Film & Audio Visual Industry
Malta is an ideal base for production offering a large diversity of locations, excellent water film production facilities as well as financial incentives to production companies.Malta also provides a cost and tax-efficient base for setting up film distribution companies and holding structures rendering an ideal gateway for audiovisual rights distribution and is an attractive jurisdiction for setting up of film funds by offering tax exemptions to funds and to non-resident investors.
The island offers versatile filming locations of diverse scenery including a baroque capital city, baroque palaces and cathedrals, bastions and walled cities, steep cliffs, rocky bays, sandy beaches, spectacular natural harbours and typical old Mediterranean and fishing villages. Malta boasts also excellent water film production facilities and 2 large water tanks with natural horizons with the sea, these are situated within the Mediterranean Film Studios. The Studios also offer production office and workshop space and are situated next to a 17-acre space where many sets were built. Malta has been hosting foreign productions since 1953 and a number of films where shot in Malta including Midnight Express, Popeye, The Count of Monte Cristo, Gladiator, Troy, Munich, Game of Thrones, By the Sea, World War Z, Risen, Agora, The Da Vinci Code, and Assassins Creed.
Cash Grants / Refunds
Production companies filming in Malta qualify for financial incentives consisting of cash grants calculated as a portion of eligible expenditure incurred in Malta. 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.
Qualifying expenditure includes
- EU below the line labour
- local labour (expenditure on Maltese employees engaged with the production company)
- location fees
- daily allowances paid to a foreign crew working in Malta
- rental of equipment and props
- leasing of offices, warehouses, facilities and stages
- hotel accommodation and real estate letting
- catering services
- telecoms (including fixed/mobile telephony and internet services)
- certain air travel and shipping expenses
- professional services
- other expenses approved by the Malta Film Commission
Companies that contribute to the Maltese audiovisual industry through the investment in the audiovisual infrastructure qualify to tax credits that consist in a deduction from the tax chargeable on income derived from a government approved audiovisual industry related investment. Companies engaged in the building and management of sound stages and other production facilities, post-production services, rental of filming, light and grip equipment as well as companies investing in film laboratories qualify for tax credits calculated as follows:
- up to a maximum of 25% of the cost of acquisition, construction, development or improvement of an industrial building, including labour costs
- up to a maximum of 40% of expenditure on plant and machinery and intellectual property
Tax incentives are also available in respect of companies engaged in providing film studio and film sets, editing facilities and filming equipment required in the production of films and similar productions.
Malta is a party to the European Convention on Cinematographic Co-production and has also a bilateral treaty with Canada. The purpose of the European Convention is to promote the development of European multilateral cinematographic co-production while defending the cultural diversity of the European countries. In order to obtain co-production status, the production must involve at least three co-producers that are established in three different countries that are parties to the Convention. The participation of one or more co-producers who are not established in a Convention member country is possible as long as such co-producer/s total contribution does/do not exceed 30% of the total production cost.
VAT & Other Issues
Maltese VAT legislation is based on the EU VAT legislation. VAT is charged at 18% on the supply of goods and services made in Malta, on the intra-Community acquisition of goods (acquisition of goods from other Member States) as well as on the importation of goods from non-EU countries. A reduced VAT rate of 5% applies in respect of certain supplies, including the provision of accommodation in hotels. The law also provides for a number of exemptions from VAT. Subject to certain conditions and limitations, VAT incurred in the course of business is fully recovered.
- property rental, hotel accommodation and restaurant bills
- fuel consumed by vehicles, commercial or otherwise, used directly in connection with the production
- taxi services and car hire relative to the film production
- materials used for the purpose of the film production which would not be otherwise recoverable
The Maltese authorities tend to adopt a flexible and practical approach in respect of foreign or local companies engaged in audiovisual production in Malta in such a way as to facilitate as much as possible the processing of the required permits and authorisations. Audiovisual productions in Malta typically give rise to other tax and compliance issues, such as for instance:
- customs procedures relating to importation of equipment or material
- location permits
- employment issues and work permits
Tax benefits for Film Distribution & Holding Structures
Malta boasts of a highly competitive EU-approved participation exemption and tax refund regime which represents interesting tax planning opportunities for companies or branches involved in the international distribution of film and audiovisual rights as well as tax efficient opportunities for holding structures.
Maltese companies are taxed at a standard corporate tax rate of 35%. Dividends paid to shareholders are taxed at corporate level and are not subject to withholding tax or further tax in the hands of the shareholders. Where a Maltese company or a Malta-registered branch of an overseas company distributes dividends/profits to its shareholder, the shareholder qualifies for a refund of the tax suffered at corporate level. In general, the tax refund available to a shareholder upon the distribution of profits is 6/7ths of the 35% underlying tax paid by the distributing company therefore producing a typical overall Malta tax burden of 5%.
Maltese law provides attractive exemptions and tax refunds aimed at attracting holding companies to set up in Malta. A Maltese company deriving profits from a Participating Holding (PH) in a foreign company/entity is, subject to certain conditions being met, exempt from Malta tax on such profits. A PH is the direct holding of 10% equity shares in a non-resident company/entity the equity shareholding level may be less subject to certain conditions being met.
Tax Benefits for Film & Media Funds
Malta offers a tax efficient base for setting up and operating a Film or Media Fund. The fund and its non-resident investors are entitled to a number of exemptions from tax on income and capital gains. In order for a fund and its non-resident investors to benefit from the tax exemptions it is not necessary for the fund or the investment to be linked with films or audiovisual productions made in Malta.
Tax Treatment of Funds
Funds can be registered in Malta as Professional Investor Funds (PIFs). A PIF may be set up as an incorporated open-ended investment company (SICAV), as a close-ended investment company (INVCO), as a limited partnership, a mutual fund or a unit trust. In essence, there are 3 types of PIFs depending on investment thresholds and other criteria.
Funds are classified as prescribed or non-prescribed funds. A prescribed fund is defined as a fund resident in Malta, which has at least 85% of its assets situated in Malta. A fund that has more than 15% of its assets situated outside Malta is a non-prescribed fund. All income of collective investment schemes is exempt from tax in Malta, except for the withholding tax (of 15% in case of bank interests and 10% in case of other income) applicable to local investment income in the case of prescribed funds.
It is possible to redomicile funds resident outside Malta to Malta thereby allowing the fund itself and the non resident investors to benefit from the tax exemptions referred to above.
Tax Treatment of Investors
The distribution of income of a fund to non-resident investors is exempt from Maltese income tax and not subject to any withholding tax. Furthermore, there are no Maltese capital gains taxes imposed on the disposal of units in both prescribed and non-prescribed funds.
No tax is payable in Malta by non resident investors receiving dividends or disposing of their investments in the case of non-prescribed funds. Tax is, however, paid by Maltese residents at the rate of 15% under the final withholding system.
FFF Legal provides tax consultancy, legal advice and support services to clients wishing to use Malta as a base for production, distribution and for the setting up of film and media funds. Our services include:
- legal advice and international tax planning relating to film production, distribution and financing
- identifying benefits and incentives to prospective productions and liaising with the Malta Film Commission and other relevant authorities
- identifying local and international financing opportunities for productions
- advice and assistance in connection with the setting up, registration and operation of production companies, distribution companies and funds
For further information, kindly contact Dr. Christian Farrugia