Category: Blog

It is now more important than ever to carefully consider tax implications when disposing of Australian residential  property (real estate) as a foreign resident. Over the last 6 years Australia has introduced new capital gains tax rules for foreign residents.

In this article, we consider the potential tax consequences of selling Australian residential property as a resident of the UK. The article is split into two segments:

1. Australian tax implications, and

2. UK tax implications.

Please note, the article below is a brief summary of tax legislation in both the UK and Australia. If you are planning to dispose of Australian property as a foreign resident, it is recommended that you seek professional advice specific to your situation and not rely solely on this article.

Australian Capital Gains Tax Implications

In Australia there are two capital gain tax (CGT) reliefs commonly utilised when disposing of residential property.

The first is the ‘main residence exemption’. The main residence exemption means there will generally be no tax liability upon sale of your main residence. Where the dwelling was your main residence for only part of the ownership, the full exemption is proportioned according to the number of days it was not your main residence. Please note, the exemption will remain available where the main residence was vacated and not rented out (and no other main residence election was made).

However, since 30 June 2020 foreign residents who have sold property have no longer been able to benefit from the exemption, unless they have satisfied the requirements of the life events test, covered below.

In order to qualify for the ‘life events test’, both of the following must be true:

  • You were foreign resident for tax purposes for a continuous period of 6 years or less
  • During that period, one of the following occurred:

– you, your spouse or your child under 18 had a terminal medical condition
– your spouse or your child under 18 died
– the CGT event happened because of a formal agreement following the breakdown of your marriage or relationship.

The second frequently utilised capital gains tax relief in Australia is the capital gains tax discount. When you sell or disposes of an asset, you can usually reduce the capital gain by 50% if you owned the asset for at least 12 months.

As with the main residence exemption however, the capital gains discount has now been removed for foreign residents who acquired assets after 8 May 2012.

Where foreign residents either acquired the asset on or before 8 May 2012 or had a period of Australian residency after 8 May 2012, they may apply the discount to part of their capital gain. The discount is then calculated using the ATO worksheet, attached here.

Upon disposing of Australian property and once the capital gains tax calculation has been finalised, foreign residents are liable to tax on their capital gain at a rate of 32.5%.

UK Capital Gains Tax Implications

As a resident of the UK you are normally liable to UK tax on your worldwide income and gains arising in the tax year, this is known as the arising basis of taxation. Therefore, your Australian residential property gain will normally be taxable in the UK.

Until 05 April 2023 the UK capital gains tax allowance is £12,300. However, from 6 April 2023 this is reduced to £6,000 and then again to £3,000 from 6 April 2024. Any taxable gain over the relevant allowance will be liable to residential capital gains tax rates, currently standing at 18% and 28% (depending on the size of the gain and marginal rate of income). Unlike the new rulings for foreign residents in Australia, the proportion of the gain which relates to the period of time where the property was your main residence will be exempt from the UK taxation. This is known as principal private residence relief (PPR relief).

However, where you are resident but non-domiciled in the UK, you can elect to be taxed in the UK on your UK income and gains alone, and pay UK tax on foreign income and gains only if these are remitted (brought) to the UK. This is known as the remittance basis of taxation. Electing to use the remittance basis however, means the loss of your tax-free personal allowances and capital gains tax exempt amount for the year the election is made. In many scenarios, the individual is selling the Australian property in order to purchase property in the UK. In this instance the capital gain would be remitted to the UK and thus UK capital gains tax would apply. Therefore, if you are entitled to use the remittance basis, it is important to calculate the most tax efficient method of taxation.

Where you are taxed on an arising basis (worldwide income) and you’ve paid tax in Australia on your Australian property gain, you may be entitled to a UK foreign tax credit.

Where a ‘UK resident’ has property gain from Australia, the Australia-UK double tax treaty in principle becomes relevant. However, it generally has no impact on the application of domestic law in Australia or the UK.

Contact Us

As evident above, ongoing changes to the rules for foreign residents selling Australian property means it is now crucial to understand the tax implications of disposing Australian property, particularly whilst resident of the UK.

If you require any advice or assistance with UK or Australian capital gains tax, we are here to help. Simply send us an email at the address below or fill in our contact form to arrange a free initial consultation.

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

Are you moving to the UK and renting out your property in Australia?

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

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

Non-residents of Australia are generally taxed on income derived directly or indirectly from sources in Australia (subject to the interaction of a double tax agreement). As a result of this, when you are tax resident of the UK you can be subject to Australian tax on rental income derived from an Australian source.

Gross rental income will be included as assessable income in your Australian tax return. You will then be entitled to a deduction for tax-deductible expenses incurred from renting out your Australian property. Where your deductions exceed the rental income, that loss may be offset against your other taxable Australian sourced income, or carried forward to the following tax year. Where you have generated a profit, you will be subject to tax at 32.5 percent on the first $120,000 (AUD) of net income, and then rates ranging from 37 percent to 45 percent for the remaining income.

Will I be taxed on my Australian rental income in the UK?

As a resident of the UK you are normally liable to UK tax on your worldwide income and gains arising in the tax year. Therefore, your Australian rental income will normally be taxable in the UK.

However, where you are resident but non-domiciled in the UK, you can elect to be taxed in the UK on your UK income and gains alone, and pay UK tax on foreign income and gains only if these are remitted (brought) to the UK. This is known as the remittance basis of taxation. Electing to use the remittance basis however, means the loss of your tax-free personal allowances and capital gains tax exempt amount for the year the election is made. Therefore, if you are entitled to use the remittance basis, it is important to calculate the most tax efficient method of taxation.

Where you are taxed on an arising basis (worldwide income) and you’ve paid tax in Australia on your Australian property income, you may be entitled to a UK foreign tax credit.

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

What expenses can I claim on my Australian property income in the UK?

If this is your first experience of being a landlord whilst resident of the UK, you may be unsure about what expenses are tax deductible. HMRC (UK equivalent to the ATO) provide 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 building 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 expenses.

Unlike in Australia where mortgage interest is fully tax-deductible, since April 2020, you have no longer been able to deduct any mortgage expenses from taxable rental income whilst resident in the UK. Instead, mortgage interest is used as a tax reducer, where you receive a tax credit based on 20 percent 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 receive my Australian personal allowance as resident of the UK?

If you are a non-resident for the full Australian income year (01 July to 30 June), you can’t claim the tax-free threshold. This means you pay tax on every dollar of taxable income you earn from Australia.

If however, you are an Australian resident for tax purposes during the income year, you will receive a part-year tax-free threshold. This may be relevant in your year of exit from Australia.

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

As resident of the UK, when you are in receipt of overseas income it automatically places you into the UK self-assessment regime. The return will be used to calculate any UK tax liability arising from your Australian property income and any additional relevant income.

The tax return deadline in the UK is 31 January following the tax year end (31 October for paper returns). Automatic late filing penalties will apply after the deadlines have passed.

Ways in which you can file a UK tax return:

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

How do I file my Australian tax return?

As non-resident of Australia, the due date for your tax return remains 31 October following the end of the tax year. Non-residents may obtain an extension to 15 May of the following year if they are registered with a tax agent, i.e. tax-year end 30 June 2022 would be due 15 May 2023.

Ways in which you can file an Australian tax return whilst overseas:

  • Lodge your tax return online with MyTax
  • Lodge your return by post
  • Lodge your tax return with a registered tax agent

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 to arrange a free initial consultation.

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

Patrick McGinty
Associate Director
Sheltons Accountants (Sydney)
P.McGinty@SheltonsGroup.com

When moving between the UK and Denmark, it is important to be aware of the differences that each jurisdiction imposes on areas of personal taxation. Failing to comply with the relevant procedures and local tax legislation could leave individuals with a series of penalties.

The table below highlights a list of arguably the most important areas of personal taxation that individuals should be aware of when moving between the UK and Denmark. Whilst both countries tax residents on their worldwide income, this is where similarities cease as from here on, the UK and Danish tax systems function differently in almost every way.

UK Tax System vs Danish Tax System:


UK Tax System Danish Tax System
Tax Year for individuals 6 April to 5 April 1 January to 31 December
Who is required to file a Tax Return In the UK, most individuals who are employed will pay tax on their income through payroll and are not required to file a Tax Return.

Tax Returns are required where:

  • Earnings are over £100,000 in a tax year
  • In receipt of non-UK sourced income
  • In receipt of property income
  • In receipt of taxable savings, investments and dividends
  • Claiming income tax reliefs
  • Need to pay capital gains tax
  • Self-employed or partnership income
  • Liable to high income child benefit charge
  • In receipt of taxable income which has not yet been taxed

In Denmark, most individuals who are employed and pay tax on their income through payroll are not required to file.
Tax Returns are required where:

  • In receipt of non-Danish source income
  • In receipt of property income
  • In receipt of some taxable savings, investments and dividends
  • Income from self-employment
Payroll System In the UK, HMRC operates a Pay As You Earn (PAYE) system where tax is collected by the employer through every payslip. The employer then remits the tax withheld to the tax office (HMRC). In Denmark, if you are an employee, your tax is collected through every payslip and sent to the tax authorities. If you are not an employee, taxes are paid through monthly instalments by the individual.  
Tax Free Allowance UK residents (and in some instances non-residents) receive a tax-free personal allowance each year. In 2022-23, the tax-free personal allowance is £12,750. In certain circumstances this can be reduced or increased. The tax-free personal allowance in Denmark is DKK 46,600 for a full year.
Income Tax The UK operates progressive rates of income tax which include:
  • £0 to £12,570 (personal allowance) – 0%
  • £12,571 to £50,270 (Basic rate) – 20%
  • £50,271 to £150,000 (Higher rate) – 40%
  • Over £150,000 (Additional rate) – 45%
    		•  Denmark operates progressive rates of tax on personal income. The rates for 2022 are as follows:

    State tax:

    • Labour market (AM-bidrag)* 8%
    • Bottom tax rate 12.1%
    • Top tax rate 15% applies to income more than DKK 552,500 per year **

    Local tax rates:

    • Municipal tax rate (average) 24.983

    In Denmark there is however a tax ceiling, which is the maximum tax rate applicable to personal income. This ceiling is designed to ensure that the total income tax does not exceed 52.07% for personal income. Church tax and labour market contributions are not included in this tax ceiling.

    *Applicable on gross salary before tax
    **Pro rata
    Capital Gains Tax

    In the UK there is a Capital Gains Tax allowance of £12,300 per year (2022-23). After this your tax rate will depend on whether you’re a ‘Basic rate’ tax payer or ‘Higher rate’ tax payer:

    Basic Rate: 18% on residential property and 10% other chargeable assets

    Higher Rate: 28% on residential property and 20% other chargeable assets

    		 In Denmark, net positive capital gains income is taxed at 37% up to DKK 47,400 (DKK 94,800 for married couples) and 42% thereafter.
    Inheritance Tax In the UK, the standard Inheritance Tax threshold is £325,000 (which can increase to £500,000 where the home is passed to children of the deceased). Where an estate is valued over £325,000 there is a 40% Inheritance Tax rate. In Denmark, there is no Inheritance Tax on the first DKK 312,500 (2022). The inheritance tax for deceased´s children and descendants, stepchildren and their descendants, parents or cohabitants during the last two years of one´s life is 15%, for others the inheritance Tax is 25%.
    Tax Return Deadline 31 January following the end of the tax year (31 October if filing a paper return) 1 May following the end of the tax year. If you have foreign income or are self-employed it is 1 July.
    Tax Payment Deadline 31 January following the end of the tax year. This is the same as the tax return deadline. 31 December in the tax year if you want to avoid interest/surcharges. If you pay after 31 December but before the deadline 1 July 2022, you will avoid the surcharges and only pay the day-to-day interest of 1.7% from the 1 January till the payment date.
    Assessable on Worldwide Income UK residents, for tax purposes are taxed on their worldwide income*. Danish residents, for tax purposes are taxed on their worldwide income.
    National Insurance/ ATP In the UK, both the employee and employer are required to pay national insurance contributions each month. The rates vary from 0% to 13.8%. National Insurance is also due on self-employed income. In Denmark, both the employee and the employer are required to pay labour market supplementary pension (ATP).
    The employee part is DKK 94.65 per month and the employer part is DKK 189.30

    *Assessable on worldwide income (UK) – Individuals resident of the UK with non-domicile status can opt to claim remittance basis and not be taxed on their overseas income as long as it is not remitted to the UK.

    The UK and Danish Tax Systems: An Overall Comparison

    Determining which country has the more competitive tax system is relatively straightforward.

    Whether your income is subject to income tax or capital gains tax, it is evident from the table above, that the UK offers greater tax-free allowances and lower rates of tax. For example, the UK offers a capital gain allowance of £12,300 with a top rate of tax at 28% (residential property), whereas Denmark has no allowance and a 14% higher tax rate standing at 42%.

    As tax systems in the UK and Denmark are extremely different, it requires in-depth analysis to understand how each system operates and the implications which might then present for an individual on a case-by-case basis.

    If you require any advice or assistance with UK or Danish personal tax, we are here to help. Simply send us an email at the address below or fill in our contact form to arrange a free initial consultation.

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

    John Munch
    Tax Manager
    Sheltons Accountants (Copenhagen)
    J.Munch@SheltonsGroup.com

    Are you moving to Denmark 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 and Danish tax issues and questions that arise when becoming a non-resident landlord in Denmark.

    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 Denmark?

    If you’re classified as a tax resident in Denmark, you will need to declare your worldwide income to skat (HMRC equivalent in Denmark). Therefore, as long as you are resident of Denmark, you will need to declare your UK rental income on your Danish tax return.

    Where you have paid tax in the UK on your UK property income, you may be entitled to a Danish foreign income tax offset. As the Danish tax year runs from 1 January to 31 December, the UK property income/expenses along with any UK tax paid will need to be proportioned appropriately.

    In situations where you own a property, but do not receive rental income, or in instances where rental income is below market rates, a tax on the property will apply, no matter where it is located.

    Where a ‘Danish resident’ has property in the UK, the Denmark-UK double tax treaty becomes relevant.

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

    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.

    As Denmark is a country in the European Economic Union, it’s likely you will be entitled to your 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 Denmark?

    Regardless of whether you’re a resident of Denmark, 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 Danish 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)
    C.Iles@SheltonsGroup.com

    John Munch
    Tax Manager
    Sheltons Accountants (Copenhagen)
    J.Munch@SheltonsGroup.com

    10 ways you can reduce your tax liability as a UK resident taxpayer

    1.Take advantage of pension schemes – Pension contributions made through your employment can be deducted from your pay before your wages are taxed (under the net pay arrangement). Alternatively, the government will top-up your pension at the basic rate (20%), commonly known as ‘relief at source’. If you’re a higher or additional rate tax payer, your gross contributions will also extend your basic rate and additional rate bands.

    2. Exploit the Marriage Allowance – If you’re married or in a civil partnership, you may be eligible for the marriage allowance. The allowance permits you to relinquish any remaining personal allowance from the lower-earning partner to the higher earner. A maximum of £1,260 can be transferred in 2022-23, however in order to qualify, the higher earner must be a basic-rate taxpayer.

    3. Utilise your personal savings allowance – The current tax allowances (2022-23) allow you to earn £1,000 of interest on savings tax-free if you’re a basic-rate taxpayer and £500 if you’re a higher-rate taxpayer. You will only pay tax on interest over these thresholds.

    4. Make use of your ISA allowance – All UK residents are entitled to open an individual savings account (ISA) and contribute up to £20,000 each tax year. An ISA is a tax-free savings or investment account shielding your investment from income tax, tax on dividends and capital gains tax.

     5. Self Employed: Include all tax-deductible expenses – Working for yourself can be extremely demanding, leaving little or no time to determine which business expenses are tax-deductible. Typical expenses which self-employed individuals usually miss are: Phone costs, mileage allowance and running costs for your home office.

     6. Dividend Allowance – Although the dividend allowance was reduced from April 2018, you can still earn up to £2,000 in dividend income tax free.

     7. Consider your Capital Gain Allowance – Utilising your capital gain allowance of £12,300 (2022-23 allowance) can save you over £3,000 in capital gains tax. Where you don’t use the allowance in a tax year, it’s lost forever, so it’s important to consider when you come to sell assets (shares, second homes etc)

     8. Invest in Enterprise Investment Schemes – If you purchase shares in a qualifying company, you will be able to reduce your tax bill by 30% of the amount invested in that year. The maximum amount you can invest in EIS companies in a tax-year is £1 million, which could result in saving up to £300,000 in income tax.

    9. Benefit from the Rent-a-room relief – If you are letting out furnished accommodation in your home, or considering doing so, you can earn up to a threshold of £7,500 per year tax-free. 

    10. Landlord: Include all tax-deductible expenses – As a landlord, it’s easy to miss some tax-deductible expenses when completing your self-assessment tax return. 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 which are missed include buildings insurance, accountancy fees, allowable mileage and replacement of domestic goods.

    If you require any advice or assistance with UK personal tax, we are here to help. Simply send us an email at the address below or fill in our contact form to arrange a free initial consultation.

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

    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/

    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