Introduction

Professor Edward Scicluna, the Minister responsible for Finance, delivered the 2015 Budget Speech on the 12th October 2015.

Malta's economy has delivered yet another year of solid economic growth in 2015, significantly outperforming its Eurozone partners, registering GDP growth of 4.2%, coupled with a further reduction in budget deficit (estimated at 1.6% for 2015) and unemployment (down to 5.4% in 2015); government debt as a percentage of GDP is at 66.56%.

Accordingly, and as expected, the Minister of Finance's Budget Speech was generally positive and upbeat, one that focuses on achieving the Government's targets of fiscal consolidation, strong economic growth and better living standards for all. 

The Budget Speech includes a range of, generally, 'pro business' measures.  These are varied, and range from measures such as the provision of financial assistance to start-ups and family owned businesses, to the launch of various private public partnerships such as Property Malta (targeting the promotion of Malta as a high end property jurisdiction), Education Malta (targeting the promotion of Malta for the set up of educational establishments), and one to develop and operate the Kalkara film studios.  Other pro business measures include assistance to be provided by Malta Enterprise to start ups renting manufacturing premises from the private sector, streamlining of the public tendering process, a revision of corporate insolvency procedures, among others.  Less welcomed by the business continuity was the announcement that a new environmental contribution of €0.50 per night (capped at €5 per visit) will be levied on every tourist aged 18 and over as of April 2016.

Tax Measures

The Budget Speech naturally also included quite a number of tax related measures, many consisting in tweaks to existing fiscal incentives.  This brief update looks at some of the more salient fiscal measures announced in the 2016 Budget Speech, particularly as these will provide incentives for economic growth whilst alleviating the tax burden on businesses and individuals generally.  These include the following:

Fiscal consolidation: the Income Tax Acts are to be amended to enable a group of companies, owned by the same persons, to compute their taxable income on a consolidated basis i.e. as if all were a single taxpayer.

Tax credits:

  • Companies may qualify for either of a tax credit or grant with respect to intra-employee 'knowledge transfer', so as to incentivise the transfer of knowledge between existing and new employees.
  • A maximum tax credit of €10,000 will be granted to enterprises employing individuals with a doctorate (or reading for one) in science, engineering or ICT for at least 12 months, with a view to incentivising research and innovation.
  • Malta Enterprise shall extend its Micro Invest Scheme so as to grant a €50,000 maximum tax credit to self-employed women and businesses with majority female ownership.

Tax deductions:

  • Capital allowances granted with respect to industrial buildings shall be extended to include office buildings.
  • Tax deductions for donations to the arts (equivalent to 150% of the value) and to the Malta Community Chest Fund (up to a maximum of €2,000).

Tax measures applicable to immovable property:

  • The final 15% tax rate applying to gross rental income, at the lessor's option, shall be extended to the rental of commercial properties.
  • The final tax rate applying to transfers of properties in Urban Conservation Areas shall be reduced from 8% to 5% of transfer value.  Transfer duty on the transfer of such properties shall likewise be reduced from 5% to 2.5%.
  • The transfer duty exemption available to first time buyers shall be extended further, to end 2016.

Taxation of individuals

  • The lowest band within the Single, Parent and Married personal income tax rates are to be widened to increase the tax free portion available to all taxpayers.
  • In line with a number of other measures aimed at encouraging exercise and sports activities, coaches and players of any sport will benefit from a reduced income tax rate of 7.5% (previously available only to football and waterpolo players).  A reduced VAT rate is also to apply to gym memberships, fitness centres, football nurseries and similar operations.

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.