Malta Budget 2019 - The Highlights | Corporate and Financial Services Provider in Malta

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Malta Budget 2019 – The Highlights

The Maltese economy continued to grow strongly in the first half of 2018. Indeed, the Maltese economy grew at a nominal rate of 7.9 per cent, or a real rate of 5.4 per cent outperforming the average growth recorded in the EU during the same period. Government debt as at the end of 2018 is expected to amount to around 46.8% of GDP (i.e. €5.6bn) and is expected to reduce to 43.8% of GDP by 2019. The surplus for 2018 is expected to amount to around €16.6m (1.1% of GDP). For 2019, this is expected to grow to around €33m.

Fiscal incentives

  • Cost of living increase of €2.33 per week.
  • Employees who were earning the minimum wage during 2017, received an increase of €3 per week during 2018 and will receive another increase of €3 per week during 2019.
  • Tax refunds being given between €40 to €68 to employees earning up to €60k.
  • Additional day of leave to be given to all employees, vacation  leave entitlement to go up to 26 days per annum.
  • The reduced VAT rate of 5% on books and printed matter will be extended on books, newspapers and publications provided electronically.
  • Full refund of VAT on bicycles and electric bicycles extended for another year.
  • The grant of VAT on wedding expenses will be increased by €250 to a maximum of €2,000.
  • Pensions to increase by Euro 4.50 a week (including COLA adjustment).
  • Pensioners who have reached the age of 75 years and who are still living in their own homes will receive the sum of €300.
  • Pensions amounting to €13,434 will not be taxed.
  • Private pensions: The annual tax credit available to employers and employees of 15% of the amount of contributions paid to voluntary occupational pension schemes or qualifying personal retirement schemes will be increased to 25% and the maximum tax credit will be increased from €150 to €500.
  • In an attempt to encourage more companies to create employment opportunities in Gozo, the refund of 30% of an employee’s average wage. (up to a maximum of € 6,000) for those employment contracts with a definite period of at least 3 years may also be benefitted from during 2019.
  • Voluntary Organisations which have revenue not exceeding €10,000 per annum will be exempt from taxation.  Such voluntary organisations should be registered and should conform with the legislation and criteria stipulated by the Commissioner of Voluntary Organisations.

Anti tax avoidance measures and initiatives

Malta signed up to the OECD’s BEPS (Base Erosion Profit Shifting) and also transposed the Anti tax Avoidance Directive (ATAD). As a result effective 1st January 2019, the following measures will be introduced:

  • Interest limitation rules.
  • Exit tax rules.
  • General anti avoidance rules.
  • Controlled Foreign Company (CFC) rules.

Regulations for the transposition of ATAD 2 (which will include provisions on anti-hybrid mismatches) are also being prepared to meet the Directive’s implementation deadlines (1 January 2020 and 1 January 2022).

Other Initiatives

  • Malta Stock Exchange to work closely with operators of Blockchain technology and cryptocurrencies.
  • The setting up of the Malta Digital Innovation Authority to regulate and monitor consumer protection for companies setting up and operating in block chain technologies in Malta.  The Malta Financial Services Authority will also set up a specialised unit in Fintech.
  • Certain aspects of blockchain technology will be given legal personality,   and at the same time preparing a document detailing the regulatory structure for Artificial Intelligence and the Internet of Things.  Tech.mt will be the new agency promoting Malta as a hub for these technologies.
  • Introduction of a scheme by Malta Enterprise to provide business advisory services to local SMEs whose business is mostly dependent on the UK so as they are prepared for Brexit.
  • The IIP (Individual Investment Program): A regulatory and enforcement unit will be introduced within Identity Malta to ensure that all rules and regulations governing the IIP are being followed.  In addition, more online facilities will be introduced.

Property

  • Scheme to help individuals over 40 to buy their own property.
  • First-time property scheme & Second-time property schemes to be extended.
  • Revised Rent subsidies.
  • Affordable accommodation and rent subsidy for Gozitan students.
  • The White Paper entitled: “White Paper Renting as a Housing Alternative” is proposing contracts to stipulate a period of time, obligatory registration of rent contracts, to establish a minimum time period to advise on the termination of a contract from both the landlord’s and the tenant’s end, enforcement on irregularities as well as more efficiency on the solving of disagreements.
  • A new scheme will be introduced to reduce the rental burdens for persons whose gross income does not exceed the established benchmark while their current rent exceeds the rental benchmarks applicable under such scheme. An aid of between €3,000 and €5,000 per year will be granted according to the circumstances of the particular.
  • Discussions relating to the introduction of a lower tax rate applicable to transfers of immovable property where the property was rented out for a period of 7 years at an affordable amount.

Education & Students

  • Matsec exams to become completely free.
  • Free public transport to be extended for teenagers from 14 years of age, to the disabled and also to those full-time students up to the age of 20.
  • Increase in the tax deductions for children attending private schools: €1,600 per child per year at kindergarten level; €1,900 per child per year at primary level and €2,600 per child per year at secondary level.
  • As from 1 January 2019, there will be an extension to the subsidy currently available to Gozitan students who are living in Malta subject to certain conditions.

Families

  • Increase in children’s allowance for families earning less than €20,000.
  • Refund of VAT on the purchase and installation of Reverse Osmosis equipment or equivalent for domestic use.  This will be capped to €70.
  • €50m investment for the construction of almost 700 social housing units. Part of the investment is being funded from the National Development and Social Fund.

CSB Group is a leading corporate services provider. Contact us on +356 2557 2557 or email us on [email protected] for any assistance required.

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