Budget Speech

John Huber & associates

14 October 2015

On the 12th October 2015, Malta's Finance Minister, Professor Edward Scicluna, delivered the 2016 Budget Speech. Malta's economy has delivered yet another year of solid economic growth in 2015, significantly outperforming its Eurozone partners, registering GDP growth of 4.2%, coupled with a further reduction in budget deficit (estimated at 1.6% for 2015) and unemployment (down to 5.4% in 2015); government debt as a percentage of GDP is at 66.56%.

This brief update looks at some of the more salient fiscal measures announced, particularly those that will provide incentives for economic growth whilst alleviating the tax burden.

Tax matters
VAT on sports activities

From the financial aspect, Professor Scicluna announced that VAT tax on sports activities, including on gym memberships, fitness centres and football nurseries will be reduced from 18% to 7%.

Taxation of individuals

The lowest band within the Single, Parent and Married personal income tax rates are to be widened to increase the tax free portion available to all taxpayers.

The 7.5% income tax rate currently applicable to football and waterpolo players will be extended to coaches and players in any type of sport.

Fiscal consolidation

The Income Tax Acts are to be amended to enable a group of companies, owned by the same persons, to compute their taxable income on a consolidated basis i.e. as if all were a single taxpayer.

Tax credits

Companies may qualify for either of a tax credit or grant with respect to intra-employee 'knowledge transfer', so as to incentivise the transfer of knowledge between existing and new employees.

A maximum tax credit of €10,000 will be granted to enterprises employing individuals with a doctorate (or reading for one) in science, engineering or ICT for at least 12 months, with a view to incentivising research and innovation.

Malta Enterprise shall extend its Micro Invest Scheme so as to grant a €50,000 maximum tax credit to self-employed women and businesses with majority female ownership.

Tax deductions

Capital allowances granted with respect to industrial buildings shall be extended to include office buildings.

Tax deductions for donations to the arts (equivalent to 150% of the value) and to the Malta Community Chest Fund (up to a maximum of €2,000).

The final 15% tax rate applying to gross rental income, at the lessor's option, shall be extended to the rental of commercial properties.

Tax measures applicable to immovable property

Budget 2016 will also see a reduction in the registration tax from 5% to 2.5% for buildings in Urban Conservation Areas whose contracts are finalised between 1 January and 31 December 2016.

Final withholding tax on the sale of regenerated UCA properties will also be reduced from 8% to 5%.

The transfer duty exemption available to first time buyers shall be extended further, to end 2016.

Other amendments in property laws

New amendments to property laws may allow a faster sale of properties whose owners are not entirely in agreement on the sale of the property. In the case of inherited properties, the law allows that the sale of a property goes through when at least 51% of the heirs agree on a price - but only 10 years from the date of the inheritance.

"To reduce the phenomenon of vacant properties, we are going to reduce this period from 10 years, to three years for all inherited properties and those that are yet to be bequeathed," Scicluna said.

The measure would allow heirs unable to agree on the sale of a property, to go through with the sale after three years and only if 51% of the heirs agree to do so.

The law is to be passed by the end of 2015, with the three-year period starting in 2016. The law will allow all properties to be sold under this procedure to be included in the list of land registration areas.

Disclaimer - No one should act upon such information without appropriate professional advice after a thorough examination of the particular circumstances. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.