Research and Development (R&D) together with Innovation are essential elements for undertakings to stay in the game, whilst providing lucrative opportunities for growth, the development of improved products or services and for the efficient operation of the business. In recognition of the importance of R&D and Innovation, various incentives (at both local and EU level) for Small and Medium enterprises and Large companies established in Malta have been introduced to encourage and reward greater investment in R&D activities and Innovation.
What makes this incentive attractive is the fact that it may be applicable to companies operating in any sector, that is, it is not only restricted to activities carried out in a laboratory structure, but it might consist of activities that a company is carrying on in its day to day operations, such as developing a new product, process or service or changing/modifying an existing product, process or service. Generally, qualifying R&D activities must seek to achieve scientific or technological advancement and involve the resolution of scientific or technological uncertainty. Identifying and quantifying eligible activities for the purpose R&D incentives may be quite complex but with potential savings of 25%- 70% (depending on size of the enterprise) of eligible costs, it is worth checking if your activities meet the criteria or otherwise.
Collaborative R&D projects which meet the qualifying criteria are also supported by increased assistance in the form of tax credits and/or cash grants of 40%-80% of eligible costs (depending on the size of the undertaking) and other conditions which shall be adhered to.
Since R&D projects may involve a high degree of uncertainty, it may be necessary to conduct a feasibility study prior to the commencement of such project. Feasibility studies may be part-financed through a non-repayable cash grant of 50%-70% of eligible costs, depending on the size of the undertaking.
Investment in research infrastructures and projects for the innovation of production or delivery processes may also be part-financed through EU funding to the extent of up to 50% of eligible costs.
First and foremost, this is largely dependent on whether you are an SME or a large company. Some schemes are solely restricted to SMEs; however, there are certain schemes which can be accessed by both SMEs and large companies. The determination of the size of the undertaking requires a group-wide analysis with reference to linked and partner enterprises rather than considering the applicant undertaking in isolation. This exercise, which can be quite complex, is central to the application process as apart from eligibility it also impacts aid intensity.
Eligible costs incurred in relation to the qualifying R&D activity, may consist of employee costs, materials and utilities consumed, contracted R&D expenditure, some types of software costs and costs of instruments and equipment used for the project. The eligible costs are subject to certain conditions which must be met for the R&D claim to be valid.
If you have questions about your eligibility for R&D tax credits, or how much your business could potentially claim, we invite you to get in touch with our Incentive Legislation Team who can assist in uncovering all of your qualifying R&D activity and costs and make sure your business is realizing the full potential of the R&D tax incentives.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.