The Maltese government has recently stepped up its efforts to promote the use of venture capital as a means of financing by providing a tax credit of up to 30% of the investment to unit holders in designated venture capital funds.
To qualify, a designated venture capital fund's purpose must be to provide venture capital for Malta-based companies and the designated authority must approve, as well as hold, units in the fund. The fund must be listed on the Malta Stock Exchange and at least 85% of its assets must be in Malta, which in itself already provides an exemption from capital gains tax. Due to the level of risk associated with venture capital funds, access to the fund would usually be restricted to professional or experienced investors.
The Commissioner of Inland Revenue issues a tax credit certificate to persons holding a fully paid-up subscription in a designated venture capital fund. The certificate will entitle the person to a tax credit of 30% of the total nominal value shown on the certificate. The tax certificate may be used only after three years have passed since the securities were acquired and the tax credit cannot exceed in the aggregate €350,000.
Non-residents can already apply for a two-thirds refund of the tax withheld on dividend payments. This tax credit will further reduce their tax liability.
Frank Chetcuti Dimech