Malta: Malta Budget 2020

Below are the salient points of the Malta Budget for the year 2020, which was presented to the House of Representatives by the Hon. Prof. Edward Scicluna, Minister of Finance, on 14 October 2019.

For a review of the salient points of the Malta budget for the year 2019, please click here.

To view and download the report, please click here.

Economic Performance

  • Malta registered a surplus – A surplus of 1.4% is forecasted for 2020 and GDP is projected to grow by 4.3%. Government debt has been reduced to 43% of GDP in 2019 and is expected to be further reduced to 40.4% of GDP in 2020.
  • Economic growth – Malta registered an economic growth of 4.7% in the first 6 months of 2019. Inflation is expected to be at 1.6%, whilst imports are expected to rise by 2%.
  • Unemployment rate – Malta registered an unemployment rate of 3.5% in August 2019 and employment is expected to increase by 4.1% in 2020.
  • Cost of living – The Minister announced that the cost of living allowance (COLA) is set to be €3.49 per week.
  • Malta has ranked first in terms of the macroeconomic stability rating of the World Economic Forum.

Tax

  • No new direct or indirect taxes were registered..
  • VAT registrations may be made online and certificates issued promptly.
  • Tax refunds to employees earning less than €60,000 shall continue to be granted in 2020.
  • Employees who work overtime, earn a basic salary of up to €20,000 and are not in management positions, shall be taxed at a rate of 15% for the first 100 hours of overtime.
  • A one-off bonus shall be given in the amount of €15 for single person households and €35 for all households with two or more members in order to compensate for the increases in bread and milk prices in 2019.
  • The VAT on educational and vocational training, including distance learning, will be removed as of 2020. Moreover, a one-off grant of €850 for Maltese students who opted to study a foreign language abroad will be introduced.

Pensions

  • An increase was granted in contributory and non-contributory pensions of €3.51 per week, over and above the COLA increase.
  • Non-taxable pension income shall increase to €13,793 to ensure that pension increases are not taxed.
  • Pensioners will no longer pay provisional tax, which will automatically be deducted from their pension. Tax rebates will be paid within six months instead of twelve.
  • A bonus of between €200 and €300 will be given to persons that do not receive a pension because they did not pay enough national insurance contributions.
  • Low income pensioners will receive a supplementary income of €150 per year.
  • Persons who worked in the police force, army, civil protection or as correctional officers, and started working elsewhere after retiring following 25 years of service, shall be able to benefit from a higher pension rate.
  • Persons over 75 years of age still living at home shall continue to receive grant of €300 per year, and those over the age of 80 years shall receive a grant of €350 per year. This shall also apply to those persons living in residential homes at their own expense.
  • Bonds shall once again be issued for pensioners to emulate the Savings Bonds 62+.
  • Service pensions shall increase by €200 once again.
  • Public sector workers shall once again be able to postpone retirement and benefit from an increased pension once they decide to retire.
  • Measures shall continue be offered to enhance the Third Pillar Pension Scheme and the Voluntary Occupation Pension Scheme. There will once again be financial incentives for individual and companies investing in private pension schemes.
  • Persons over 75 years of age shall be given free public transport.
  • Elderly widows or widowers who have children 18 years of age or under shall be entitled to a €10 a week allowance, whether or not they work.
  • For more information on employment matters, please do not hesitate to contact our Employment Team.

Property

  • The Residential Leases Bill has been brought before Parliament to promote the development of the residential rental sector by ensuring standards of fairness, clarity and predictability in contractual relations between lessors and lessees and to safeguard and protect the right to adequate accommodation. For more information, please click here.
  • A new law is expected to set up and regulate a Building and Construction Regulator, as part of a reorganisation project of the building industry. It is proposed that the said Regulator will be responsible for harmonising and consolidating current work practices, standards, procedures, regulations and laws currently governing the industry under a single piece of legislation, which will consequently be brought before Parliament as a Bill. For more information, please click here.
  • From 1 January 2020, any income or profits received from the assignment of any right obtained under a promise of sale agreement, including the promise to sell in any way an immovable property or a promise in regard to emphyteusis, shall be subject to a final tax rate of 15% on the first EUR 100,000 of income or profits received from the said assignment. Such persons shall be subject to a 35% tax for any amount exceeding EUR 100,000. The notary shall be obliged to collect the said tax dues upon signing of the assignment of the promise of sale agreement.
  • Person who choose to live in a property that is inherited will benefit from a reduced stamp duty rate of 3.5% on the first €175,000.
  • All previous property incentive schemes relating to first-time buyers and second-time buyers, to the purchase of vacant properties in Urban Conservation Areas, and the purchase of property in Gozo shall all be extended for a further year.
  • First-time buyers shall now be subject to an increased exemption on stamp duty for the first €175,000 compared to €150,000 as in previous years.
  • Those under the age of 40 years that wish to purchase immovable property together with a home loan but do not have the liquidity to pay the deposit shall be given an interest-free loan by the banks for this purpose, which shall be repaid over a 15-year period, and the interest shall be paid by the government.
  • Rental aid benefits will be extended to people who spend more than 25% of their income on rent, with the salary cap for single people entitled to receive this benefit rising from €14,500 to €19,000. For couples with two children, the eligible cap will increase from €28,600 to €32,000.
  • Social housing is to be bolstered, with the conversion of dilapidated properties into social housing.
  • Should you require further information, please do not hesitate to contact our Real Estate Team

Environment

  • Further studies are to be carried out in relation to air pollution, biodiversity, and related matters.
  • In 2020, a deadline for the import of motor vehicles with combustion engines into Malta will be published by a Commission set up by the government that is studying the matter. Malta has registered an increase in electric cars in 2019. Plans are being laid out to increase public charging points for electric cars.
  • Persons that have electric cars will be given decreased electricity tariffs during the night of €0.13 per unit in order to charge vehicles as of 1 January 2020.
  • A beverage container refund scheme is to be introduced in 2020 allowing for the operation of a deposit and recovery scheme for beverage containers in Malta. The first bottle-return machines will be installed in shops by the end of 2019, with the scheme fully operational by end of in 2020.
  • Single use plastics will be prohibited from 1 February 2022 with the scheme being introduced on 1 February 2021.
  • Plans are being laid out for every fuel station in Malta and Gozo to provide gas and be fitted with charging points for vehicles running on alternative energy.
  • Contractors will be offered grants of up to €200,000 when they replace their heavy machinery with less polluting and less noisy models.

Energy

  • Schemes for solar panels and insulation are to be continued.
  • The Natural Gas Pipeline between Malta and Sicily, Italy shall be concluded by 2024 with an investment of €400 million.
  • An investment of €130 million is being made in reverse osmosis plants to reduce energy and change and upgrade plants.

Banking & Finance

  • The Malta Development Bank (MDB) has continued to offer new schemes and facilities to provide investment opportunities to SMEs and infrastructure projects. This allows more access to finance, smaller collateral assets and more favourable interest rates. The MDB is in communications with several credit institutions and other entities to finance significant projects related to the environment and education.
  • The Malta Stock Exchange (MSE) has welcomed 25 new instruments listed on its exchange in 2019.
  • The MSE shall lay out plans to issue Green Bonds in order to incentivise investments in the environment and sustainable development sectors.

FinTech

  • Malta has plans to lay out a regulatory framework in artificial intelligence (AI) and the internet of things. An AI taskforce has been set up and a strategy for AI was published in October 2019, making Malta one of the top 10 jurisdictions in the world for AI innovation and other related incentives.
  • The internet of things is to complement AI and a pilot project using this technology is in progress.
  • Should you require further information, please do not hesitate to contact our FinTech Team.

eSports

  • Incentives are to be introduced encouraging eSports' and video games' companies to establish themselves in Malta.
  • Programs will be offered to assist students to specialise in these sectors
  • For more information please do not hesitate to contact our Gaming Team.

iGaming

  • iGaming continues to be a source of significant growth in Malta.
  • Should you require further information, please do not hesitate to contact our Gaming Team.

Brexit

  • Malta Enterprise has launched a business advisory service intended to assist Maltese SMEs whose business depends on the UK market.

Business

  • The Malta Industrial Parks is assisting small businesses to find premises in and around industrial areas in Malta.
  • Malta Enterprise has introduced schemes and grants to companies that employ disabled persons.

Aviation

  • Air Malta, the national airline, is expected to continue to grow and strengthen its foundations. It is expected to replace its aircraft over the next 5 years in order to be more sustainable and efficient. Plans are being laid out to improve its service, increase flights, and introduce medium and long-haul flights.
  • Plans are being laid out to introduce a new sector for drones in Malta. Malta has the potential to encourage foreign R&D companies to establish themselves in Malta.
  • Malta Air Travel Services shall continue to upgrade taxi ways and runways.
  • Work is to commence on the construction of a new Air Traffic Control Centre to service the needs of the sector for the next 50 years.
  • Should you require further information, please do not hesitate to contact our Aviation Team.

Shipping

  • Plans are being laid out to continue to consolidate Malta's position and consolidate the Malta Ship Registry as the largest in Europe and sixth largest in the world.
  • Further incentives are expected for shipping companies.
  • A new Transport Safety Investigation Agency is to be set up.
  • Connectivity at sea is to be upgraded by means of investment in ferries and in ferry landing sites.
  • The cruise liner industry is experiencing growth as a port of call in the Mediterranean Sea. The Valletta cruise terminal is to be upgraded.

Tourism

Justice

  • Pending cases before the Courts of Malta have been decreased.
  • The State Advocate Act has been promulgated to establish and regulate the role of the lawyer of the state as an advisor to the Government. The Attorney General is to assume a more prosecutory function.
  • The powers of the Asset Recovery Bureau are to be increased, particularly in relation to the recovery of assets following amendments to a number of laws.
  • Plans are being put in place to increase parliamentary and court autonomy.
  • Plans are being put in place to encourage the use of mediation to decrease court cases.
  • Improvements shall be made to the Court's internal IT systems and online systems.

Citizenship

  • The Malta Individual Investor Programme and the Malta Residency and Visa Programmes have once again been extended.
  • Should you require further information, please do not hesitate to contact our Immigration Team.

AML/CFT

  • A National Coordination Committee will lead this process going forward bringing together some 20 national institutions to assist with this. Institutions in the UK and the USA will also be assisting in this process.
  • A Financial Organisation Crime Agency will be set up. It will not replace the Economic Crimes Unit within the Police Force but will work in collaboration with it.
  • Transfers of immovable property, motor vehicles, vessels and yachts, jewellery and art may no longer be made by payment in cash from 1 January 2020 where the consideration is in excess of €10,000.
  • Increased investment is expected in the Customs Department, especially with the purchase of an x-ray tunnel van, and two new machines for the scanning of luggage.

Voluntary Organisations (VOs)

  • The Office for Commissioner of VOs is to be strengthened and a VO centre is to be set up in Marsaxlokk.
  • Environmental VOs that have been enrolled for more than 5 years and are in compliance with the VOs Act will be subject to a maximum capping of €1,000 when making appeals before the Planning Authority.
  • A new VOs strategy has been launched to strengthen such a crucial democratic arm.

Other Measures

  • One additional day of vacation leave shall be granted to all workers in order to compensate for public holidays falling on a weekend. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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