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Register of Beneficial Owners

The Malta Business Registry (MBR) issued a guidance document with respect to the Register of Beneficial Owners (RBO) to assist with the identification of the Beneficial Owner/s (BO) or Senior Management Officials (SMO).

 

Please be informed that any changes in the BO or SMO of a company must be notified to the MBR within 14 days.  It is therefore of paramount importance that you keep us informed of any changes in the structure which affects the BO or SMO of the Maltese company.  Heavy fines and penalties are imposed by the MBR for failure to notify the MBR within the stipulated time period.

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Budget Newsletter 2021

Introduction and the economy

The Minister of Finance, Economic Development and Planning announced that this year the GDP is expected to decrease by 7.4%.  However, the government is anticipating a recovery next year of 5% in real terms and 6.4% in nominal terms.  The growth is expected to be generated from a 7.5% growth in investment and 3.7% in private consumption. Exports are expected to increase by 5.5%.  These forecasts mean an increase of 2.3% in jobs next year with unemployment to remain around 4%.  Inflation rates should remain very low.  Deficit is expected to be 9.4% this year but it will go down to 5.9% of GDP in 2021 while debt will be 55% of GDP this year and increase to 58.6% of GDP in 2021.

 

COLA and Vacation Leave

  • The Cost of Living Adjustment (COLA) for 2021 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.  Pensioners will also receive an increase of €3.25 so that the total increase received by pensioners will amount to €5 per week.
  • Vacation leave will increase by an additional day.

 

Income Tax

  • Tax free bracket for pensioners will increase to €14,058 so that pensioners will not be subject to income tax even after the increase.
  • Tax exemption for third pillar pensions will be increased by €1,000 to €3,000.
  • Tax refunds ranging between €45 to €95 will be given to all taxpayers earning less than €60,000.
  • Royalties received by publishers will be subject to a final tax of 15%.
  • Tax on gains arising upon the assignment or cessation of any rights acquired under a promise of sale agreement is subject to tax at 15%.
  • Extension of the reduction of property transfer tax to 5% if the promise of sale agreement is signed by 31 March 2021 and the final deed is signed by 31 December 2021.

 

Duty on Documents

  • The property value eligible for a reduced duty is being increased from the current €175,000 to €200,000 for first time buyers.
  • Reduction in the stamp duty upon the purchase of a residential home in Gozo to 2% and on property located in an Urban Conservation Areas to 2.5%.
  • Reduction in stamp duty rate on the first €200,000 for non-first-time buyers upon the purchase of a residential home to 3.5% and on inherited immovable residential property.
  • Extension of the reduction of stamp duty upon the acquisition of immovable property to 1.5% on the first €400,000 if the promise of sale is signed by 31 March 2021 and the deed is signed by 31 December 2021.
  • The exemption from duty on documents on property donations to descendants is being increased from €200,000 to €250,000. The property must be used by the descendants for residential purposes.
  • The reduced stamp duty of 1.5% on the transfer of a business by parents to their children is being extended by another year.
  • Extension of duty refunds of €3,000 (or €5,000 for persons with special needs) for individuals who sell their first residential property to acquire another residential property during 2021.

 

Value Added Tax (VAT)

  • The only new VAT measure announced in the budget is the VAT exemption threshold which is being increased from €20,000 to €30,000.
  • The VAT refund scheme on the purchase of bicycles, e-bikes, electric motorcycles and scooters will be retained. The refund is capped to €400.

 

Social Measures

  • The COVID-19 wage supplement will be extended to at least 31 March 2021 but the eligibility criteria will be revised.
  • Tax deferrals, moratoriums and guarantees are all being extended to 31 March 2021.
  • All residents over 16 years of age will receive vouchers totalling €100 with €60 may be used on accommodation and entertainment whereas €40 may be used in retail outlets and services.
  • Children’s Allowance will increase by €70 per child per annum if the household income is less than €25,318 per annum. If the annual income exceeds the stipulated amount, the children’s allowance will increase by €50 per child per annum.
  • The threshold for the eligibility of the in-work benefit will increase to €35,000 for working couples, €23,000 for single working parents and €26,000 for couples with a single working parent.
  • Foster care allowance will increase by €520 to €5,720.
  • Definition of widow and widower will be amended to cater for those who in civil unions or are cohabitating.
  • The grant to couples adopting a local child will increase up to a maximum of €1,000.
  • The annual subsidy for expenses incurred by the elderly who employ a full-time or part-time carer will increase from €5,291 to €6,000.
  • Free public transport for those over 70 years (reduced from 75 years).
  • People aged 62 years and over will be able to subscribe to Government savings bonds yielding a more favourable return than traditional bank deposits.

 

Environment

  • Single use plastics will no longer be imported after 1 January 2021 and cannot be sold after 1 January 2022.
  • Extension of the exemption from registration tax and annual licence fees for the first five years on electric vehicles (EVs).
  • Extension of vehicle scrappage scheme with the maximum grant amounting to €7,000.
  • Revision to registration tax and licences on motor vehicles such that there are no increases due to the revision introduced by EU on emission tests.
  • A grant of €400 for those who convert their car to run on gas provided the emissions are reduced by at least 25%.

 

Innovation

 Malta Enterprise will introduce a new scheme to enterprises with less than 50 employees who undertake ‘transformation projects’. The scheme will cover a maximum of 50% of the investment and capped at €200,000.

 

Conclusion

This year’s budget has been drawn up in extraordinary circumstances. The COVID-19 pandemic strained the world’s economy and Malta is no exception.  Before the start of the pandemic, the Maltese economy was doing well, with low unemployment, a budget surplus and decreasing debt.  This allowed the Maltese government to avoid the introduction of new or increased taxes and focus on social measures as well as the extension of the COVID-19 measures introduced in the Economic Regeneration Plan. However, the budget did not introduce any incentives for corporate investment other than the incentives to invest in digitalisation.  Nor are there any ideas or incentives to diversify the local economy which is heavily dependent on tourism and to a lesser extent, on financial services.

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WORLD TAX 2021 Edition

The Management of Avanzia Taxand is pleased to announce that for the second consecutive year, The World Tax ranked the firm as Tier 1 for Private Clients.  The firm is also ranked as a Tier 2 firm in Tax and Tax Controversy.  Details of the 2021 rankings may be accessed through the following link: www.itrworldtax.com/Firm/Avanzia-Taxand/Profile/1075#rankings

The World Tax 2021 is a comprehensive guide to the world’s leading tax firms covering almost 90 jurisdictions located in every continent and is produced in association with the International Tax Review.

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Guidelines in relation to ATAD

Following the implementation of the EU Directive 2016/1164 (ATAD1) by means of Subsidiary Legislation 123.187, the Maltese tax authorities issued official guidelines with respect to the Interest Deduction Limitations, CFC and Exit Tax.

 

The guidelines also include examples and illustrations with respect to Interest Deduction Limitations and CFC provisions.  As regards Exit Tax, the guidelines make it clear that this new concept has to be interpreted by keeping in mind local tax provisions such as certain capital gains exemptions.

 

The guidelines are available on the website of the Office of the Commissioner for Revenue.

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Economic Stimulus following COVID-19

Since the start of the COVID-19 pandemic, the Maltese Government launched €900 million worth of fiscal incentives to stimulate the economy and mitigate as much as possible the negative impact of this pandemic on the local economy.   The incentives are primarily aimed at reducing business costs and to incentivise consumption in view of the reduced influx of tourists. 

 

The following are the incentives announced on the 8 June 2020:

 

  • Extension of COVID-19 Wage Supplement until the end of September 2020. As from 1 July 2020, the benefit rate of €800 for full-timers and €500 for part-timers will be maintained in areas involved with tourist accommodation, travel agencies, language schools, event organisation and air transport.  Those who up to June 2020 were assisted under Annex A but do not feature in the categories listed above shall be kept within the parameters of Annex A but will however move to a tapered aid of €600 for full-timers and €375 for part-timers. Students and pensioners who are in employment shall fall within this new category.  Personal services and other businesses/self-employed who depend on local consumption will benefit from the partial supplement under Annex B. Companies and self-employed who were being assisted under the partial supplement (Annex B) will retain this aid until 30 September 2020;

 

  • A grant of up to €2,500 to cover rental costs  for businesses eligible for a wage supplement (click here for further information);

 

 

  • Business eligible for the Micro Invest Credit may opt to receive up to 30% of the Micro Invest tax credits during 2020 in form of a grant which is however capped at €2,000 or €2,500 for undertakings operating in Gozo and for female-owned undertakings;

 

 

 

  • Further funds will be allocated to the Skills Development Scheme for the benefit of businesses employing less than 50 employees. This will provide assistance to businesses wishing to further develop the skills of their employees;

 

 

  • Reduction of stamp duty due upon the purchase of immovable property by the end of the current year. The stamp duty rate will be reduced from 5% to 1.5% on contracts to be signed between 9 June 2020 and 31 March 2021;

 

  • The final tax due upon the sale of immovable property under development or those contracts made between 1 June 2020 and March 31 March 2021 will be reduced from 8% to 5%;

 

  • The first time buyers scheme will be modified for all contracts taking place from 9 June 2020, unless a person has benefitted from the scheme since 2013;

 

  • €100 worth of vouchers per person aged 16 and over that can be used in a licensed accommodation, restaurant or business that had to close during the pandemic;

 

  • With effect from 15 June 2020, petrol and diesel prices will be reduced by 7 cents per litre;

 

  • The tax payment deferral scheme will be retained until September 2020, with the deferred payments to be settled over a period of 12 months. As from 1 July 2020 no deferral will be allowed for the settlement of FSS tax and social security contributions withheld from wages and salaries;

 

  • Refund of 33% in port charges for those ships that bring cargo to our country in order to support the supply chains of our economy;

 

  • A 10% refund will also be given on container discharge fees for import and export but not transhipment;

 

  • Support for export promotion. A budget of €400,000 has been allocated to Trade Malta to reimburse half of the costs involved, with a maximum of €10,000 for local businesses to invest in campaigns aimed at foreign markets;

 

  • Up to 80% refund of the costs incurred by businesses participating in international fairs which were cancelled;

 

  • A full refund of trade licence / permits paid during 2020 by businesses that were forced to close during the pandemic;

 

  • A new underwriting facility for private enterprise bonds will be set up through the Malta Development Bank;

 

  • €5 million to help Maltese and Gozitan businesses promote themselves and help will be provided for the production of local produce;

 

  • Improvement in the in-work benefit and a special supplement of €250 will be given for each family that benefits from the same scheme;

 

  • A grant (capped at €2,000 per couple) to fund certain forfeited deposits on wedding expenses;

 

  • Financial assistance to old people’s homes.

 

Most of the incentives are managed by Malta Enterprise and details of the incentives are still to be published. 

 

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COVID-19 – Additional support measures

As expected, the Government announced additional measures to alleviate the financial burden due to the COVID-19 pandemic.  These additional measures follow the order of the Superintendent of Public Health to close non-essential businesses as from Monday 23 March 2020.

 

The Government will provide for a monthly subsidy to employers consisting of:

 

  • €800 for each full time employee within the private sector who have been severely affected by the COVID-19 pandemic.  Employers are expected to top up the remaining part of the monthly wage up to a maximum of €400 for each employee.  Employers who are not in a position to pay the remaining wage must reach an agreement with the employees through the involvement of unions and the Department for Industrial and Employment Relations.  Pro-rata subsidies are also available to part time workers with a maximum subsidy of €500 per month.  The list of businesses that fall within this wage subsidy are listed here – Annex A.

 

  • One day’s salary per month based on a monthly salary of €800 per employee for adversely affected businesses.  Pro-rata subsidies are also available to part-time workers with a maximum subsidy of €100 per month.   In the case of Gozo based businesses, this will increase to two days’ salary per week equivalent to €320 per month for full time employees, and €200 per month for part time employees.  The list of businesses that fall within the ambit of this wage subsidy are listed here –  Annex B. 

 

The above measures apply also to self-employed persons working within the applicable sectors.  All measures are subject to the approval of the Malta Enterprise.

 

Apart from the above, the Government will also be providing business guarantees from the National Development and Social Fund and EU funds for operational loans with low interest rates and longer repayment periods whilst commercial banks are processing a three-month moratorium on business or personal loans.

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COVID-19

The COVID-19 pandemic continues to spread in various countries around the globe and Malta is no exception.   The hit on the economy is expected to be significant given that one of the main drivers of the Maltese economy, tourism, is currently at a standstill and it is still unknown how long this situation will prevail.

 

Last week, the Government announced a Tax Deferral Scheme to postpone the payment of taxes payable in March and April 2020 by submitting an application before the 15 April 2020 to Malta Enterprise.  The taxes due must however be paid within the end of August 2020.  Whilst this may alleviate some of the cash burden on taxpayers and particularly employers for the months of March and April 2020, it is unlikely that businesses will be in a better cash position in the months to follow given the effects of this pandemic will continue to be felt for various months.  Full details are available online.  https://cfr.gov.mt/en/News/Pages/2020/Fiscal-Assistance-Postponement-of-Payment-of-Certain-Taxes.aspx 

 

Following the closure of various outlets as well as a number of offices, various employers felt the need to strengthen their resources to ensure that their employees may continue working remotely.  The Government recognised that this resulted in additional costs for employers and therefore Malta Enterprise launched a call under the Business Development and Continuity Scheme which may provide a cash grant of up to €500 per teleworking agreement with a limit of €4,000 per undertaking.  The grant shall be awarded against 45% of the eligible cost which must be incurred after the 1st of March 2020.  Applications must be submitted by 30 March 2020.  Full details are available on https://www.maltaenterprise.com/sites/default/files/Call%20for%20the%20Facilitation%20of%20Teleworking%20Activities%2015-03-2020_0.pdf.

 

Earlier this month, the Government also announced the introduction of quarantine leave which adds additional paid leave days to the employee should mandatory quarantine be imposed on the employee.  This adds to the financial burden most businesses are facing and therefore it was announced that a €350 cash grant will be given for each employee on Quarantine leave.  An application for such grant is to be launched online through the Malta Enterprise website as from 25 March 2020.

 

The Malta Financial Services Authorities have informed regulated entities that they will consider extending the deadlines for the submission of regulatory reporting falling due in March and April 2020.  This extension will be made by case by case basis and therefore regulated entities must contact the appropriate unit within the Authority to submit their request for an extension.  Full details are available on https://www.mfsa.mt/news-item/mfsa-extends-regulatory-reporting-deadlines-for-firms-due-to-outbreak-of-covid-19/.

 

Malta Enterprise has extended the deadline for the submission of the Mirco Invest Applications for self-employed persons to 30 April 2020 due to the disruptions caused by the COVID-19.  Full details are available on https://www.maltaenterprise.com/extension-microinvest-submission-deadline-self-employed.

 

It is expected that other support measures will be announced in the coming weeks due to the disruptions caused by the pandemic.

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Malta signs a tax treaty with Armenia

Malta signed a tax treaty with Armenia and provides for the following withholding tax rates in the case of payors resident in Armenia:

Dividends – 10% reduced to 5% if the investment in the Armenian entity exceeds 10%

Interest and Royalties– 5%

The treaty provides for the usual articles related to Mutual Agreement Procedures and Exchange of Information.

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Malta signs a tax treaty with Ghana

Malta signed a tax treaty with Ghana and provides for the following withholding tax rates in the case of payors resident in Ghana:

 

Dividends – 6%

Interest – 7%

Royalties – 8%

Services fees – 12%

 

Malta does not impose any withholding taxes.  Elimination of double taxation is under the credit method.

 

The treaty provides for the usual articles related to Mutual Agreement Procedures and Exchange of Information.

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Reduction in interest rate

By virtue of two separate legal notices, the interest on late payments of income tax and VAT has been reduced from 0.54% to 0.33% per month.  The change is effective from 1 January 2020.

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