中小企業發展研究
 

法律對于“小”的定義在國家和行業中都是不同，它同時也取決于經濟系統的運行。小企業在許多國家中的最常見的類型。偶們中小企業定義如下：

微觀，小型和中型的企業（SMEs）是由雇傭人數少于250人的公司組成的，它的年營業額不超過5000萬歐元，并且/或年度資產負債表總額不超過4300萬歐元。

既然Malta是一個小國家，99.9%的所有當地公司都以這個SME的定義為準，而組成。因此為了這個essay，“小”的定義被限制為微觀的，和小型的公司。（MSEs）為了更好的區分“小”的含義，就應該避免覆蓋Malta的所有公司。
 

同時考慮到管理和經濟的因素，小型公司面臨著幾個挑戰。事實上，有許多財政措施，包括采取措施和激勵措施，為了保護環境，改善投資。這支持了一部分論點，顯示出，小型企業畢竟是對經濟（否則這樣的激勵不到位且不被鼓勵），同時也是對投資者（如靈活性，專業化，顧客反映），在經濟方面有價值的。

 

The legal definition of ‘small’ varies by country and by industry, and it also depends on the economic system in operation. Small businesses are the most common type in many countries. The European Commission defines SMEs as follows:

 

‘the category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.’

 

Since Malta is a small country, 99.9% of all companies situated locally fall under this SME definition. Thus the definition of ‘small’ for the purpose of this assignment was restricted down to micro and small sized enterprises (MSEs), in order to better distinguish the meaning of ‘small’ and thus avoiding to cover all companies in Malta.

 

Small enterprises face several challenges with regards to both management and finance. In fact, there are a number of fiscal measures, including initiatives and incentives that seek to safeguard the environment and promote investment. This supports one side of the argument that shows that after all small enterprises are financially worthwhile, to the economy (otherwise such incentives would not be in place and encouraged), but also to the investor (e.g. flexibility, specialisation, customer response).

 

However there is a contradicting view to this subject which argues that large companies are more financially worthwhile than smaller companies, having more access to finance and substantial amount of capital that generates large amounts of revenues, leaving a larger contribution to the economy. Also investors might prefer investing in large companies due to the possibility of having lower risk than small companies due to a number of factors.#p#分頁標題#e#

 

Introduction

 

‘Micro, small and medium-sized enterprises (SMEs) are the engine of the European economy. They are an essential source of jobs, create entrepreneurial spirit and innovation in the EU and are thus crucial for fostering competitiveness and employment. The new SME definition, which entered into force on 1 January 2005, represents a major step towards an improved business environment for SMEs and aims at promoting entrepreneurship, investments and growth’.

 

Extract of Article 2 of the Annex of Recommendation 2003/361/EC

 

The SME Definition ensures that enterprises which are part of a larger grouping and could therefore benefit from a stronger economic backing, do not benefit from SME schemes. The first step to qualify as an SME is to be considered as an enterprise which according to the new definition is:

 

‘any entity engaged in an economic activity, irrespective of its legal form’

 

Enterprises qualify as micro, small and medium-sized enterprises (SMEs) if they fulfill the criteria laid down in the Recommendation which are summarized in the table below.

 

Micro, small and medium-sized enterprises are socially and economically important, since they represent more than 99% of all enterprises in the EU. With respect to the Maltese scenario, the above definition would cover also almost all companies, i.e. 99.9%, therefore it would be more reasonable to define ‘small’ as Micro and Small Enterprises (MSEs). Given that the majority of the studies were focused on SME’s as a whole, they were still applicable to our study and thus were referred to.

 

MSEs provide around 64 million jobs in the EU and contribute to entrepreneurship and innovation. However, such enterprises face particular difficulties which the EU and national legislation is trying to address by granting them various advantages. The application of a common definition by the Commission, Member States, the European Investment Bank (EIB) and the European Investment Fund (EIF) ensures consistency and effectiveness of those policies targeting SMEs and, therefore, limits the risk of distortions of competition in the Single Market.

 

MSEs are important to almost all economies in the world, but especially to those in developing countries and, within that broad category, especially to those with major employment and income distribution challenges. MSEs contribute to output and to the creation of decent jobs.

 

The most successful developing country over the last 50 years, Taiwan, is built on a dynamic MSE sector. This has produced both record breaking growth and a quite low level of inequality, by comparative standards

 

Even though SMEs form the backbone of our economy, they are often confronted with market imperfections. They frequently have difficulties in obtaining capital or credit, particularly in the early start-up phase. The new definition of an SME is an important tool for implementing efficient measures and programmes to support the development, financing and success of SMEs.#p#分頁標題#e#

 

Analysis of MSEs in Malta

 

The contribution of Maltese MSEs to the overall economy, compared with the EU average, is more important than that of large firms. Out of the 99,9% SMEs in Malta, 95.7% of the enterprises in Malta are considered micro, 3.5% are small and only 0.6% are the medium-sized companies.

 

The contribution of micro firms to employment in Malta (40%) is higher than the EU average (30%). On the other hand both small and medium firms employ 18% of the working population. The contribution of the total MSE sector to employment (59%) is in Malta comparatively higher than in the EU on average (50%). A drawback for Malta in comparison to the EU is the proportion of total state aid devoted to SMEs which is just 1% while the EU average is 10%.

 

From 2002 to 2008, Malta registered a 2% increase in the number of SMEs, which is lower compared to the average EU-growth (13%). In particular, the number of medium-sized enterprises has dropped. However, as we can observe from the above graph, after Malta’s entry in the EU in 2004, one can see an upward trend in the number of SMEs.

 

In the period 2002-2008 employment growth of Maltese SMEs has fluctuated with an overall decrease of 2%, which is well below the EU-average growth of 12 %. Employment was reduced in particular in small and medium-sized firms.

 

The value added created by SMEs in Malta grew almost steadily with 19%, which is however well below the EU average growth of 28%. This however reiterates the importance of SMEs to our economy.

 

In a local survey conducted by the GRTU Research Unit during 2010 on the state of their business involving only SMEs the results were the following when comparing to business done in 2009:

 

Comparing the turnover of this year with the same period of last year, 24.4% said that it had remained the same while 21.2% said that it was up to 10% less than last year, another 18.4% said it was 20% worse than last year and a further 21.6% said that it was over 20% less than last year.

 

In summary 61.2% said that their turnover was worse than last year. On the other hand 24.40% stated that it had remained the same whilst only 14.4% said that business was better than last year.

 

Amongst the various reasons given by firms about this decline in business were obviously the effects of the financial crisis, high prices of raw materials, strong and new competition and the fact that for some of them, the government is not guaranteeing a level playing field for SMEs.

 

Impact of the global crisis on MSE and entrepreneurship financing

 

Given the recent financial and economic crisis across economies, evidence suggests that MSEs in most countries are being confronted with a clear downturn in demand for goods and services if not a demand slump. For MSEs there are two related stress factors:#p#分頁標題#e#

 

an increase payment delays on receivables which, together with an increase in inventories, result in an endemic shortage of working capital and a decrease in liquidity; and

 

an increase in reported defaults, insolvencies and bankruptcies.

 

Whereas larger firms have both the expertise and resources to obtain finance from the capital market; MSE's appear to be heavily dependent on the banking sector. In all countries following the financial crises, the tightening of credit conditions by banks was clearly evident for all the banks’ clients. The European Central Bank (ECB) data also confirmed the tightening. The ECB attributes the tightening to the banks’ ability (or inability) to access capital, the banks’ liquidity positions, expectations regarding the recession and higher risk on collateral. Interest rate spreads have risen to unprecedented levels, thereby partially offsetting the effects of the easing of monetary policy.

 

The main factors exacerbating the banks’ attitude towards lending to MSEs are:

 

the poor MSE economic prospects;

 

stagnation in inter-bank lending and increased cost of capital; and

 

the desire to rebuild bank balance sheets.

 

In all reporting countries, banks are under pressure and are trying to preserve or strengthen their capital base. As a result, they are seeking fully collateralized transactions. In consequence, by choosing to keep only the strongest clients, banks and other financial institutions are contributing to a polarization process. For many banks this may be a sensible survival strategy and their survival is vital. In some countries it is also a case of returning to normal lending practices after a number of years of excessive flexibility and generosity in lending.

 

Confronted with worsening access to credit, SMEs are exploring alternative sources of finance such as the mobilization of reserves, self-financing and factoring.

 

Bonello (2010) stated that the restricted flow of credit in the Euro area does not appear to have been replicated in Malta, whose banking sector emerged from the financial turmoil with high capital and liquidity ratios. In fact, when asked what is their most pressing problem, only 8% of the local SMEs considered access to finance a main concern compared to 16% in the EU.

 

Access to venture capital and private equity also appears to be constrained. The financial crisis has had a three-fold impact on venture capital and private equity markets. First, exit opportunities are reduced. Second, fundraising activities seem to be shrinking. And thirdly, invested capital has stagnated or even slowly started to decline, especially investments in new projects.#p#分頁標題#e#

 

Global venture capital fundraising slowed down between 2007 and 2008.

 

The very recent economic recession and the global downward pressure on prices are expected to influence the future prospects for fundraising in the markets in the long run. Institutional investors providing funding will simply be less willing to supply new funds with fresh capital.

 

Under the influence of these trends, public funds (both direct and indirect investment funds) will be impacted as much as the private funds. In markets with public or semi- public investment funds, which provide capital to funds-of-funds activities, such public funds are likely to witness a more limited possibility for co-investment with private funds, simply because the private funds increasingly reduce their investment activities. As a result, public funds cannot be expected to provide the same leverage effect as before the crisis, unless supplied with more capital.

 

Importance of MSEs in normal times and in times of crisis

 

In many economies and especially locally, MSE's are the key generators of employment and income, and drivers of innovation and growth. Given their importance in all economies, they are essential for the economic recovery.

 

Locally, MSEs played a significant role in the continuing diversification towards high value-added services, which in turn was a key to the relative resilience shown by the Maltese economy during the recession. Most of the enterprises providing these services which include pharmaceuticals, remote gaming, ICT, and business and financial advisory are indeed ,MSEs.

 

Even in normal economic conditions governments have recognized that, to survive and grow, MSEs need specific policies and programmes. However, as already discussed above, at the present time, MSEs have been especially hard hit by the global crisis. These firms are more vulnerable now for many reasons: not only has the traditional challenge of accessing finance continued to apply, but new, particularly supply-side, difficulties are currently apparent. It is important to stress that MSEs are generally more vulnerable in times of crisis for many reasons among which are:

 

it is more difficult for them to downsize as they are already small;

 

they are individually less diversified in their economic activities;

 

they have a weaker financial structure (i.e. lower capitalization);

 

they have a lower or no credit rating;

 

they are heavily dependent on credit and

 

they have fewer financing options.

 

MSEs in global value chains are even more vulnerable as they often bear the brunt of the difficulties of the large firms. An additional constraint in Malta is the small size of the domestic market. Local MSEs are forced to break into foreign markets if they want to succeed. However, very often this does not result in a level playing field, given the larger foreign competitors.#p#分頁標題#e#

 

Comparison between small and large companies

 

Being small does have its own advantages such as MSEs can take risks that a larger company might not. For example a different marketing technique or a new and innovative strategy can easily be implemented without the need to go through a number of channels or get someone’s approval. However MSEs may face higher interest rates than larger enterprises to compensate them for the increased exposure to risk.

 

It has also been argued that an MSEs can focus on a very narrow area and make a profit, whereas big business often cannot do this as it requires larger markets in order to provide enough return to cover overheads. Thus MSEs can specialise and prosper in a smaller niche market that would be impractical for a bigger company.

 

Small businesses can respond better to their customers and provide more personalised service. However big corporations may have an advantage in marketing budget and buying power. Moreover such important advantage of large corporations over small firms is that of Economies of Scale (EOS). EOS is the long-run reduction in average (or unit) costs that occurs as the scale of the firm’s output is increased.

 

Firms may seek to achieve EOS by becoming large or even dominant producers of a particular type of a products or service. Large companies’ vis-à-vis small enterprises may exploit the advantage of both external and internal EOS.

 

Large companies may benefit from EOS that arises from:

 

At larger outputs there is more scope for using specialist labour and capital equipment.

 

Superior techniques or organisation of production as scale is increased.

 

Large companies’ may benefit from mass or batch production.

 

Economies of bulk-buying of raw materials and supplies.

 

Large firms have a cost advantage over their competitors and over small firms. Not only does a larger plant gain form EOS but it also produces more. Companies often use this advantage as a competitive strategy by first building a large plane with substantial EOS, and then using its lower costs to price aggressively and increase sales volume. Apart from the fact that generally EOS are not experienced by small firms, there are also some other significant disadvantages.

 

While there are many potential advantages of a small scale, there are also some significant disadvantages in certain contexts. The following figure depicts the most important challenges EU SMEs are facing, according to the European Commission Report in 2008.

 

The cost of administrative procedures for a small company can be up to ten times more than for a large company making this burden disproportionately heavy for small business. Legislative burdens are also more affected on MSEs. It has been found that in the UK smaller companies are exempted from filing audited financial statements if their turnover falls below ￡5.5 million. Small companies are reaping right away the saving in audit costs apart from reduced compliance cost of meeting the full IFRS code. Malta has introduced the General Accounting Principles for Smaller Entities (GAPSE) with a view to reducing audit and financial statement reporting requirements for small and medium sized companies to more realistic requirements. In a similar bid to facilitate matters, the government had recently substantially reduced registration and annual fees for MSEs that submit accounting forms in electronic format.#p#分頁標題#e#

 

According to a survey conducted by the European Commission’s Directorate General for Economic and Financial Affairs, over the past years SMEs endured more volatility than larger firms, making it exceedingly difficult to achieve a reasonable return on capital and deliver sustained performance. Their main weakness is that they tend to finance their growth from internal sources which invariably are limited. This is particularly applicable to Maltese MSEs as they lack finance to see their projects through. This can be seen from a study that was carried out amongst a number of Maltese SMEs during July and August 2006 and benchmarked with a similar survey amongst 15 European states in September 2005.

 

MSE’s entrepreneurs sometimes have limited understanding of investors’ or banks’ concerns and lack knowledge of sources of finance which makes it harder for them to find the financial backing they need. Due to their incompetence, financial management is often not given the attention it warrants. Also, the lack of information, insufficient expertise and scarcity of resources make it difficult for MSEs to comply with environmental legislation.

 

Constraints and Opportunities for MSEs in Malta

 

From a review of the literature concerning small enterprises it can be concluded that their constraints and opportunities stem from their very inherent characteristics. Very often, they tend to be independent minded, workaholic and have a strong family orientation. This enables them to take flexible decisions leading to a quicker action to respond to the day-to-day arising situations. Hence bureaucracy is reduced whilst the drive to succeed is enhanced.

 

The flexibility and lack of formality of small enterprises is also a weakness as such firms often do not seek professional guidance. Accessing finance is also difficult for MSEs and is thus often seen as a major stumbling block for their success. This is due to the high risk element which is normally associated with them. This lack of finance constraints their options for the carrying out of any necessary restructuring which is nowadays fundamental to withstand competition from larger firms. There are also limited possibilities to reap the benefits of economies of scale.

 

In a local survey carried out by Psaila (2007), where ninety eligible micro enterprises replied to the study that investigated the strengths of such enterprises, it has been found that 31% of the respondents considered their business as a form of providing for the future well being of all the members within the family. A quarter of the respondents associated such enterprises with a stronger motivation towards success as a result of self-ownership whereas 16% emphasised their flexibility in decision taking which they find it useful in pursuing their growth prospects. Other strengths were mentioned such as their speed in decision-taking and the attraction of government support.#p#分頁標題#e#

 

Source: amended from Psaila, Constraints and Opportunities for Micro-Enterprises in Malta (2007)

 

With respect to the weaknesses of MSEs, the Maltese respondents identified access to finance as the most important constraint. In fact one of the preoccupations of the management team in every family business concerns cash flows. Limited government support was also indicated as one of the main constraints, given the strong reliance placed on government agencies and departments by many small enterprises. 14% of the respondents pointed out the presence of foreign competition as the primary constraint whereas 11% highlighted that they experienced difficulties in assessing EU funds. The problem of limited possibilities to reap the benefits of scale was identified by 7% of the respondents.

 

Source: amended from Psaila, Constraints and Opportunities for Micro-Enterprises in Malta (2007)

 

If the strengths of MSEs are properly exploited they will yield competitive advantages and opportunities to boost the profitability and sustainability within a market environment. On the other hand, if the weaknesses are carefully understood and dealt with, they will help MSEs overcome the negative impact of external shocks on their internal operations.

 

The need for Government Policies

 

The aforementioned constraints may lead to a situation where many MSEs will not be sustainable in the long-run. This implies the importance for government policies to be integrated as part of a nation-wide strategy. Such policies should aim at minimising the constraints and maximising the strengths associated with small enterprises. These can be divided into two: (1) those that target the efficiency and sustainability of micro-enterprises such as the removal of regulatory barriers and better facilities for financing; (2) those that promote entrepreneurship as a key instrument for stimulating economic growth.

 

The implementation of these policies is of great importance for our economy, due to the fact that MSEs are essential for our economy. MSEs provide fundamental economic advantages that are needed to sustain our economy. First of all, MSEs increase our value added. The higher the value added per employee, the higher the contribution towards the local economy. It all ensures a longer sustainability lifecycle. The implementation of the EU’s Small Business Act (SBA) binding principles is of great importance as they will enhance competitiveness. Such principles include the increase training opportunities, access to finance, exposing small firms to internationalization and providing bureaucracy-free one-stop-shop services.

 

Moreover the notion of capital inflows is another advantage. The importance of a healthy export oriented industry is crucial to any economy as it contributes towards the country’s balance of payments. This is even more crucial in the context of a small island economy such as that of our islands, which is inherently dependent on imports for its basic commodities.#p#分頁標題#e#

 

Finally MSEs provide market diversity of industrial sectors. Diversity is important especially in our relatively open economy. Lessening any dependence on any one particular industrial sector will shelter us from the ill-effects of international market volatilities and external shocks. Aiding MSEs therefore is essential.

 

Investing in Malta

 

The island of Malta has a relatively high population density in relation to its small dimensions. It forms part of Southern Europe and is situated in the Mediterranean Sea. Malta is positioned 93km south of Sicily and 288km away from North Africa.

 

Competitive Advantages of Investing in Malta

 

“Being small and able to adapt quickly has given Malta a head start over many of its rivals” (Finance Malta 2009). As a member of the EU and the euro zone, Malta provides international business advantages, including low effective tax rates, professional services infrastructure, and a well-regulated legal jurisdiction. Furthermore, Malta’s strategic position is advantageous for its local and international business since it is located in the centre of the Mediterranean; being one of the busiest shipping lanes in the world.

 

Through a productive (favourable) tax system, Malta has one of the world’s most favourable operating environments. Compared to other European countries, Malta has one of the lowest business cost figures; boosted by its multilingual and competent workforce together with advanced telecommunication systems. Thus the above factors are assets to Malta’s attractiveness as an international business centre.

 

Other competitive advantages include:

 

A clear, transparent and stable administrative and regulatory regime;

 

A stable macro-economic environment;

 

Well-developed financial and taxation systems; and

 

A strong and dynamic ICT infrastructure;

 

Challenges faced by enterprises operating in Malta

 

Businesses have a number of advantages when it comes to investing locally; however, this is balanced by the following limitations:

 

Cash flow problems due to late payments;

 

High energy costs as a result of the worldwide increase in the price of oil;

 

Increasing operational costs due to increased administrative burdens.

 

Nonetheless, it is worth mentioning that the Government is aiming to foresee these challenges by providing the necessary support, through better access to finance. Also, reduced costs to MSEs including non-wage labour costs, and enhanced entrepreneurship are offered. The latter may be accomplished through education.#p#分頁標題#e#

 

Government Action towards increasing the number of MSEs investing in Malta

 

The Maltese Government is examining the operations of Malta Enterprise and Malta Industrial Parks. The aim is to stress importance on MSEs’ requirements, such as: offering incentives specifically targeted to micro and small enterprises. Even though the promotion of investment is the key purpose of the aforementioned entities, it is necessary to encourage and support small enterprises so as to enable them to enhance and build on their potential to expand.

 

Government action and investment largely address improvements of hard and soft infrastructures or issues related to social, economic, and environmental sectors; striving to strengthen Malta’s sustainable development. The Government’s intent is to nurture and support private companies since a great deal of the local national wealth generation is associated with having a dynamic and strong economy. Much of the required support depends on the presence of an appropriate business environment that allows companies to invest and develop. In fact, the Government deems this idea to be foundational for enterprise policies and actions. This is because the lack of an adequate environment will inevitably cause companies to succumb to current and upcoming challenges.

 

Incentives for Investing in Malta

 

Malta is one of the most attractive investment states in the European Union. This is the result of the numerous incentives that Malta offers to new businesses. This is not only from a financial point of view that businesses can reap from such advantages but from a broad and comprehensive package of incentives. Malta has a complete environment that is conductive to business such as the fact that Malta has:

 

A Strategic location in the Mediterranean;

 

an excellent air and shipping facilities;

 

a highly-educated and skilled workforce;

 

multitude of highly skilled professionals in every field;

 

a proactive business environment;

 

advanced telecommunications infrastructure;

 

solid yet flexible legislative and regulatory framework for businesses and

 

English as the business language.

 

All of these have made Malta a location of choice for foreign direct investment and international trade. Other than this, statistics have shown that record levels of investment are flowing into Malta as the international business community discovers the advantages of doing business from this Mediterranean island. This is proved by the fact that Dubai Internet City’s Tecom and Lufthansa Technik have both invested large amount of money in Malta as they predict a bright future ahead in the Maltese business growth environment.#p#分頁標題#e#

 

An EU State on the doorsteps of Southern Europe and North Africa, Malta has developed into one of the most progressive and efficient business locations in Europe.  In fact, Malta ranked 6th in inward FDI growth as classified in the World Investment Report 2007.

 

The Business Promotion Act: Introduction

 

The recently enacted Act to amend the Industrial Development Act, Cap. 325 has renamed the ‘Industrial Development Act’ (IDA) as the ‘Business Promotion Act’ (BPA). The Act came into force in 2001. The BPA introduces greater scope and flexibility to the incentives available for the promotion of business and covers a much wider range of qualifying sectors and activities than before.

 

The BPA makes provision for the introduction of new incentives and schemes for the promotion of business in Malta, shifting the focus from "industries" to "businesses". Indeed, the incentives and benefits available under the BPA are now linked to an enterprise, defined as any individual or body of persons who or which carries on or exercises a trade, business, profession or vocation and the definition of "qualifying company" has been amended to read a company which carried on, or intends to carry on in Malta, a trade or business consisting solely of any of the activities referred to in the act in section 3(1)(a) to (k).

 

The incentives available under the Business Promotion Act may be subdivided under two headings namely, tax related incentives and non-fiscal related incentives for doing business in Malta.

 

The Business Promotion Act: Incentive Package

 

The BPA provides incentives for those industries demonstrating growth and employment potential that are engaged in manufacture, repair, improvement or maintenance activities.

 

New provisions also provide attractive fiscal incentives for companies engaged in certain manufacturing and qualifying activities, a summary of which is set out below:

 

Electronic and telecommunications equipment, semiconductors and other components;

 

Software development including installation, implementation & support and training;

 

Machinery and engineering;

 

Certain fabricated metal products;

 

Rubber and plastic items;

 

Pharmaceuticals and medicinals;

 

Medical, precision and optical instruments and equipment;

 

Production of audio-visual productions including films, advertising programmes or commercials and documentaries;

 

Jewellery and related articles;#p#分頁標題#e#

 

Repair, improvement and maintenance of aircraft, yachts, motor boats, turbines, gantry cranes and their equipment;

 

Biotechnology;

 

Aquaculture;

 

Waste treatment and recycling;

 

Research and development;

 

MSEs carrying out the activities listed above qualify for the incentives as shown under section A below, together with the incentives set out under sections B and C. The incentives listed in sections B and C are available to manufacturing and related service companies.

 

Section A

 

Tax incentives for qualifying companies carrying out specific activities

 

Reduced rates of income tax

 

Qualifying companies benefit from a highly favourable tax structure. The applicable rates of tax will be as follows:

 

(a) 5% for the first 7 years of operation

 

(b) 10% for the following 6 years

 

(c) 15% for the following 5 years

 

Investment tax credits

 

Tax payable can be reduced or eliminated by investment tax credits calculated as the higher of:

 

(a) 50% of the amount invested; or

 

(b) 50% of the first 2 year wage cost of new jobs created

 

(c) For SMEs the percentage for both the above is increased to 65%

 

(d) Unutilised investment tax credits may be carried forward

 

The interaction of the above incentives would normally result in minimal or no taxes being paid for a number of years.

 

Section B

 

Tax incentives applicable to manufacturing and related service companies

 

Value Added incentives scheme

 

A scheme whereby companies may benefit from reduced rates of tax according to the increase in value added of their activities.

 

The reduced rates of tax are as follows:

 

5% for the first 7 years

 

10% for the following 6 years

 

15% for the following 5 years

 

The reduced rates of tax apply to part or indeed a multiple of the increased profit when compared to a base period. For new companies since the base period will be NIL all the profits in the initial three years will be taxed at the reduced rate 5%.

 

Investment allowances

 

Tax deductions in addition to normal tax depreciation are provided as follows:#p#分頁標題#e#

 

Plant and Machinery - 50% of the investment.

 

Industrial Buildings or Structures - 20% of the investment.

 

Reduced tax rate for reinvested profits

 

The tax on profits re-invested in projects approved by the Malta Development Corporation is reduced by 19.25%.

 

Research and development expenditure

 

In Malta all research and development expenditure is for tax purposes deducted at 120%.

 

Incentives for job creation

 

The creation of a new job may entitle a company to write off a percentage of the wage costs of the said new job, as a further tax deduction.

 

Tax Treaties

 

Malta has concluded tax treaties with a number of countries (mainly with European states, Canada and Australia) and which enhance the incentives provided by Maltese domestic legislation. Most of these treaties ensure that profits generated in Malta are either exempt from tax in the country of residence of the investor, or that such a country will provide a tax credit for the Malta tax spared as a consequence of the incentives Malta provides.

 

Section C

 

Other non-tax incentives applicable to manufacturing and related service companies

 

Provision of industrial buildings

 

The corporation also provides industrial buildings at competitive rates of rent.

 

Soft loans

 

Companies may also benefit from loan up to 75% of the qualifying expenditure.

 

Loan interest rate subsidies

 

Companies may also qualify for a subsidy on the interest rate payable on loans needed to acquire additional assets.

 

Loan guarantees

 

The Malta Development Corporation may guarantee loans taken by the company to finance the acquisition of such additional assets.

 

Exemption from import duties

 

Plant, machinery and equipment as well as materials, accessories and components to be used for processing may be imported duty free.

 

Training assistance

 

Qualifying companies may benefit from substantial training assistance. Depending upon whether a company is classified as a “large”, or a “small or medium” enterprise, such assistance may vary from 35% to 80% of costs involved.

 

In addition to the above incentives, listed in the BPA, the General Accounting Principles for Smaller Entities (GAPSE) were launched by the Government on Friday 27th February 2009. This was done to reduce the financial burden and complex requirements on the small companies, when it comes to the disclosure of financial results.#p#分頁標題#e#

 

Malta Enterprise Incentives

 

Malta Enterprise administers a number of investment facilities and incentives which have been introduced in Malta due to the fact that the 2010 budget has put foreign investment in Malta at the top of its economic list of priorities. Malta Enterprise is enabled by the Malta Enterprise Act to support the development of enterprise in Malta and in fact this enterprise developed a number of incentives for the promotion and expansion of businesses, covering a wide range of sectors and activities. It engages in manufacturing, ICT development activities, Call Centres, Healthcare, Pharmaceuticals, Biotechnology among others and all these may benefit from incentives offered by Malta Enterprise.

 

The incentives provided by such enterprise addresses micro, small and medium sized companies and these incentives are subdivided into six separate themes, namely:

 

Access to Finance -Companies may be assisted through loan guarantees, soft loans, loan interest, subsidies or royalty financing in the case of highly innovative projects.

 

Investment Aid -Companies engaged in specific activities can benefit from tax credits on capital investment and job creation.

 

SME Development -There are grants targeting the creation and development of innovative start-ups, and the development of forward looking small and medium-sized enterprises.

 

R&D and Innovation -Various incentives will be offered to stimulate innovative enterprises to engage in research & development.

 

Enterprise Support -This involves assistance to businesses to support them in developing their international competitiveness, improving their processes and networking with other businesses.

 

Employment and Training

 

These incentives are administered by the Employment & Training Corporation.  Enterprises are supported in recruiting new employees and training their staff. To apply for the incentives, enterprises are required to submit a letter addressed to the Corporation giving details of the activities of the enterprise and in some instances one will need to attach the Memorandum & Articles of the company and the latest audited financial statements, depending on which incentive the enterprises are applying for. Each theme is then subdivided into a number of incentives that are offered. The Table below summarizes all these incentives and a more detailed description of each incentive is found in Appendix [1] . Source:

 

Incentives provided by the European Commission

 

The Competitiveness and Innovation Framework Programme (CIP) has several schemes and a budget of over €1bn to facilitate access to loans and equity finance for SME’s, which are obviously applicable to MSE’s as well.#p#分頁標題#e#

 

The Enterprise and Innovation Programme (EIP), one of the specific programmes under the CIP, seeks to support SMEs and their innovation in the EU, focusing on:

 

Access to finance for MSEs through "CIP financial instruments" which target SMEs in different phases of their lifecycle and support investments in technological development, innovation and eco-innovation, technology transfer and the cross border expansion of business activities.

 

The financial instruments cover SME’s different needs, whether start-up or established companies:

 

High Growth and Innovative SME Facility provides risk capital for innovative micro, small and medium sized enterprises in their early stages and in their expansion phase.

 

SME Guarantee Facility provides loan guarantees to encourage banks to make more debt finance available to MSEs, including microcredit and mezzanine finance, by reducing the banks’ exposure to risk.

 

Support to innovation: The CIP Supports transnational networking of different actors in the innovation process and innovative companies, including benchmarking initiatives and the exchange of best practice.

 

Business services: the "Enterprise Europe Network". Business and innovation service centres all around the EU and beyond provide enterprises with a range of quality and free-of-charge services to help make them more competitive.

 

Three main aid sources are:

 

Venture capital and loans and also increasing the availability of microloans through its financial instruments.

 

Public financial aid

 

Tax credits

 

The Network provides a number of services including:

 

Providing practical information on market opportunities and European legislation;

 

Helping SMEs to find suitable business partners using its business and technology cooperation database;

 

Providing information on tender opportunities and international networking;

 

Developing the research and innovation capacities of SMEs by helping to create synergies with other research actors, foster technological cooperation and holding brokerage events;

 

Helping SMEs to share research results, participate in research programs and apply for funding, particularly from the EU's Seventh Framework Programme for Research and Technological Development (FP7);

 

Involving SMEs and business actors in the policy-making process, by transmitting feedback to the Commission.

 

Eco-innovation pilot and market replication projects for the testing in real conditions of innovative products, processes and services that are not fully marketed due to residual risks and that are aimed at reducing environmental impacts, preventing pollution or achieving a more efficient use of natural resources.#p#分頁標題#e#

 

Support for innovation and SME policy-making through contracts and grants: Analytical work and awareness raising activities (i.e. conferences and studies) on certain industrial sectors, SMEs or innovation policy are organised to inform and support policy-makers, and make policy suggestions to increase cooperation between EU Member States.

 

Finally, the European Investment Bank (EIB) Group is broadening the way it supports SMEs, making its funding mechanisms simpler, more transparent and more targeted to the individual needs of small businesses across Europe.

 

Conclusion

 

Increasing the size of the business will reduce many of the problems associated with MSEs. However, in practice growing larger in both size and space is often not possible in Malta, even if demand permits. This is due to the fact that substantial number of MSEs are located in residential areas where space is very limited. Furthermore, Malta’s market is very small and limited and thus it will then become quickly saturated. One should also keep in mind that such MSEs create jobs and contribute a considerable proportion of GDP to any economy, including Malta. Considering all this, growing larger is thus difficult and sometimes not economically feasible……”small but resourceful…”