On 14 October 2019, the Honourable Minister for Finance, Professor Edward Scicluna, presented the Budget for the coming year. In his introduction, he summarised the most salient features in relation to the performance of the Maltese economy with the main points being the following:
- The economic growth for the first six months of 2019 was 4.7% in real terms and 7.3% in nominal terms;
- GDP increase in real terms is expected to be 4.3% for 2020;
- Unemployment stood at 3.3% in August 2019 and it is expected to be around 3.5% in 2020;
- Inflation rate is expected to be 1.6% for 2020;
- Government debt as a percentage of GDP is expected to be 43.1% at end of 2019 and this should go down to 40.4% in 2020.
The Cost of Living Adjustment (COLA) for 2020 will amount to €3.49 per week which will be given in full to pensioners and persons on social benefits. Employees will also be entitled to an additional day of vacation leave which is added to their annual leave entitlement.
- 15% tax rate on the first 100 hours of overtime for persons earning less than €20,000 per annum;
- The maximum tax-free pension income will be increased to €13,798 whilst the maximum tax-free income for retired couples earning only one pension will increase to €15,798;
- A tax refund to employees will be granted and will be based on the employee’s income. The tax refund varies between €40 and €68;
- Tax incentives under the Voluntary Occupational Pension Scheme are being extended;
- VAT exemption on education related services;
- VAT refund (capped to €1,000) granted to persons with disabilities who purchase medical equipment.
- Registration and deregistration of VAT numbers and PE applications may now be done online;
- Married couples may now opt for separate tax returns and assessment;
- The Inland Revenue Department will generate provisional assessments in lieu of the tax return to reduce the need for individuals filing of an income tax return;
- The Inland Revenue Department will issue tax statements and refunds within a period of six months from the submission date.
Property Related Measures
- The existing reduction in duty on documents (to 1.5%) upon the transfer of business to family members is being extended by another year;
- Extension of the current schemes for the reduction of duty on documents for first time buyers, second time buyers, purchase of property in UCA and purchase of property in Gozo. The first €175,000 (previously €150,000) of the value of property bought by first time buyers is now exempt from duty on documents;
- Duty on documents on residential property acquired through causa mortis will be taxed at the rate of 3.5% (instead of 5%) on the first €175,000;
- Gains made on the sale of a promise of sale agreement will be subject to tax at the rate of 15% on the first €100,000. This tax is a final tax and the gain made from the transfer of the promise of sale agreement will not form part of the chargeable income of the person.
- Various tax refund to low income earners;
- Increase in pension income for persons opting to work after retirement age;
- Increase in social security payments to persons and pensioners suffering from disabilities;
- Assistance to parents whose children suffer from rare diseases, persons suffering from certain conditions and persons under cancer treatment;
- Assistance to persons under the age of 40 who do not have enough funds for the deposit on the purchase of residential property;
- The subsidy for low income earners to assist in the payment of rent on residential property is being extended and the criteria to qualify for such subsidies will be widened.
Environment Friendly Measures
- A Commission will be set up to determine the date after which no polluting engine cars may be imported;
- Reduction in the electricity tariff for persons opting to charge their electric car at home;
- Introduction of the Beverage Container Recycling Scheme for the collection of certain waste;
- Abolition of single use plastic as from 1 January 2022;
- Grants will be available to persons in the construction industry who opt to replace their polluting machines with environmentally friendly ones. The grant is capped to €200,000;
- A Grant of €1,000 for persons purchasing batteries for the storage of electricity generated by photovoltaic panels. This is only available to persons who no longer benefit from feed-in tariffs;
- Extension of the exemption from registration taxes on electric and hybrid cars;
- Extension of the VAT refund upon purchase of bicycles and electric motors, scooters and bicycles;
- Extension of the current grant of a maximum of €1,500 given to persons opting to change their car to one which is more environment friendly.
- Additional investments allocated to Artificial Intelligence (AI) which will place Malta with the top 10 countries in this field. Such investments include educational programmes, the inauguration of an AI Innovation Hub, implementation of pilot projects in the public sector utilising AI and additional technological infrastructure;
- The Government will be implementing assistance measures for sectors such as digital arts, games programming and production media in order to attract additional foreign investments relating to the game productions;
- To further diversify the Maltese economy, a legislative framework for the space industry is planned to be introduced. A consultation document will be drafted as a basis for a national strategy which will also tackle research and development in this field;
- Malta will also explore a new economic sector in the aviation industry relating to Drones (Remotely Piloted Aircraft Systems) in order to attract foreign investors for research, technological experiments and education in this area;
- Schemes such as the Micro Invest, Business START and Start-Up Finance will be extended;
- Malta Enterprise will be introducing incentives for businesses to employ people with special needs;
- Additional investment in the gas pipeline between Malta and Sicily of €400 million till 2024;
- Consultation for the revision of the current aviation rules to incentivise further investment in the sector.
- Introduction of the Film Fund during 2019 to incentivise cinema productions;
- A new fund will be launched so that Gozo may become a destination for Meetings, Conferences and Events;
- The Gozo Business Scheme will continue. This scheme assists start-ups in Gozo;
- Fiscal incentives for companies to relocate to Gozo;
- A tendering process for the forth ferry will start to enable the Gozo Channel to acquire a new ferry;
- Studies such as the preliminary designs and environmental impact assessment in connection to the bridge between Malta and Gozo are to be concluded in the coming months.
Strategy against fiscal evasion and money laundering
The Minister announced that a report issued by the European Commission’s Directorate General for Taxation and Customs (TAXUD) noted that Malta is the fourth country within the EU Member States with the least evasion in VAT collection.
Following the issuance of the Moneyval recommendations, the National Coordination Committee is coordinating a detailed plan for the implementation of these recommendations.
The Minister further announced that a new agency known as the ‘Financial Organised Crimes Agency’ will be set up and will be complimentary to the Economic Crimes Unit.
As from next year, cash payments exceeding €10,000 for the purchase of property, cars, boats, yachts, diamonds, precious stones and works of arts will not be allowed.
During the budget speech, the Minister noted that Malta’s success is being recognised by international agencies. Indeed, The World Economic Forum rated Malta in the first place for two consecutive years. Furthermore, he noted that this is the third budget in a row with no increase in taxes and based on the Government’s estimates, the year 2020 will be the fifth year with a budget surplus.
Rather than introducing new measures, this budget was an extension of existing measures focusing on the social aspect and low-income earners, property related measures and environment friendly measures. The Minister made references to plans to develop new areas like Artificial Intelligence and Digital Arts in order to attract further foreign direct investment.