Introduction 

The budget speech for 2022 was read by the Minister of Finance and Employment last night and as previously announced no new taxes were introduced.  Instead, various measures were proposed to assist low-income earners and persons in the brink of poverty together with other environmentally friendly measures and immovable property related measures.

 

The Economy

Despite the adverse economic impact of the COVID-19 pandemic, it was announced that the rate of employment during the first three months of 2021 increased when compared to 2019 figures to 77.3%.  Unemployment rate stood at 3.2% in August of 2021 whilst average unemployment rate in EU stood at 6.8% during the same period.

Expected economic growth for next year is expected to be 6.5% in real terms and 8.6% in nominal terms.  Unemployment rate is expected to remain 4%.

Deficit for 2021 is expected to be 11.1% of the GDP which is in line with the estimations made last April but higher than what was anticipated last year.  National debt is expected to increase to 61.8% of the GDP whilst the annual deficit is expected to go down to 5.6%.  It is envisaged that by 2024, the national debt will stand at 62.4% whilst the deficit will go down to 2.9% of the GDP.

 

COLA

The same Cost of Living Adjustment (COLA) as 2021 was announced for 2022 and thus will be €1.75 per week which will be given to all employees, pensioners as well as those on social benefits. Students receiving a stipend will receive a pro-rata COLA.

 

Income Tax

  • The tax-free bracket for pensioners will increase so that pensioners will not be subject to income tax even after the increase in pensions and COLA announced during this budget.
  • The tax refund will be extended and increased.  Persons earning less than €60,000 will be entitled to a refund ranging between €60 and €140.
  • Overtime annual income not exceeding €10,000 will be subject to 15% tax rather than being added to the employment income of the individual.  This only applies if the basic annual employment income does not exceed €20,000.
  • Part-time income will be subject to 10% tax rate instead of 15%.
  • Artists will be subject to an income tax rate of 7.5%.
  • As from 1 June 2022, the rate of interest on unpaid taxes will increase to 7.2% per annum.  Whilst it will still be possible to request for a remission of interest due on unpaid taxes, this will only be granted in exceptional cases.

 

Immovable Property

  • The tax on the first €200,000 of the transfer value of immovable property acquired or disposed that has been rented out for at least 10 years to persons eligible for rent benefit will be subject to a reduced rate of tax. If the property is sold to the tenants, then no tax will be paid by either the buyer or seller.
  • Increase in subsidy to €25,000 for structural works carried out on rented property which is subject to controlled rental law.
  • Removal of Capital Gains tax and Duty on Documents upon the transfer of qualifying immovable property situated in a UCA zone, houses which are older than twenty years and have been vacant for at least seven years or new developments built using traditional Maltese style. This exemption is applicable on the first €750,000 of the value of the property.
  • First time buyers will also be eligible for a grant of €15,000 if the qualifying immovable property is in Malta and €30,000 if the qualifying immovable property is in Gozo.
  • VAT refund of up to €54,000 on restoration expenses incurred on the regeneration of qualifying immovable property.
  • Extension of the reduction in duty on documents upon the purchase of immovable property for first time buyers, second time buyers and purchase of immovable property in Gozo.

 

Environment

  • Free public transport for residents in Malta and Gozo as from 1 October 2022.
  • Fiscal incentives for persons opting to purchase an electric vehicle or Plug-In Hybrids increased to €11,000 and if used together with motor vehicle scrappage scheme to €12,000.
  • Motor vehicles scrappage scheme increased to €2,000 in Gozo.
  • Extension of the exemptions from registration tax and annual licence fee for a period of five years on electric vehicles and plug-in vehicles.
  • Extension of VAT refund on bicycles and electronic bicycles as well as motor bikes, scooters, motor assisted bicycles as well as grants for vehicles which are upgraded to work on gas.

 

Employment

  • Discussions are being held for the implementation of the EU directives concerning parental leave and work-life balance.
  • Possible changes to the national minimum wage.

 

Businesses

  • Extension of rental subsidy for qualifying businesses to lighten the burden on importers and businesses who are facing increasing costs because of the increase in transportation costs.
  • Entities with unabsorbed capital allowances during 2020 and 2021 due to losses suffered as a result of the COVID-19 pandemic, may transfer such capital allowances to other companies within the same group to offset them against any chargeable income.
  • Malta Enterprise will launch a new scheme whereby it will be possible to obtain a tax benefit if a percentage of business profits is reinvested within a two-year period.
  • Extension of the reduction in Duty on Documents upon the intervivos transfer of family businesses to younger family members.
  • Malta will start offering iStart-up Visa to attract foreign start-ups and entrepreneurs. Malta Enterprise will launch a program to attract certain non-EU residents wishing to set up stop in Malta.

 

Social Security

It will now be possible to pay social security contributions on more than one part-time income up to a maximum of 40 hours per week.  This will enable persons approaching pension age to ensure they will have more social security contributions for a better pension.

 

Conclusion

The budget presented for 2022 is in line with most of the other budgets announced under this administration.  As with previous budgets, no new taxes were announced despite the disruption caused by the COVID-19 pandemic and the economic set back such pandemic caused.  The Maltese government seems to be confident that the economy will recover and we will see better years despite the fact that very little mention was made to new economic sectors.  Much of the focus remains on immovable property which proved to be an economic generator in the last few years.   Furthermore, environmental incentives are mostly an extension on existing schemes with no new incentives being launched.  No incentives were launched to address the shortfall in adequate education in certain professions which will ultimately affect the country’s future.