On Monday the Finance Minister Edward Scicluna delivered the new 2014 Maltese budget. The main features include, among others, changes in income tax rates and indirect taxes, in duty on documents and transfers, proposals regarding infrastructural investments and the Individual Investor Programme. Below we present main outlines.
Income Tax
To start with, the top 32% income tax rate for those who earn less than €60,000 will be reduced to 29% for single, married and parent computation; however dividends received by individuals will be taxed at rates applicable before the introduction of the marginal tax rate of 32%. Additionally, tax free bracket for parents will be increased from € 9,300 to € 9,800.
|
Rate
|
Single Computation
|
Parent Computation
|
Joint Computation
|
|
0%
|
0-8,500
|
0-9,800
|
0-11,900
|
|
15%
|
8,501-14,500
|
9,801-15,800
|
11,901-21,200
|
|
25%
|
14,501-19,500
|
15,801-21,200
|
21,201-28,700
|
|
29%
|
19,501-60,000
|
21,201-60,000
|
28,701-60,000
|
|
35%
|
60,001+
|
60,001+
|
60,001+
|
The 15% tax rate in respect of part-time income is being extended to apply on the first €10,000 for part-time employment and the first €12,000 for part-time self-employment (previously in all cases the limit was €7,000). The tax on income of footballers engaged on a part-time basis will be reduced to a flat rate of 7.5%.
Furthermore, the new budget introduces some tax deductions, among others a new tax deduction for employers regarding work placements and apprenticeships - €600 deduction for each work placement and €1,200 for each apprenticeship. The government introduced also incentives for women returning to employment and employers who employ persons aged between 45 and 65.
Duty on Documents and Transfers
As for duty on documents and transfers, the tax on the sale of goods by auction will be removed. Moreover, the interest payable on duties from death taxes will not exceed the amount of duty owed what may result in savings for heirs. Furthermore, first-time immovable property buyers will benefit from cut of 3.5% duty payable on the first €150,000 of the value of a house. It was also agreed that the valuation of property may be prepared by an architect appointed privately, subject to certain conditions.
Rental Market
The government decided to regulate the rental market by introducing an optional final withholding tax of 15% on rental income, calculated on gross rental income. This solution will be backed by final 35% income tax on undeclared rental income.
VAT
In the area of VAT it has been confirmed that current rates will not be increased. Moreover, the existing system where payments made are o the first place appropriated to interest before they are appropriated to any tax will be changed. As a result of the amendments, any payments made will be set-off tax before amounts due. Furthermore, penalties for late filing of VAT returns will no longer be due when a VAT return is filed on time but without the accompanying payment. The Minister also confirmed that the rates of punitive interest for late payment of VAT will be reduced.
Tax Evasion
Hand in hand with these improvements, Minister Scicluna announced a new campaign against fiscal tax evasion "in a bid to make people understand that there is no room for evasion in a democratic and developed society" and confirmed the government’s efforts towards fighting tax evasion. Moreover, an on-line system to report tax evasion will be introduced.
Individual Investor Programme
Finally, the new budget introduces of the Individual Investor Programme aimed at collecting funds by sale of Maltese citizenship to wealthy investors. The government intends to set up and finance this way a National Development Fund, which should eventually contribute to social projects in housing, education and other areas. Moreover, to boost small business, the microinvest scheme will be reintroduced for small enterprises and self-employed individuals. Entrepreneurs will be granted aid in respect of eligible investments in the form of a tax credit equivalent to 45% (65% in Gozo) of the eligible expenses incurred.
On Monday the Finance Minister Edward Scicluna delivered the new 2014 Maltese budget. The main features include, among others, changes in income tax rates and indirect taxes, in duty on documents and transfers, proposals regarding infrastructural investments and the Individual Investor Programme. Below we present main outlines.
Income Tax
To start with, the top 32% income tax rate for those who earn less than €60,000 will be reduced to 29% for single, married and parent computation; however dividends received by individuals will be taxed at rates applicable before the introduction of the marginal tax rate of 32%. Additionally, tax free bracket for parents will be increased from € 9,300 to € 9,800.
|
Rate
|
Single Computation
|
Parent Computation
|
Joint Computation
|
|
0%
|
0-8,500
|
0-9,800
|
0-11,900
|
|
15%
|
8,501-14,500
|
9,801-15,800
|
11,901-21,200
|
|
25%
|
14,501-19,500
|
15,801-21,200
|
21,201-28,700
|
|
29%
|
19,501-60,000
|
21,201-60,000
|
28,701-60,000
|
|
35%
|
60,001+
|
60,001+
|
60,001+
|
The 15% tax rate in respect of part-time income is being extended to apply on the first €10,000 for part-time employment and the first €12,000 for part-time self-employment (previously in all cases the limit was €7,000). The tax on income of footballers engaged on a part-time basis will be reduced to a flat rate of 7.5%.
Furthermore, the new budget introduces some tax deductions, among others a new tax deduction for employers regarding work placements and apprenticeships - €600 deduction for each work placement and €1,200 for each apprenticeship. The government introduced also incentives for women returning to employment and employers who employ persons aged between 45 and 65.
Duty on Documents and Transfers
As for duty on documents and transfers, the tax on the sale of goods by auction will be removed. Moreover, the interest payable on duties from death taxes will not exceed the amount of duty owed what may result in savings for heirs. Furthermore, first-time immovable property buyers will benefit from cut of 3.5% duty payable on the first €150,000 of the value of a house. It was also agreed that the valuation of property may be prepared by an architect appointed privately, subject to certain conditions.
Rental Market
The government decided to regulate the rental market by introducing an optional final withholding tax of 15% on rental income, calculated on gross rental income. This solution will be backed by final 35% income tax on undeclared rental income.
VAT
In the area of VAT it has been confirmed that current rates will not be increased. Moreover, the existing system where payments made are o the first place appropriated to interest before they are appropriated to any tax will be changed. As a result of the amendments, any payments made will be set-off tax before amounts due. Furthermore, penalties for late filing of VAT returns will no longer be due when a VAT return is filed on time but without the accompanying payment. The Minister also confirmed that the rates of punitive interest for late payment of VAT will be reduced.
Tax Evasion
Hand in hand with these improvements, Minister Scicluna announced a new campaign against fiscal tax evasion "in a bid to make people understand that there is no room for evasion in a democratic and developed society" and confirmed the government’s efforts towards fighting tax evasion. Moreover, an on-line system to report tax evasion will be introduced.
Individual Investor Programme
Finally, the new budget introduces of the Individual Investor Programme aimed at collecting funds by sale of Maltese citizenship to wealthy investors. The government intends to set up and finance this way a National Development Fund, which should eventually contribute to social projects in housing, education and other areas. Moreover, to boost small business, the microinvest scheme will be reintroduced for small enterprises and self-employed individuals. Entrepreneurs will be granted aid in respect of eligible investments in the form of a tax credit equivalent to 45% (65% in Gozo) of the eligible expenses incurred.