Malta: Budget 2018

October 26, 2017

The budget for the 2018 legislature was presented to the Maltese Parliament on October 9 2017. The main theme of the budget, from a commercial perspective, was the creation of business, the incentivisation of the markets and the attraction of foreign direct investment. At the core of the budget document were a number of interesting fiscal measures and incentives for both businesses and households.

In the sphere of direct tax, the budget proposed a one-time tax repayment to individuals earning no more than €60,000 ($71,000) annually. Tax credits for postgraduate courses will also be introduced, subject to certain conditions, and individuals may benefit from a tax credit of up to the first €60,000 of income earned. The value of assistance offered in terms of the MicroInvest scheme will also be increased from the current €30,000 to €50,000, for businesses based in Malta, or €70,000 under other circumstances. In addition, as part of the government's pledge to incentivise employment in the private sector in Gozo, employers offering a minimum three-year contract of work to Gozitan employees will be given a refund of up to 30% of the average salary of its employees, up to a maximum of €6,000.

With respect to indirect tax, the government will raise the threshold for small undertakings that may opt not to charge VAT, from €14,000 to €20,000. Furthermore, VAT grouping will be introduced in the financial services and gaming sectors, in terms of which separate legal persons having a fixed place of business in Malta and a financial, economic and organisational relationship between themselves will be able to register as one taxable person for VAT purposes, and as a result, intra-group supplies will be regarded as falling outside the scope of VAT. Other measures introduced include the extension of a scheme whereby persons who purchase bicycles or pedelecs will receive a grant of 15.25%. The VAT rate on the rental of bicycles has been reduced from 18% to 7%. Moreover, the instances where taxpayers can submit social security forms and VAT returns electronically will also be increased.

Pensioners will also be able to benefit from measures proposed in the budget, such as an increase of the tax-free bracket for pension income to €13,200. Homeowners will be able to benefit from a second time buyers' scheme where individuals who own one immovable property being their place of residence, dispose of it to purchase another, will benefit from reduced stamp duty, by way of a refund of up to a maximum of €3,000. The government is also considering the possibility of introducing equity release facilities in Malta, where owners of immovable property will be able to secure regular income from their immovable property after retirement age.

From a compliance perspective, the government has again renewed its pledge to combat tax evasion and unjust competition, and has announced that it shall be increasing penalties for tax offences.