Budget 2017
How does it affect you? For more information visit www.ksimalta.com
General Overview On the 17th of October 2016, the Government laid out the Malta Budget speech for the upcoming 2017 year. As expected, a number of social considerations have been tackled with the main aim being of helping several sectors of society, especially: pensioners, minimum wage earners and those dependent on social benefits. Backed by a strong and much
improved economic performance, the Government announced a number of initiatives seeking to enhance investment with particular attention being given to the need to increase the quality of ‘product Malta’.Of particular highlight was the Government’s emphasis on and commitment to Malta’s financial services sector.
Words of encouragement were expressed in favour of Malta retaining fiscal integrity while at the same time introduce innovative tax measures including the Group Tax Consideration which had been announced during last year’s budget.
Economic Indicators
Have a look at the number of positive economic indicators and other measures intended to have a direct effect on the Maltese economy.
Tax Measures See how individuals and companies will be affected by new or amended income tax, stamp duty and excise tax measures.
Property Sector Measures See what has been announced in the property sector
Incentives See what new or improved incentives have been targeted by the Government.
Other Social Measures
See the various social considerations outlined during the budget speech.
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KSi Malta Budget Summary 2017
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ECONOMIC INDICATORS
With the unemployment rate standing at its lowest rate ever (4.9%) and complimented with a 4.1% growth in GDP for the first six months of 2016, Malta has established itself among the most economically sound member states in the EU. The deficit is expected to go down to 0.7% – beating the target of 1.1% set for the 2016 Budget. As a direct economic measure, the Government announced a cost of living adjustment (COLA) increment equivalent to ₏1.75 per week. As in previous years, this increase is expected to be enjoyed also by pensioners.
Eco-Contribution and Excise Taxes
While it has been announced that the remaining Eco-contribution charges applicable on batteries, detergents, plastic objects and similar have been removed, there has been the introduction of a new excise tax on non-biodegradable utensils and garbage bags. Moreover, a new excise tax shall also be imposed on certain construction materials, tax revenue therefrom will be diverted into a fund for environmental projects and causes. Tax on cigarettes and cigars will increase by 3%, while that on tobacco will increase by 5.5%. Tax on non-alcoholic drinks, excluding water, will increase by 2%
Pensioners
As expected, pensioners have been heavily targeted by the Government through a number of positive measures, predominantly a direct tax measure. Pensioners in receipt of pensions not exceeding €13,000 will be exempt from income tax through a tax exemption to be introduced gradually over the next two years. This shall apply to whoever receives a treasury, service or private pension.
Dividend Taxation
Small holding shareholders (defined as not holding more than 0.5% of a company’s nominal share capital) of companies listed on the Malta Stock Exchange shall be entitled to a tax rebate of the original tax withheld at source without the general limitation depending on an individual’s other income.
Rental Income
While the Government clarified that the current rental income taxation shall remain unchanged, further emphasis will be made on clamping down tax evasion in this sector. Amongst such anti-abuse measures, the Government shall only grant double-rent subsidies to low income earning tenants capable of presenting copies of their rental agreements. The Government is also expecting to launch a pilot project aimed for landlords willing to rent out their properties to people on social housing prices for a minimum of seven years. These landlords will see income tax on their rental income decrease to a 5% final withholding tax.
Family Business
People who transfer ownership of family businesses to the next generation will see their stamp duty decreased from 5% to 1.5% for a single year. This measure is consistent with the Family Business Act concept.
KSi Malta Budget Summary 2017
TAX MEASURES | KEY POINTS
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KSi Malta Budget Summary 2017
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PROPERTY SECTOR MEASURES
Besides the measures related to rental activity (see Tax Measures), as usual, the real-estate sector has been subject to some positive announcements: -
The exemption from stamp-duty (capped at â‚Ź5,000) applicable to first-time buyers shall be extended for contracts of sale concluded by the end of the year 2017.
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Acquisition of property in Gozo shall be subject to a reduced rate of duty of 2% (rather than the standard 5%) in case of properties subject to a promise of sale during 2017 and having the respective contract of sale concluded by the end of the year 2018.
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All transfers of property which would have been originally acquired by way of inheritance (causa mortis), will now be subject to a 7% final withholding tax in all instances.
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People who purchase old property in urban conservation areas may be given a maximum grant of â‚Ź100,000 to be used on restoration works.
INCENTIVES Malta Stock Exchange 1. Businesses which sell their shares to public on the Malta Stock Exchange shall be given fiscal incentives. Capital gains from the sale of such shares will be tax exempt.
2. An annual tax credit of up to €250,000, in terms of a Risk Investment Scheme, for investors in SMEs or funds registered on Alternative Trading Platform of Malta Stock Exchange.
Pensions paid by Employers
So as to encourage contributions to private pensions by employers, such contributions will be considered as a tax deductible expense. Furthermore, the employer will be entitled to a further tax credit amounting to €150 for each €1,000 contributed.
Transport for Employers
Companies which provide transport for their workers will be eligible to a tax deduction of 150% on their expenses, capped at €35,000. Small companies which team up to provide such transport will have the tax deduction capping raised to €50,000 per company.
Malta Enterprise
1. A number of schemes will be introduced by Malta Enterprise, including: 2. A tax credit between 25% and 45% on research and development expenditure incurred by disadvantaged persons up to a maximum of €25,000. 3. A tax credit of 30% on expenditure incurred on the development of cultural digital games. 4. A scheme will be launched by Malta Enterprise consisting of a tax credit in relation to costs incurred on renovation works undertaken on hotels and restaurants, capped at €200,000 and €50,000 respectively.
Others
1. Business start-ups will be assisted through the International Accelerator which would identify new areas of potential economic activities: 2. Companies who work with local councils to develop gardens and other open spaces will benefit from a tax rebate of 120% of their expenditure. 3. Companies registered in the last three years by certain postsecondary students shall be exempt from statutory audits on their financial statements (threshold below €80,000 turnover) or may opt to be granted 120% deduction of the audit cost (capped at €700 p.a.). 4. The setting up of an entity called Property Malta with the aim to attract foreigners to invest in Malta.
KSi Malta Budget Summary 2017
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KSi Malta Budget Summary 2017
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OTHER SOCIAL MEASURES
With considerable attention being given to social justice, the 2017 Budget shall cater for: -
The doubling of rent subsidies for low-income earners living in private residences – this currently stands at €83 per month.
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An increase in the in-work benefit and supplementary allowance.
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An increase in minimum pensions by €4 a week in case of married pensioners.
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An increase in the disability pension for people who are not in a position to work, to become equivalent to the minimum wage.
KSi Malta, Villa Gauci, Mdina Road, Balzan, BZN 9031, Malta Call: (+356) 21 22 6176 Fax: (+356) 21 22 6019 info@ksimalta.com
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