feasible than holding the training locally;

(f) air travel expenses incurred to bring trainers to Malta;

(g) costs of renting training rooms, tools and equipment, to the extent that they are used exclusively for the training project.

It is necessary to apply for the grant before 30 November 2022 and a cost plan must be prepared for a training programme which can only start after the application for the grant is submitted.

If you need advise to understand what expenses to bring in, in which category your company is classified and you need to be assisted in the preparation of the application, remember that we can assist you.

Just contact us at the email provided below.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 05 July 2020 in Corriere di Malta newspaper

Grants for diversification and internationalisation of companies

At this delicate stage of the economy, companies need to strengthen their business by opening in new markets or by activating new services or product lines. Besides, they can also become more competitive through enhancing innovation or by diversifying internal productions or organisational processes.

The Government of Malta provides some measures that allow small and medium-sized enterprises to grow and internationalise thanks to the support of some grants. Let us analyse how.

Participation in international trade fairs, for example, is a traditional but always good way to allow your products or services to be known and to be able to increase orders, especially if you can present in the stands something innovative with respect to the existing products or services.

One of the incentive still available this year, with several deadlines for submissions in the coming months, is the incentive that provides for a maximum grant of EUR 10,000 to cover 50% of the costs of participation at fairs held abroad, aimed at introducing new products and services in new markets with the aim of strengthening the presence of the company at international level.

This measure also supports the participation to trade fairs abroad as part of trade missions abroad.

In this case, the costs which could be reimbursed refer to:

  • Participation fee.
  • Rental of hexibition space/stand.
  • Expenses for services related to the construction and installation of the stand.
  • Travel expenses for up to 2 employees/administrators representing the company.
  • Per Diem allowance for up to 2 employees/administrators representing the company up to a maximum of 8 nights according to the rates set by the Ministry of Finance.
  • Costs related to the design and printing of advertising material within the limits of the guidelines.
  • Shipping costs of the products that will be displayed in the stand.

All the costs described above must be incurred from external sources to the beneficiary company.

Moreover, another way to achieve new goals and lead the company towards new development and real growth paths is via innovation and diversification projects. Also for this, there are support measures.

Especially in this period companies have been looking for and are still thinking about new paths, For example, we are assisting a company active in the manufacturing sector and that manufactures products destined for the tourism sector. The company has suffered a drop in turnover and its aware that tourism will start again in a year time or two. Still, the entrepreneurs who lead this company have decided to move towards innovation so to strengthen their product and, at the same time, develop a new type of service. Such service will operate in a completely different field and can be activated right away. So, this is what innovation is all about: is the ability to get back into the game in other areas while continuing the existing path.

But let us go back to the analysis of the aids available.

There is one which deadline for submitting applications is at the end of this month. This tool aims to specifically support companies in developing investment strategies for their diversification, for the implementation of substantial change or for bringing significantly improved and innovative products/services to the market, compared to those already offered by the company.

In this case, it will be necessary to develop a business plan with the aim of better defining the specific activities. For example, activities which can be supported by this measure are:

  • production diversification in an existing plant of different products or services;
  • implementation of a substantial change in the production process of an existing plant;
  • adoption of solutions for the development of a significantly improved product service.

To be eligible for such aid measures, companies must operate in certain sectors, such as:

  • The production, manufacture, improvement, assembly, preservation, processing of goods, materials, commodities, equipment, plant machinery.
  • Biotechnology, pharmaceuticals, and life sciences.
  • Research and technological innovation.
  • The repair, overhaul or maintenance of pleasure boats, yachts, aircraft.
  • Development of information and communication technologies (ICT), software development.
  • Eco-innovations and environmental solutions.
  • Developments of tourism products and/or services because of networks created between traditional tour operators and craft companies.
  • Development and supply of tourism products and/or services related to emerging niche markets.
  • Development and supply of tourist products and/or services related to social tourism with a focus on the elderly.
  • Development and provision of childcare-related services and products.
  • Development and creation of artisanal products.

While the costs covered by this measure are as follows:

  • Leasing and rental costs of premises required for the operation of the enterprise activity for the duration of the project. Such costs must not exceed 10% of the project’s total eligible expenditure.
  • Costs of building and improving the premises for the operation of the business activity. Such costs must not exceed 10% of the project’s total eligible expenditure.
  • Costs for the purchase of equipment, machinery and/or plant. Machinery and equipment can also be used, refurbished, or reconstituted, but only under certain conditions set out in the guidelines.
  • Costs related to patents or licenses essential for the effective implementation of the project. Such costs must not exceed 10% of the total eligible expenses of the project.
  • Costs of the full-time salary of a “Change Manager” who has the ability to drive the necessary change within the company through diversification or a substantial change initiative, for the duration of the project, i.e. for a period of no more than 24 months.

In addition to the typical documentation to be provided in such cases, to benefit of this aid measure a project must be supported by a solid business plan that must be attached to the application. Such business plan must include some minimum requirements, defined by the guidelines, requirements normally provided in any standard business plan.

If you need help developing a new project, or developing a good business plan, or evaluating which type of state aid or financial support measure is best suited to your initiative, be aware that we can help. Simply send us an email at the address below.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 28 June 2020 in Corriere di Malta newspaper

How to finance the cost of a business plan

In one of the previous articles we have analysed how important it is to implement a business plan that, on the one hand, can be a useful tool for entrepreneurs and managers who want to develop a project or start a start-up and, on the other hand, can also constitute a credible document to convince investors, banks and public authorities.

It is normal for companies to seek the assistance of a professional, experienced in the drafting of business plans. The Government of Malta provides for the possibility of recovering part of the professional’s cost through a reimbursement procedure up to 80% of the cost, equal to the amount of EUR 4,000 out of a maximum expenditure of EUR 5,000.

However, when filling out the application, be careful to follow the rules defined by the Government’s guidelines. For example, there are some aspects of importance we would like to highlight for you to avoid making mistakes.

First, it is necessary to check deadlines: applications are to be submitted, through an online platform, by certain dates (open calls), the next one is 17 July 2020. But don’t panic, there are also other further deadlines and the last one is scheduled for 30 November 2020.

In addition, it should be verified that your business can actually be defined as micro, small or medium-sized enterprise and that it is included in the list of eligible sectors. For example, steel processing companies, transport companies or those that provide insurance financial services, or which produce advertising material, are excluded.

Besides, it is not possible to include among the costs those relating to ongoing services such as tax advice services provided routinely, or legal or advertising advice services that are provided regularly.

Another very important aspect relates to the professional advising on the drafting of the business plan. The professional consultant or consultancy company must external and anyhow independent from the company who intends to apply for the grant, in the sense that there must be no business relationship between the two. In addition, the professional providing you with his/her consultancy should be listed in a special registry before the Ministry which manages these funds. So do check on your consultant to verify he/she is duly registered.

Among the various declarations and certificates to be attached to the application, there is a very important statement relating to so-called “de minimis aid”, which is now well known by companies that are used to submit applications for grants.

The so called “de minimis aid” is a measure that has all the characteristics of a State Aid, but does not distort competition nor has an impact on trade since such aid does not exceed a preset amount and it is granted to a company in a given period of time. Therefore, such aid is not considered as State Aid in strict sense and does not follow the notification procedure which otherwise would involve complications and long times.

The rule is that a company can receive “de minimis” subsidies from a Member State within three years, within the maximum of EUR 200,000.

Moreover, if various companies, formally separated, act on the market as a single entity, by virtue of the links between them, through forms of control or connection with the company applying for the grant, in this case it is necessary to consider them all as a single company and must declare those positions in the application, also including the relevant balance sheets.

The approval procedure is not normally very long and in the event that the Evaluation Committee does not approve the application, it sends a letter describing the reasons why the application was not approved with the possibility of appeal within 10 days from the notification date and in this case a board will re-evaluate the application on the basis of the reasons given in the appeal procedure.

Following the approval of the application, an agreement is reached between the public authority that manages the funds and the contact person identified by the company that applied for the contribution.

At this point the consultancy service covered by the application, in this case the business plan, can be developed and once finished, transmitted in the final version along with the request for reimbursement.

As this measure is co-financed by the European Union, the beneficiary has an obligation to give visibility to the intervention following the guidelines rules.

If you are about to start a new business or develop a new project, you will surely need a good business plan. Please consider seeking our assistance for developing such a business plan as we can provide you with any information and support you need to identify the scheme that best suits your specific project and submit its application.

You can easily contact us by sending an email at the address below.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 21 June 2020 in Corriere di Malta newspaper

Inside the new measures to support businesses

In the last article we anticipated the content of the package of new measures that the Maltese Government announced a few days ago to support the recovery of the economy following the COVID-19.

Today we can provide more detail in our analysis and, in this article, we intend to summarise the main incentives that are made available for business support. Such financial aids include the drafting of business plans, the investments in machinery, equipment, materials, assistance to open new markets and for the training of employees.

Businesses are facing a new reality now that the COVID-19 emergency is behind them and will therefore have to redesign their business plans so that they can tackle the new challenges with determination. For this purpose, an aid measure of up to EUR 5,000 has been introduced for the development of business plans by external consultants. The budget allocated for this measure is EUR 2.5 million and will allow you to use more technology in your business by guiding the country more and more towards a digital economy.

In the construction sector, EUR 4 million has been allocated to enable companies to purchase modern, more efficient machinery that reduces environmental impact as well as reduces costs. The maximum incentive each company can get is EUR 200,000.

Those companies that in 2019 obtained a tax credit through Microinvest, the development support measure managed by Malta Enterprise, the operational arm of the Government, will now be able to obtain the conversion of 30% of the tax credit into a corresponding contribution to the cost of restructuring and improving offices and factories, investments in machinery and other equipment. This measure was designed to support those at a disadvantage having made investments last year, just before the outbreak of the pandemic. The maximum grant is EUR 2,000 for all companies, while it reaches EUR 2,500 for companies located in Gozo, family-run businesses and those run by women entrepreneurs.

As Malta’s traditional business markets may be in a weak position at the moment, opening up to new markets such as the African continent, the Middle East and Latin America can strengthen the capacity for economic recovery even if there is an element of risk that hinders access to these markets. To encourage this new opening and help companies to address this risk, EUR 10 million has been put in place to activate an export credit guarantee system to be managed by Malta Enterprise with the help of Malta Development Bank.

In addition, Malta Enterprise will define a cash grant in the maximum limit of 80% of eligible costs to support companies in the implementation of projects that increase or start the production of products being relevant to COVID-19 or that involve the diversification of existing production towards products connected with COVID-19.

Investments must be completed within 6 months from the start of work and eligible costs must be incurred after 1 February 2020. These include material and intangible goods, the cost of personnel developing tools for collecting and processing data (including Artificial Intelligence solutions) to support the medical profession and public issues associated with COVID-19. Also included are the costs for testing new plants and the material costs required for such tests and the data sets acquired to the test the processing and data collection processes. The measure will be available until 31 December 2020.

Finally, Malta Enterprise will strengthen an existing skills development measure, called the Skills Development Scheme. This measure will enable more beneficiaries to be reached through an additional EUR 5 million to be allocated to small businesses, those with no more than 50 employees. The aim is to support employee training, especially internal training by focusing on sharing skills between the most experienced and the youngest.

As you can see the measures activated by the government are numerous, you only have to wait for the enactment of the operational criteria and then activate in the preparation of any business plans and applications for access to the different facilitative opportunities.

Please do remember that if you need assistance in this regard you can contact us by writing to the email address below. We will be happy to help you.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 11 June 2020 in Corriere di Malta newspaper

‘A Better Tomorrow.’ The Government’s new measures to boost the economy

A couple of months ago we anticipated that new governmental measures would be launched to support the restart of the economy. Such new measures complement those already approved in recent months and are all in response of the crisis caused by COVID-19.

The Prime Minister has in fact just announced a series of new measures to enable the economy to recover rapidly in the wake of the crisis caused by COVID-19 by putting in place a EUR 900 million package partly designed to support and develop businesses.

The relaunch plan under the name “A Better Tomorrow” is based on three main pillars:

  1. Reduce costs for companies and support them with new funding.
  2. Promote domestic demand by encouraging consumption.
  3. Provide direct support to companies by encouraging work.

In this article we will examine in detail why these measures are relevant for businesses. Please notice that our analysis is based on the first official information released by the Government. It will take a few more days for the Government to announce further application provisions.

In any case, at present, the relevant measures are as follows:

  • The wage supplement already provided by the first COVID-19 measures will remain unchanged until September 2020 and tourism companies will continue to receive the allowance of 800 euros per month for each employee in the case of full-time work and 500 euros for part-time employees. The sectors concerned are tourist accommodation, travel agencies, language schools, event organisation and air transport. Other companies that do not belong to the tourism sector, which are already included in Annex A, will receive a total of 600 euros for each full-time employee and 375 for part-time employees from July to September 2020;
  • Reimbursement of 50% of electricity bills paid by companies for three months (July, August and September) up to a maximum of 1,500 euros per applicant;
  • Companies listed in Annex A and B may benefit from a concession of up to 2,500 euros for the cost of renting commercial space for July, August and September;
  • The deferral regime for the payment of taxes will be maintained until September 2020, with deferred payments to be settled for a period of 12 months. From 1 July, no deferral will be allowed for the payment of tax and social security contributions established by the “Final Settlement System tax and social security” withheld from wages;
  • Those who have invested in their activities will be helped by converting up to 30% of tax credits through the Microinvest programme into cash grant. A total of 5 million euros will be distributed. Businesses in Malta will receive a maximum of 2,000 euros, while companies in Gozo and those run by women will receive up to 2,500 euros;
  • Financing of 5,000 euros per company, especially small ones, to develop new business plans an re-engineering their business;
  • Funding for employee training for companies employing less than 50 people with an endowment of EUR 5 million for the current Skills Development Scheme run by Malta Enterprise;
  • A refund of 33% will be granted in port taxes for a period of 6 months for those ships carrying goods to Malta excluding transfer operations;
  • A 10% refund will be granted for a period of 6 months in container discharge fees on import and export of goods, but not for transhipment operations;
  • Up to 10,000 euros will be granted aid to companies investing in digital promotion campaigns for new foreign markets, while up to 80% of the costs incurred by companies for participation in international trade fairs that have been cancelled will be reimbursed;
  • Aid, coordinated by the Malta Development Bank, is planned for those companies looking to new markets with an endowment of EUR 10 million to establish an export credit guarantee system;
  • 4 million has been allocated to enable the construction industry to modernise its machinery in order to make them more efficient and environmentally friendly. Contributions of up to 200,000 euros will be made available.

This set of measure is the largest injection of funds the Government has ever made in Malta’s history. In the coming days we shall keep you updated on any relevant news and on the implementation procedures of the measures described above.

Please do not hesitate to contact us should you require any assistance.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com