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.
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.
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.
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.