The Honourable Minister for Finance, Edward Scicluna presented his speech for Malta’s Government Budget 2017 to parliament on the 17 October 2016.
On a number of occasions the Minister emphasised the Government’s intention to continue supporting Malta’s tax infrastructure and highlighted the importance of maintaining tax sovereignty while at the same time continuing to comply with European Union standards abiding by its principles and laws.
The following is a list of the salient provisions raised from the Minister’s Budget speech:
Exemption applicable to listed shares
Capital Gains derived from the transfer of listed shares held before such listing will once again become tax exempt. This is in line with the government’s intention to issue a number of incentives through the Malta Stock Exchange (MSE).
Tax Refund on Dividends from Listed Shares
Shareholders, not holding more than 0.5% of the nominal share capital of a MSE listed company, who are in receipt of dividends from same companies may declare their dividends allowing them the option to claim a refund of the underlying tax paid by the distributing company on those dividends. This shall only apply to profits earned on or after 1 January 2017.
Companies incorporated by post-secondary graduates (subject to revenue-capping rules) will have the option to either be exempted from performing an audit for two years or otherwise claim a deduction equivalent to 120% of the audit costs, subject to that such deduction shall not exceed € 700 per annum.
Pensioners older than 61 years of age in receipt of pension income not exceeding €13,000 per annum shall not be liable to pay income tax. The government will implement this provision over a two-year period and such changes depend on the residential rates used.
Companies providing free transport to their employees will be entitled to a claim a deduction of up to 150% of the expenses incurred. Such deduction is capped at € 35,000 in the case of companies providing such services on their own and € 50,000 where such services are being offered in conjunction with other companies.
Companies investing in private pensions for their employees will be entitled to claim a deduction for the expenditure in their corporate tax return. Additionally, a tax credit of € 150 for every € 1,000 contribution by the employer will be granted. Such contributions shall not be deemed to give rise to a taxable fringe benefit in the hands of the employee and were the employee invests in the same scheme, such employee will be able to benefit from a tax deduction of up to € 150.
Risk Investment Scheme for SMEs
A tax credit of up to € 250, 000 a year in line with the Risk Investment Scheme for persons investing in SMEs registered on an alternative trading platform.
Malta Enterprise Assistance to Business
- Schemes will be implemented to attract investment in certain key economical areas, including for instance;
- Financial assistance of up to € 25, 000 to start-ups incorporated by underprivileged individuals.
- A person investing in research projects shall be entitled to a tax credit of between 25% to 45% for the expenses incurred.
- Persons Investing in Digital Gaming shall be entitled to a tax credit of 30% on capital expenditure for the development of digital games with a cultural element.
- Renovation work undertaken by restaurants and hotels may give rise to a tax credit of up to € 50,000 and € 200,000 respectively.
- Restaurants and Hotels who employ the services of international experienced chefs shall be entitled to a tax credit of up to € 10,000.
Registration of Rental Agreements
As an Anti-Abuse Measure the government has introduced the obligation to register any rental agreements which is for a term of three months or more, with the Tax Authorities. The registration may be done by either party to the agreement. Penalties apply where such contracts are not registered.
Rental Income earned from low-income earners
Landlords who rent property for a minimum of 7 years to low-income earners are eligible to pay tax at the preferential rate of 5%.
Transfer of Inherited Property By Judicial auction
Transfers of inherited property by a judicial auction will be subject to a final tax of 7% on the transfer value.
Duty on Documents and Transfers
Transfer of Business to Direct Descendants
With effect from 2017, duty on transfer of business interest from parents to their direct descendants in the direct line will be reduced to 1.5%. This benefit only applies for a 12-month period.
First Time Buyers
The exemption on the first € 150, 000 for first-time buyers shall be extended to acquisitions made in 2017.
Properties situated in Gozo
The rate of duty shall be decreased to 2% from the current 5%, where property acquisitions are made within the territory of Gozo by the end of 2018, for promise of sales agreements entered into during 2017.
Eco-Contribution and Excise Duty
Eco-contributions on batteries, mattresses, detergents, toiletries, oil and fuel filters and plastic containers and kitchen utensils will be removed. Such indirect taxes were replaced with the new excise tax on toiletries and building materials, while this budget also saw an increase in the excise tax rates on garbage bags, tobacco based products and non-alcoholic beverages;
Tobacco Based Products
Cigarettes and Tobacco – increase in duty rate by 3.76% – 5.5%
Non-alcoholic beverages (Excluding Water) – Increase in duty rate of € 0.02 per litre
- Non-bio-degradable garbage bags – Increase of € 0.012 per bag
- Make-up, skin care, beauty and hair care products – Introduction of excise duty of €0.50 per litre or kg
- Shampoo, deodorants, personal hygiene, soap and shower gel – Introduction of excise duty of € 0.03 per litre or kg
- Aftershave and room deodorisers – Introduction of excise duty of € 0.50 per litre or kg
- Pre-cast concrete – Introduction of excise duty of € 0.0256 per kg
- Ceramic Tiles – Introduction of excise duty of € 0.0075 per kg
- Iron Rods and beams – Introduction of excise duty of € 0.005 – € 0.05 per kg
- Float Glass – Introduction of excise duty of € 0.005 – € 0.016 per kg
Other Tax Related measures
VAT paid on vehicle registrations between 1 May 2004 and 31 December 2008 will continue to be refunded over a period of time.
Property Restoration Grant
Schemes will be launched whereby first-time buyers of immovable property situated in a UCA shall benefit from a grant of € 100,000 on restoration fees.
A joint enforcement task force will be set up to counter tax evasion. The Task Force will primarily aim towards combating employment related irregularities, undeclared income from rental of immovable property and unfair competition.
New measures will be issued to allow a group of companies to calculate their income tax liabilities as one single unit, thus facilitating the income tax obligations.
The Government outlined that the Planning Authority will be issuing fiscal incentives for the development of new public car parks.
Cost of Living Adjustment (COLA)
Cost of Living Adjustment based on inflation adjustments shall be € 1.75 a week.
Public Transport Incentive to Those Turning 18
Individuals turning 18 years of age during 2017 will be granted free public transport for a year.
Self Employed Full Time Students
Full-time students under the 24 years of age who are also self-employed shall become eligible to pay social security contributions at the rate of 15% on their net income, in a pro-rata manner.
Care of The Elderly
Elderly waiting to be admitted to care homes shall become entitled to appoint a care worker and at the same time obtain a higher monetary aid amounting to € 5,200 per annum.
Rent Subsidy for Low Income Earners
The rent subsidy will be doubled to € 166.66 weekly depending on the household income and family size.
No increase in rental fees for individuals renting immovable property from the Government or its authorities once the rental agreement expires. Additionally, any increase applied in 2013 will be refunded to tenants.
Use of Tablets
All Government, church and private primary schools shall be introducing the use of tablets to grade 4 and above students.
Fund to improve current facilities
€ 7,000,000 shall be allocated for the improvement of various University of Malta, including The Junior College, facilities.
Further Educational Facilities Developments
The government announced that plans are in place to build three new schools by the end of 2017. Additionally, a new MCAST campus shall be established.
Pharmacy of Your Choice Pilot Project
Medicines will start being distributed to patients over 70 years of age at their own homes.
New Medical Services
The government will be offering free dental care and anti-biotic to certain patients.
Cancer Patients Medical Paid Leave
Consultations shall take place with strategic partners for the introduction of Medical Paid Leave for cancer patients who at the same time continue to be employed.
The Government together with its Malta Government Investments Limited arm will introduce Solar Bonds to the Public. The contributions made shall be made available to further develop photovoltaic systems both at public and private commercial places.
Energy Efficient Appliances
Schemes will be introduced for the payment of ECO cheques granted to low-income earners for the replacement of air conditions, tumble dryers, refrigerators and other appliances.
Property Alterations for Energy Efficiencies facilities
Photovoltaic panels schemes shall be introduced. Other schemes involving alterations to residences related to renovations of wells, roof insulation and solar water heaters.
New Business Fast Track
Shops and other commercial establishments shall no longer require a trading license to engage in their business activities. Bureaucratic systems shall be removed to further reduce the setting up of a business process to 3 days (From the Current 30 days).
The Gaming Authority will be launching a reform to its regulatory framework. These amendments aim to tackle the industry’s needs and further enhance prospects to achieve its objectives.
Malta Development Bank
The Malta Development Bank shall start to operate in 2017, with an authorised share capital of € 200, 000, 000 aimed to support businesses, investment and ease access to finance.