What costs does EU funding in Malta cover: eligible expenses explained

How EU grants in Malta reimburse costs

All six active ERDF Malta schemes operate on a reimbursement basis. You fund the investment or advisory work yourself, implement it within the agreed period, submit documentary evidence of eligible expenditure to the Measures and Support Division (MSD), and the grant reimburses the approved portion. There is no upfront payment to beneficiaries. This means you need the cash flow to cover costs before any grant comes back to you.

Two consequences follow from this model. First, the timing of expenditure matters: costs must be incurred after the Grant Agreement is signed to be eligible. Second, not all costs are recoverable — each scheme defines an eligible cost list, and only costs that fall within that list, properly documented and procured, are reimbursed. Costs outside the list are borne in full by the business, regardless of how closely they relate to the project.

The six schemes divide into two types: investment schemes (SME Enhance and Digitalise your SME) and advisory schemes (Business Reports for SMEs, Internationalisation Strategy for SMEs, Marketing Strategy for Micro and Small Enterprises, and Standards and Awards for SMEs). Each type has a different cost structure.

Investment schemes: SME Enhance and Digitalise your SME

Both investment schemes share the same four-component cost structure. The eligible cost categories and the caps between them are identical. What differs is the scope of the main component.

Component (a): Equipment, Machinery, and Digital Solutions

This is the primary cost component. Under SME Enhance, it covers tangible and intangible assets used directly in the economic activity:

• Furniture, fixtures, and fittings (with exclusions noted below)
• Production machinery and operational equipment
• IT hardware and intangible IT assets
• Vehicles, where directly related to the economic activity and primary use is not general transport
• Software, including two-year subscriptions
• Intangible assets such as licences, patents, and acquired know-how

Under Digitalise your SME, the main component is Digital Solutions, which explicitly includes:

• Commercial off-the-shelf (COTS) software and custom-developed software
• Laptops, docking stations, monitors, and tablets
• Analytical tools (hardware and software components)
• Cybersecurity systems
• Cloud computing
• Internet of Things (IoT), artificial intelligence (AI), Big Data, and Quantum Technology
• Routers, switches, and WiFi equipment
• Other hardware, software, or digital solutions approved under the scheme
• Installation and training on specific acquired items, where included in the purchase price and delivered by the same supplier
• Two-year software subscriptions

Component (b): Ancillary items

Items that support the primary investment but do not form the core asset purchase. Eligible up to 10% of the Component (a) eligible cost, with the grant contribution for ancillary items capped at €10,000. Items in this category need to be directly linked to the main investment.

Component (c): Lease of private operational premises

Two-year lease costs for private premises where the funded activity takes place. The eligible amount is capped at 10% of the Component (a) eligible cost, rising to 20% for start-up enterprises. The premises must be used operationally for the project activity and must be privately leased, not owned by the applicant.

Component (d): Indirect cost flat rate

A 7% flat rate applied to the sum of components (a), (b), and (c). This is calculated automatically and does not require itemised documentation. It covers indirect costs attributable to the project. See the next section for detail on how this works.

What is not eligible under the investment schemes

The exclusion list for SME Enhance is explicit. Items not eligible include:

• Repair and maintenance of existing assets
• VAT and customs duties
• Insurance costs
• Training, unless embedded in the purchase price of a specific eligible item from the same supplier
• Used, refurbished, or remanufactured equipment
• Land, buildings, and construction works
• Fees for design, marketing services, or general consultancy (except through the 7% flat rate)
• Mobile phones
• External apertures (doors, windows, gates)
• Mechanical and electrical works — plumbing, electrical installation, air conditioning — unless directly specialised for the specific economic activity
• Wall paintings, soft furnishings, plants and shrubs, surface finishes
• Solar panels
• Military equipment
• Costs incurred before the Grant Agreement is signed

The Practical Guidelines for Digitalise your SME may specify a different or narrower exclusion list. Confirm against the current guidelines on fondi.eu before preparing a cost schedule.

The 7% indirect cost flat rate

The 7% flat rate is not optional — it is part of the scheme's cost structure and applies automatically to all eligible direct costs under the investment schemes. On a project with €100,000 in eligible direct costs (components a, b, and c combined), the flat rate adds €7,000, bringing total eligible costs to €107,000. The grant is then calculated as a percentage of that total.

The flat rate covers indirect project costs without requiring itemised documentation. It is also the mechanism through which a consultancy element can be incorporated: fees for application preparation and project management are not separately eligible as direct costs under the investment schemes, but the flat rate provides a route for recovering this type of cost within the overall eligible cost envelope. Confirm the specific scope with MSD before drawing up budget plans on this basis.

The flat rate is not available under the advisory schemes. Those schemes have their own cost structures, described below.

Advisory schemes: costs and grant structure

The four advisory schemes fund the procurement of specific external consultancy services. Each scheme targets a different type of advisory output, and the cost and grant structure varies by scheme.

Business Reports for SMEs

This scheme provides a fixed lump sum grant of €4,000, representing 80% of the eligible consultancy cost. The grant is paid at this fixed amount regardless of the actual cost of the report, provided the cost is at or above the threshold. The service provider must be registered with MSD as an eligible provider and must be independent from the beneficiary. There are two eligible report types: a Business Plan (covering executive summary, business model, market analysis, financial projections, and risk assessment) and a Process and Systems Review (covering process analysis, digitalisation strategy, and technology recommendations).

The lump sum model means there is no per-line cost verification, which makes this the simplest of the advisory schemes to administer.

Internationalisation Strategy for SMEs

This scheme offers up to €20,000 in grant funding, split across two parts. Part 1 (global opportunities study: market analysis and feasibility assessment) carries a cap of €10,000. Part 2 (country-specific strategy: market entry, marketing and sales strategy, financial and operational planning) carries a separate cap of €10,000. A single undertaking can apply for up to two grants under this scheme, one per part. The aid intensity varies by enterprise size and status: 60% for micro and small start-ups under five years old, 50% for micro and small enterprises beyond five years.

Part 1 requires the enterprise to have been trading for at least one year at the application date. Marketing material costs are excluded.

Marketing Strategy for Micro and Small Enterprises

Maximum grant of €10,000, with aid intensity of 60% for micro and small start-ups under five years old and 50% for those beyond five years. The scheme is open to micro and small enterprises only; medium-sized enterprises are not eligible. The service provider must be IB-registered. Each undertaking is limited to one application over the lifetime of the scheme. Marketing material production costs and promotional expenses are explicitly excluded. The implementation period is a fixed six months from the Grant Agreement.

Standards and Awards for SMEs

Maximum grant of €15,000, increasing to €20,000 where more than two standards or awards are pursued from the same service provider in a single application. Aid intensity is 60% for start-ups under five years and 50% for other micro and small enterprises (confirm rates for medium enterprises in the Guidance Notes). The scheme funds advisory services leading to internationally recognised standards or national excellence awards. It does not cover regulatory certifications required to place products on the market, training programmes, or marketing material costs. The enterprise must have been trading for at least one year at the application date, and each undertaking can submit a maximum of two applications across the lifetime of the scheme.

For detailed eligibility and the full list of IB-registered service providers under each advisory scheme, refer to fondi.eu. Engaging a provider who is not on the MSD register disqualifies the cost entirely.

Costs incurred before the Grant Agreement

The single most consequential eligibility rule across all six ERDF Malta schemes is this: costs incurred before the Grant Agreement is signed are absolutely ineligible. No exceptions apply. The rule holds regardless of the circumstances, the urgency of the business decision, or whether the purchase would otherwise have been fully eligible.

What "incurred before the Grant Agreement" means in practice:

• A purchase order placed with a supplier before the Grant Agreement date disqualifies that cost
• A contract signed with a service provider before the Grant Agreement date disqualifies the associated costs
• A payment made, even partially, before the Grant Agreement date disqualifies the item from reimbursement
• Equipment delivered before the Grant Agreement date is ineligible, regardless of when the invoice is paid

This rule applies equally to advisory scheme costs. An internationalisation strategy commissioned before the Grant Agreement is signed is not eligible for reimbursement, even if the work is completed within the implementation period.

For the full application and assessment process, including when the Grant Agreement is issued and how the implementation period is structured, see the article on how EU funding applications in Malta are assessed. For a full overview of all active schemes, see the EU funding in Malta page or the EU Funding Advisory service description.

Frequently asked questions