The Minister of Finance, the Economy and Investment, the Hon.
Mr. Tonio Fenech delivered the 2012 Budget Speech on the
14th November 2011 and announced a number of fiscal
measures aimed at incentivizing investment and business, amongst
These measures are being introduced against a backdrop of
positive economic growth, namely a projected increase in Gross
Domestic Product (GDP) of 2.6% in real terms in 2011, and
Malta's positive performance in the context of the current
global financial crisis. The Minister of Finance listed the
following as the main Budget objectives:
Ensuring the macro economic stability and financial
sustainability required to attractive further investment and job
creation is in place;
Investing in initiatives aimed at fostering economic
Sustaining the current programme of investment in the
country's infrastructure, energy sector and the
Investing in education and training;
Supporting the needs of families, the elderly and the more
vulnerable members of society.
This brief update looks at some of the more interesting fiscal
measures announced in the 2012 Budget Speech as these will affect
the business community.
Incentives for Business
A significant number of fiscal incentives shall be introduced
with the aim of further encouraging investment in Malta as well as
attracting the necessary talent required to encourage further
growth in key areas. These incentives, some of which specifically
underline the Government's support for innovation, include:
A tax exemption applicable to royalty income derived from
copyright – to include copyright on books, film scripts,
music and art - on the lines of the one currently in force for
income from patents on inventions;
An expenditure-based income tax credit of up to
€15,000 will be granted to companies that commission the
development of educational or promotional digital games;
The Highly Qualified Persons Scheme – which provides
for a flat 15% personal tax rate to highly qualified expatriates
working in the financial services and egaming sectors –
shall be extended to international professionals such as game
directors and game designers, as well as academics and researchers
in the research and development sector.
Other incentives aimed at fostering growth within the business
sector include the extension of the MicroINVEST scheme, offering a
40% (60% to Gozo businesses) tax credit to small businesses, for a
further year; the launch of a MicroGuarantee scheme catering for
Government-provided bank guarantees on loans to existing or new
enterprises requiring access to capital; the launch of the Malta
Games Fund to support the growth of the digital games sector
locally, amongst others.
Value Added Tax
With a view to supporting those businesses that have encountered
difficulties in recent years relative to the timely payment of VAT
dues and, as a result, have accrued significant penalties, the
Government shall be introducing a scheme enabling businesses to
benefit from a reduction in accumulated fines and penalties. This
scheme is expected to be published shortly by way of Legal Notice
in terms of the VAT Act.
Tax incentives for working women and families
The Government has announced an extension of the period of
maternity leave from 14 to 16 weeks as of 2012, going up to 18
weeks in 2013; this increase in benefits shall however be borne by
the state as opposed to the employer.
Other family friendly tax incentives include the introduction of
a 'parent tax computation'. New income tax bands shall in
fact apply to income derived by parents having children in their
custody under 18 years of age (21, if in tertiary education) and
are not gainfully employed.
Amendments shall also be introduced to the Part-Time Work Rules,
providing for a 15% income tax rate in respect of income from part
time work or activities, so as to extend the benefits of same
generally as well as to extend the statutory deadline for payment
of the tax.
Other Fiscal Measures
Other fiscal measures include family-related measures, such as a
further increase in the private school fees personal tax deduction;
a revision of various vehicle registration taxes as well as of
various excise duties, including an increase in the excise duty
levied on cement. A number of other measures include tax incentives
for the elderly, tax incentives relative to the restoration and
renovation of scheduled properties and properties in Urban
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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An Israeli investor is investing in the Czech Republic. A substantial part of the investment will be financed with debt. As the Czech withholding tax on interest paid to Israel is 10%, he wonders whether this withholding tax can be avoided by structuring the loan through a third country.
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