Cap. 325 Art. 5AInvestment incentive scheme.

(1) Where a qualifying company incurs expenditure in acquiring qualifying assets and the aggregate expenditure of the company on such assets during any relevant year and in the preceding six accounting periods:

(a) is equivalent to or exceeds a percentage (in this subarticle referred to as "the qualifying percentage") of the company’s total sales during the same period, the income derived by such company, from its trade or business, during the relevant year as is proportionately attributable to its increased export sales as determined in terms of subarticle (2) shall be taxed at a reduced rate of income tax as is determined by reference to the qualifying percentage as follows: Qualifying percentage Applicable rate of reduced income tax % % 8 17.50 9 8.75 10 0.00 Provided that the six accounting periods preceding the relevant year shall be accounting periods the profits of which fall to be charged to income tax in year of assessment 1998 or subsequent years of assessment and, where the number of such accounting periods preceding the relevant year are less than six, the qualifying percentage referred to in this paragraph shall be determined for the period of time commencing from the first day of the accounting period the profits of which fall to be charged to income tax in year of assessment 1998 and ending on the last day of the relevant year: Provided further that where a company was not in

*1st November, 2000 - see Legal Notice 135 of 2001. existence during all of the six years preceding the relevant year, the qualifying percentage referred to in this subarticle shall be determined for the period of time during which such company was in existence; or

(b) is equal to or exceeds €16,305,613.79, the income derived by such company from its trade or business during the relevant year as is proportionately attributable to its increased export sales as determined in terms of subarticle (2) shall be exempt from income tax: Provided that:

(i) if the number of days comprised in the period of time commencing from the first day of the accounting period the profits of which fall to be charged to income tax in year of assessment 1998 and ending on the last day of the relevant year, is less than two thousand five hundred and fifty-five; or

(ii) the number of days comprised in the relevant year and in the preceding six accounting periods is less or more than two thousand five hundred and fifty-five, the amount of €16,305,613.79 shall be increased or reduced to an amount arrived at by multiplying €16,305,613.79 by the proportion which the number of the days comprised in the aforementioned periods bears to two thousand five hundred and fifty-five days.

(2) The income derived by a qualifying company from its trade or business during the relevant year and which shall be exempt from income tax or taxed at the reduced rates of tax in accordance with the provisions of subarticle (1), shall be calculated in accordance with the formula set out in article 5(2): Provided that a qualifying company may not claim a benefit under this article for any year of assessment in which it has also claimed a benefit under article 5.

(3) A qualifying company may benefit from the incentive provided for by this article for not more than ten years of assessment which years need not be consecutive.

(4) For the purposes of this article:

(a) there shall be excluded any income which is not derived by the company from its trade or business;

(b) the amount of total sales and export sales shall be calculated free on board and where the sale is made pursuant to a contract of works, it shall include the uninvoiced value of any materials and components provided by the customer.

(5) In this article: "expenditure in acquiring qualifying assets" means expenditure incurred in acquiring assets in respect of which an investment allowance can be claimed in terms of article 7, excluding any expenditure incurred on non-commercial motor vehicles; "non-commercial motor vehicles" means those vehicles to which article 14(3) of the Income Tax Act applies; "relevant year" means any accounting period of a qualifying company which ends in the year preceding year of assessment 1998 or any subsequent year of assessment as the case may be; "accounting period" means the accounting period as determined by reference to article 11 of the Income Tax Act; "profits" and "income" shall in all cases be taken as comprised in the company’s chargeable income for income tax purposes after account has been taken of any incentive or benefit obtained by the company under the provisions of this Act.

(6) With effect from such date as may be determined by the * Minister by order in the Gazette , the provisions of this article shall only be applicable to:

(a) qualifying companies which existed on the day immediately preceding such date and, in the case of companies incorporated outside Malta and which had been registered as oversea companies in terms of the Companies Act, were so registered on the day immediately preceding such date;

(b) qualifying companies incorporated in Malta or registered as oversea companies after that date which carry on or intend to carry on a trade or business which relates to a project in respect of which the Corporation has prior to such date approved the granting of any assistance in terms of this Act, and such companies shall continue to be so entitled to the incentive contemplated under this article up to and including the year of assessment 2021 or such other date as may be prescribed by the Minister.