Finance Minister Edward Scicluna presented the Government’s fourth budget of the legislature to Parliament on 12 October 2015. In his introduction he highlighted the success of the previous budget which put Malta on a sound footing and provided the foundation for further reforms in this year’s budget, Malta Budget 2016.
Malta Budget 2016 Highlights:
- Workforce and entrepreneurship: increased participation and inclusion in the work force and providing incentives for entrepreneurship.
- Education: investment at all levels of the educational system.
- Social Measures: the budget also featured social measures with the slight adjustment of personal tax bands, increases in pensions and a pilot project for the part financing of the cost of home help for elderly persons on the waiting list for state care homes.
- Immovable Property: incentives for the refurbishment and use of abandoned commercial properties, measures to facilitate the disposal of properly locked in inheritance disputes, a broadening of the application of a 15% final withholding tax, reduced final withholding tax and acquisition duty of on the transfers of property in Urban Conservation Areas (UCAs).
Malta Budget 2016: TAX MEASURES
Income Tax Measures - Individuals
- Widening of tax free bands (up to €9,100 for individuals, €12,700 for couples applying married rates and €10,500 for parents applying the parent rates)
- An adjustment in the manner in which the tax computation is worked results in a saving in tax per year of:
- €90 for individuals with an annual income of upto €19,500 (single computation);
- €120 for individuals with an annual income of upto €28,700 (joint computation;
- €105 for individuals with an annual income of upto €21,200 (parental computation)
- €120 for couple opting for a joint declaration and who earn up to €28,700;
- €180 for couple opting for a separate declaration and who earn up to €28,700
- Coaches and players of any sport will benefit from a reduced income tax rate of 7.5%
- “Extra duty” carried out by police officers for organisations, individuals and companies will be taxed separately at a rate of 15%.
Deductions
- Introduction of a tax deduction of 150% of any amount donated to the arts.
- Tax deduction equivalent to the full amount donated by companies to the Community Chest Fund during 2015, where such donation is not less than €2,000.
- Businesses that buy hybrid or electric vehicles may take a deduction amounting to 50% of the cost of the vehicle in the year of purchase.
- Wear and tear allowances previously restricted to industrial buildings, hotels and car parks will also be available for office buildings
Immovable Property
- Option of 15% final tax on gross rental income currently applicable to leases of residential premises extended to commercial property with the exclusion of rental income derived from intra-group rental agreements.
- Reduction of final tax from 8% to 5% of transfer value, upon transfer of rehabilitated immovable property situated in Urban Conservation Areas – effective January 2016.
- Stamp duty reduced from 5% to 2.5% on sale of properties in Urban Conservation Areas if contract is concluded between 1 January and 31st December 2016.
- Stamp duty exemption for first time buyers extended until end of 2016 with refunds being paid to transferees who entered into contracts after 1 July 2015.
Tax Credits
- Extension of Micro-Invest Scheme to provide a tax credit of up to €50,000 to self-employed women and businesses that are majority owned by women.
- A tax credit up to a maximum of €10,000 to enterprises employing individuals holding or reading for a doctorate in science, ICT or engineering, for a period of at least 12 months.
- Companies may qualify for either a tax credit or a grant for the “knowledge transfer” between employees aimed at encouraging the transfer of skills from existing to new employees.
Fiscal Consolidation
- Introduction of a fiscal consolidation regime whereby companies owned by the same persons will be permitted to compute taxable income on a consolidated basis and submit one income tax return.
VAT
- Rate of VAT on gym memberships, fitness centres, football nurseries and other similar activities decreased from 18% to 7%.
Malta Budget 2016: Other Measures
Registration fees for small companies
- Registration fee for companies registered in electronic format and whose authorized share capital does not exceed €1,500 shall be reduced from €250 to €100.
Compensation for relocation costs
- An incentive is being launched by Malta Enterprise whereby small enterprises engaged in manufacturing activities will obtain reimbursement of relocation costs when moving to premises leased from the private sector for continuation of their manufacturing activities.
Finance Minister Edward Scicluna presented the Government’s fourth budget of the legislature to Parliament on 12 October 2015. In his introduction he highlighted the success of the previous budget which put Malta on a sound footing and provided the foundation for further reforms in this year’s budget, Malta Budget 2016.
Malta Budget 2016 Highlights:
- Workforce and entrepreneurship: increased participation and inclusion in the work force and providing incentives for entrepreneurship.
- Education: investment at all levels of the educational system.
- Social Measures: the budget also featured social measures with the slight adjustment of personal tax bands, increases in pensions and a pilot project for the part financing of the cost of home help for elderly persons on the waiting list for state care homes.
- Immovable Property: incentives for the refurbishment and use of abandoned commercial properties, measures to facilitate the disposal of properly locked in inheritance disputes, a broadening of the application of a 15% final withholding tax, reduced final withholding tax and acquisition duty of on the transfers of property in Urban Conservation Areas (UCAs).
Malta Budget 2016: TAX MEASURES
Income Tax Measures - Individuals
- Widening of tax free bands (up to €9,100 for individuals, €12,700 for couples applying married rates and €10,500 for parents applying the parent rates)
- An adjustment in the manner in which the tax computation is worked results in a saving in tax per year of:
- €90 for individuals with an annual income of upto €19,500 (single computation);
- €120 for individuals with an annual income of upto €28,700 (joint computation;
- €105 for individuals with an annual income of upto €21,200 (parental computation)
- €120 for couple opting for a joint declaration and who earn up to €28,700;
- €180 for couple opting for a separate declaration and who earn up to €28,700
- Coaches and players of any sport will benefit from a reduced income tax rate of 7.5%
- “Extra duty” carried out by police officers for organisations, individuals and companies will be taxed separately at a rate of 15%.
Deductions
- Introduction of a tax deduction of 150% of any amount donated to the arts.
- Tax deduction equivalent to the full amount donated by companies to the Community Chest Fund during 2015, where such donation is not less than €2,000.
- Businesses that buy hybrid or electric vehicles may take a deduction amounting to 50% of the cost of the vehicle in the year of purchase.
- Wear and tear allowances previously restricted to industrial buildings, hotels and car parks will also be available for office buildings
Immovable Property
- Option of 15% final tax on gross rental income currently applicable to leases of residential premises extended to commercial property with the exclusion of rental income derived from intra-group rental agreements.
- Reduction of final tax from 8% to 5% of transfer value, upon transfer of rehabilitated immovable property situated in Urban Conservation Areas – effective January 2016.
- Stamp duty reduced from 5% to 2.5% on sale of properties in Urban Conservation Areas if contract is concluded between 1 January and 31st December 2016.
- Stamp duty exemption for first time buyers extended until end of 2016 with refunds being paid to transferees who entered into contracts after 1 July 2015.
Tax Credits
- Extension of Micro-Invest Scheme to provide a tax credit of up to €50,000 to self-employed women and businesses that are majority owned by women.
- A tax credit up to a maximum of €10,000 to enterprises employing individuals holding or reading for a doctorate in science, ICT or engineering, for a period of at least 12 months.
- Companies may qualify for either a tax credit or a grant for the “knowledge transfer” between employees aimed at encouraging the transfer of skills from existing to new employees.
Fiscal Consolidation
- Introduction of a fiscal consolidation regime whereby companies owned by the same persons will be permitted to compute taxable income on a consolidated basis and submit one income tax return.
VAT
- Rate of VAT on gym memberships, fitness centres, football nurseries and other similar activities decreased from 18% to 7%.
Malta Budget 2016: Other Measures
Registration fees for small companies
- Registration fee for companies registered in electronic format and whose authorized share capital does not exceed €1,500 shall be reduced from €250 to €100.
Compensation for relocation costs
- An incentive is being launched by Malta Enterprise whereby small enterprises engaged in manufacturing activities will obtain reimbursement of relocation costs when moving to premises leased from the private sector for continuation of their manufacturing activities.