Mediterranean sunshine island Malta is the latest place to launch tax breaks for start-ups along the lines of the British Seed Enterprise Investment Scheme (SEIS).
The Seed Investment Scheme (SIS) was launched this week by Prime Minister Joseph Muscat.
He echoed criticism of bank funding for small businesses in the same way as former Chancellor George Osborne did in the UK when the first SEIS was launched in April 2012.
Muscat branded Malta’s banks as ‘glorified safety deposit boxes’ and urged them to play a bigger part in backing entrepreneurs and business in the country.
Starting in August, the SIS has a target of raising 5 million euros for start-ups on the island.
How the Seed Investment Scheme works
Each new business can claim up to 250,000 euros or a 35% tax credit with a maximum limit of 750,000 for each company.
The finer details of the scheme will be released by the Malta Investment Management Company Ltd (MIMCOL), which is the organisation tasked with running SIS by the government.
“This initiative will result in more jobs. Even though the scheme was announced in November last year, I am disappointed the banks are not playing more of a part,” said Muscat.
“The public will not judge the banks by the profits they make, but by how they improve the economy. Finance for business is one important aspect of this.
“The government is showing how tax can be an incentive and we need to encourage small businesses to invest more.”
SEIS in the UK
Besides Britain, Australia has adopted a seed enterprise investment scheme as well.
In the UK, SEIS had funded 4,660 start-up businesses to a total of £424 million between April 2012 and March 2015, according to the latest statistics from HM Revenue and Customs (HMRC), which manages the scheme.
Under SEIS, a company can raise a maximum £100,000 of investment offering income tax breaks of 50% relief on tax paid by investors, no capital gains tax on the growth in value of shares and loss relief if the start-up should fail during the 36-month term of the investment.