The Government of Malta, in its budget for 2005 announced the introduction of a number of fiscal and financial incentives for audiovisual productions shooting in Malta as from this year.
The incentives are expected to take the form of a cash grant given to qualifying productions on the portion of eligible expenditure spent in Malta. Up to 20% of this expenditure could be rebated to a qualifying production company.
The relevant regulations for these incentives are currently being finalised, and shall be enacted in June of 2005.
Feature film and television productions, mini-series, animation and documentaries are all eligible for the incentives, as long as they are at least partially produced in Malta.
A qualifying production would be required to present a provisional application to the Malta Film Commission, including a detailed projection of the Malta budget for the production. Upon assessment, which would be based on specific guidelines, the Commission would grant a provisional approval. The final approval would be granted upon review of a final application, including audited accounts and a detailed analysis of the Maltese production expenditure, no later than 12 months after shooting is completed.
The rebate to be given as a cash grant on completion of an audiovisual production would be calculated on the following expenses incurred in Malta:
Labour, hotel bed nights, transportation equipment and hire, location fees, catering services, per diems, leasing of offices, computer equipment, props (sourced locally), property (owned locally), animals, equipment, vehicles, boats and locations. Other qualifying expenditure includes courtesy payments, telecommunications, laundry and cleaning services and professional services.
Presentation of expenditure should be net of V.A.T. which is charged at 18% and is fully refundable on all goods and services.
The BUSINESS PROMOTION ACT provides fiscal incentives for companies engaged in certain target sector activities, including the film industry.
Maltese and foreign registered companies involved in the production of audio visual productions consisting of feature films, television films, advertising programmes or advertisements and documentaries can benefit from a highly favourable tax structure.
Companies engaged directly in audiovisual productions as aforesaid may avail themselves from a reduced rate of tax of 15.25%.
Investment tax credits are also available. Tax payable can be reduced or eliminated by tax credits calculated as the higher of:
– 50% of the amount invested; or
– 50% of the first 2 year wage cost of new jobs created
– For SMEs the percentage for both the above is increased to 65%
– Unutilised investment tax credits may be carried forward to the following year and increased by 7%.
The interaction of the above incentives would normally result in minimal or no taxes being paid for a number of years.
Building of Film Sets
The building of film sets has to be approved by the planning directorate of the MALTA ENVIRONMENT AND PLANNING AUTHORITY
For structures standing less than one month a DEVELOPMENT NOTIFICATION ORDER has to be presented to the MEPA for approval.
For film sets intended for a period longer than one month a BUILDING DEVELOPMENT APPLICATION has to be presented to MEPA including designs of the set and other required information.
All documents would have to be signed by a local architect. Administration fees are charged by MEPA in both cases.
Importation of goods
Goods for the production of films can be imported to Malta on a temporary permit as long as the Comptroller of Customs is satisfied that they have been imported for temporary use only. MALTA CUSTOMS usually require that the goods imported against a temporary import permit are identifiable.
Customs take note of the description of the goods, including any identifying marks, such as serial numbers, make etc and can also affix seals where necessary. Consumables (including foodstuffs) cannot be imported on a temporary permit and any import tax must be paid on importation.
The whole quantity of goods should be re-exported within three months from the date of importation or within such further period allowed by the Comptroller of Customs. If he so requires, the importer shall apply to the Comptroller of Customs for an extension of the import period before the expiry of the first three months.
Normally, a deposit must be paid to the Comptroller of Customs or security (e.g. a bank guarantee) covering the duty which would otherwise be payable. The deposit is refunded (or revoked, in the case of security) on the exportation of goods in terms of the applicable rules. The goods may not be disposed of in Malta, save in accordance with the terms of a permit issued by the Comptroller of Customs.
A clearance from the Maltese Health Authorities, C.I.T.E.S. and the Veterinary Services is required in cases of importations of animals.
Goods imported on a temporary permit must be entered on a Customs Single Administrative Document Form. The importer shall produce certified invoices or substitute documents, delivery order, package list etc. In order to facilitate clearance, importers shall declare any identification marks as appropriate.
ATA Carnets are widely accepted and recommended for the importation of goods for film production. ATA Carnet allows the temporary importation of goods without the need of making deposit/guarantee or submitting any Customs Declaration.
Import licences and other import permits are not normally required for goods on a temporary permit. However, appropriate permits must cover certain goods such as arms (including imitation) and ammunition, wireless equipment, animals etc. Importers are advised to inquire in advance on the import requirements for particular items by calling (+356) 2123 5135.
If all or part of the goods imported on a temporary import procedure are not re-exported, the importer shall apply to the Comptroller of Customs and pay the import taxes and carry out all the necessary import procedures applicable to the particular goods. Before any guarantees and other security are returned to the importer, import dues and other customs formalities for items not re-exported need to be settled.
Employment of Minors and Young Persons
Legal Notice 91 of 2000, titled PROTECTION OF YOUNG PERSONS AT WORK PLACES, regulates the employment of minors and young persons in Malta. Minors in Malta are children under fifteen years of age. Young persons are all children and adolescents under eighteen years of age.
Before employing any minor, production companies require an approval in writing from the Director for Industrial and Employment Relations.
Before engaging or offering work to any young person, an employer shall carry out an assessment of the occupational health and safety hazards which may be involved at the place of work, and such assessment shall be repeated whenever there is any major change in working conditions.
Parents or chaperones must be present at all times and shall have the right to be within sight and sound of the particular minor. Parents may accompany the minor to wardrobe, makeup, hairdressing and dressing room facilities.
No minor is required to work in a situation, which places him or her in clear and present danger to life or limb. The minor, after discussing such conditions with stunt coordinator and parent, may refuse to work in such conditions. There must be one person designated on each set to coordinate all matters relating to welfare of the minor.
Lodging and meal allowances apply to the parent as well as the minor. When required, a qualified child-care person must be present on the set during workday. A safe and secure place must be provided for rest and play on set.
All auditions and fitting activities for children under fifteen years of age are to be held after school hours and complete by 9pm. Adults must be present at and during any call.
Workday for minors begins at 7am or 6am for location productions. Workday must end no later than 8pm on days preceding school days, and 10pm on other days.
Work time is not to exceed 6 hours for under 6 years old, and 8 hours for 6 years and older.
Work time does not include mealtime, but includes a mandatory 5 minutes break. Rest from end of call to next start is 12 hours.
Income tax is paid by the employee unless the employer offers to reimburse such employees for the tax paid or payable. The general principle is that employees are taxable at the normal rates varying between 0-35% on all their income (including bonuses, fringe benefits etc) but:
(a) subject to any applicable double taxation treaty, in the case of film production activities, the Maltese Inland Revenue’s practice is that in the case of expatriate employees who are employed by a foreign company, they are charged to tax only if they are present in Malta for a period exceeding 6 months in total (not necessarily consecutive) and the tax charge will be restricted to income received/ remitted in Malta;
(b) although subject to the normal tax rules, employment of local extras would usually be part time employment for tax purposes, and in that case a withholding tax of 15% would apply instead of the normal tax rates.
Other employment costs
Other material costs to be budgeted apart from the employees’ basic salary include:
(a) a minimum of one day of rest per week;
(b) vacation leave amounting to 4 working weeks plus 4 days per annum.
Public holidays that fall on weekends are added to vacation leave over and above (in 2003, there are four such days, and three in 2004). Part-timers satisfying certain terms and conditions are entitled to a pro rata leave entitlement by reference to hours worked. Vacation leave is also pro rated in the case of employees working for less than the whole year;
(c) statutory annual bonuses of Lm58 payable in each of June and December (i.e. total Lm116) and another Lm52 payable in each of March and September (i.e. total Lm104). Part-timers satisfying certain terms and conditions may be entitled to pro rata bonuses by reference to hours worked.
(d) such sick leave as may be applicable to the particular employees under any applicable law or regulation (often subject to a minimum period of service).
(e) payment for overtime on working days is at 1.5 the normal rate and whilst payment for working on Sundays and holidays is at twice the normal rate.
Social Security Contributions
Under normal rules, so as to be exempt from paying social security contributions in Malta, an expatriate has to provide official evidence to the Maltese authorities that he or she is paying national contributions elsewhere. In the case of the film industry, an exemption from payment of social security contributions can be obtained on the basis that the expatriate employees would only be present in Malta for a short period of time and in connection with a film production.
A film company can make a block application listing the respective expatriates and their details. The DEPARTMENT OF SOCIAL SECURITY subsequently issues one ‘en bloc’ exemption from Maltese social security contributions covering the said employees.
The normal rule is that social security contributions in respect of employees holding two or more employments are paid only in respect of the highest basic wage or salary. Social security contributions amount to one-tenth of the basic wage (excluding overtime, bonuses, extra allowances, benefits in kind and commissions) subject to a minimum of Lm5.31 per week and to a maximum of Lm12.90 per week. Social security contributions are payable by both the employer (one-tenth of basic wage as set out above) and by the employee (once again, one-tenth of basic wage as set out above).
As a matter of policy, the DEPARTMENT OF SOCIAL SECURITY does not require charging of social security contributions for the recruitment of extras for film productions, although legally payment of such contributions may be due in certain circumstances.
Value Added Tax
Malta has a Value Added Tax charge of 18% on all goods and services supplied in Malta and on all taxable importations.
The VAT rate for accommodation in hotels and licensed premises and the supply of alternative energy equipment is 5%. Certain supplies are exempt (e.g. food and medicine). On the majority of goods and services supplied a VAT refund is given to the person/company acquiring the service or good – depending on the types of supplies carried out by that person/company.
Foreign film productions shooting in Malta can also claim refunds in the following cases:
1) Input VAT incurred on property rental or hotel accommodation (bed and breakfast, half board or full board) with respect to all those persons, foreign or otherwise, directly engaged in the production of a foreign film, TV series, commercial or documentary;
2) Input VAT on restaurant bills could be claimed back, even it falls outside the accommodation package, with respect to all those persons, foreign or otherwise, directly engaged in the production of a foreign film, TV series, commercial or documentary;
3) Input VAT incurred on fuel may be claimed back when consumed by vehicles, commercial or otherwise, used directly in connection with the production of a foreign film, TV series, commercial or documentary;
4) Input VAT on the cost of taxis and car hire relative to the film production – excluding however VAT on purchase of non-commercial motor vehicles;
5) Input VAT on the cost of materials used for the purpose of the film production which would not be otherwise recoverable.
Payment of VAT on imported material used for the development of film projects and left in Malta after the conclusion of the production would be deferred. Thus no VAT is paid at the point of entry.
VAT refunds are affected within 5 months from the later of the expiration of the time allowed for furnishing the VAT return for the particular VAT period or from the day on which the said return is made.
Any foreign national may proceed to Malta, with an entry visa, (if such is required for the foreign national concerned) and remain in Malta for a period of up to three months from their date of entry under the ‘no employment’ condition.
Foreigners seeking to work in Malta need to be in possession of a valid work permit.
Employment licences are issued to employers wishing to engage foreigners for a determined period and for a specific purpose, only after it has been ascertained that every effort has been made to engage a suitable Maltese citizen. Understanding the high level of expertise required in certain areas of filmmaking, the EMPLOYMENT AND TRAINING CORPORATION cooperates readily with foreign film companies shooting in Malta.
Production co-ordinators of local or foreign film companies seeking to employ foreigners on film projects in Malta are to download the work permit applications for their employees from the website of the EMPLOYMENT AND TRAINING CORPORATION and forward them at least 10 days before their first working day in Malta.
Licences are normally issued with a validity of one year, and may be renewed further provided such requests are justified.