The budget for 2024 was presented by the Minister of Finance and Employment yesterday evening. In his introduction the Minister indicated that notwithstanding the global turmoil the Government was committed to maintain the energy subsidies to curb inflation. Cereals will also be subsidised.
Despite the global challenges, the Government is forecasting an increase in the GDP in real terms of 4.1% for 2023 and 4.2% for 2024. The annual inflation for the current year is expected to reach 5.7% and then to fall to 3.7% in 2024. The unemployment rate is expected to be around 2.7%.
The national debt as a percentage of the GDP is expected to be 52.8% for 2023 and 55.3% for 2024 and therefore below the 60% threshold required by the EU. The deficit is set to decrease from 5% in 2023 to 4.5% in 2024 and further down to 3% by 2027 in compliance with EU regulations.
The Cost-of-Living Adjustment (COLA) announced for 2024 for employees, pensioners and those on social benefits amounts to €12.81 per week. Students’ stipends will also be increased pro-rata. As from 2024, the national minimum wage will be increasing gradually up to 2027 and is set to increase to €213.54 per week including COLA for 2024.
Income Tax Measures
The main income tax measures include:
- Malta will apply a six-year derogation with respect to the EU Minimum Tax Directive (also known as Pillar 2) which introduces a global minimum tax of 15% applicable to multinationals. This effectively means that the Income Inclusion Rule (IIR), the Undertaxed Profits Rule (UTPR), and the Qualified Domestic Minimum Top-Up Tax (QDMTT) will not apply for the time being.
- No changes are envisaged to Malta’s full imputation system. The Government is also committed to the introduce Qualified Refundable Tax Credits (QRTCs) which are compliant with EU regulations and the OECD framework.
- Tax exemption applicable to widows and widowers’ pensions even when the recipient is under the age of 61.
- The income tax exemption applicable to pensioners who earn income from employment will increase from 40% of such income in 2023 to 60% of such income for 2024. Income from pension will remain tax exempt.
- Tax deductions of up to €500 with respect to donations made to certain voluntary organisations.
- Extension of tax credits for continued education under the Get Qualified and Higher Education Qualification schemes.
- Extension of tax credits under the Seed Investment Scheme.
- The reduced tax rate of 7.5% applicable on income derived from sporting activities will be extended to apply to more athletes and sports persons.
The main social measures include:
- Tax refunds ranging between €60 and €140 to eligible individuals earning less than €60,000.
- Childrens Allowances to increase by €250 per child.
- Increase in the tax credits for parents of children with disabilities and attending therapy.
Various measures related to immovable property will be available and these include:
- The reduced stamp duty rate of 1.5% applicable on the transfer of family businesses will be extended for another year.
- The exemption from capital gains and duty on documents applicable on the transfers of qualifying vacant property and property in a UCA will continue to apply. This exemption is capped at property value of €750,000.
- The exemption from stamp duty for first time and second time buyers’ schemes is being extended whilst the Gozo Property Scheme providing for a reduced duty rate will not be extended for 2024.
- Exemption from capital gains and stamp duty upon certain transfers of immovable property to tenants benefitting from subsidised rent will be available. The exemption is limited to the first €200,000 of the property value.
- The annual grant of €1,000 for ten years given to first time buyers is also being extended. Grants will be available if the immovable property is situated in a UCA.
- Extension of VAT refund available to first time buyers who are building or renovating their homes.
Environmental measures include:
- New schemes will be announced to encourage the installation of renewable energy sources such as photovoltaic systems, renewable power storage batteries, heat pumps and restoration of wells.
- Installation of more electric vehicle charging stations.
- Extension of current schemes to encourage the purchase of electrical vehicles, plug-in hybrids, motorcycles and e-bikes, pedelecs, and e-scooters.
- An extension to the scheme for the installation of water purifying equipment.
- Initiation of plans to work on a strategy introducing the use of hydrogen.
Proposals for Businesses
A number of proposals were announced which are relevant to businesses in Malta:
- Revision to the Highly Qualified Persons Rules with the possibility of widening its scope.
- More tax credits available to businesses registered with the Family Business Office and fiscal incentives for family businesses who innovate and digitalise.
- The creation of a Common Central Data Repository to facilitate the process of identifying applicants doing business in Malta.
- Less onerous audit requirements for small companies.
- Initiatives and extension of current schemes to assist companies including start-up companies, especially those within the technology sector.
- Regulatory changes to attract Family Offices, wealth and asset management, REITs and aircraft leasing.
- Changes to the Merchant Shipping Act to attract more superyachts to Malta.
- Increase in the application fees for new work permits.
The budget speech indicates that the Government’s attention is to alleviate the burden of inflation especially on those who are vulnerable. Whilst there are a number of social measures and primarily extensions of existing ones, the budget lacks detail on how the country will attract new business to Malta and change its strategy on importation of cheap labour, control excessive construction and tackle a number of environmental and health issues or concerns.
Unfortunately, there are no indicative timelines and details with respect to changes to Malta’s tax system, but this seems to have been postponed thus creating uncertainty to attract foreign direct investment and international businesses to Malta.