Malta Budget Highlights – 2017

October 31, 2016

Budget_case_0002State of the Economy

During 2016 the Maltese economy continued to grow.  It is expected that the GDP growth rate will reach 4.1% by the end of 2016.  The rate of inflation has remained at a relatively low rate of 1%. This is expected to increase to 1.5% in 2017. In 2016, the Government’s deficit is expected to drop to 0.7%, whereas public debt is expected to drop to 63.3% of GDP. For 2017 the deficit is forecast at 0.5%, and public debt is expected to drop to 61.9% of GDP. Malta’s credit rating has improved and Standard and Poor’s Credit Rating Agency has raised Malta’s rating from ‘BBB+’ to ‘A-’. The Labour Force Survey recorded an employment rate of 69.1% in the second quarter of 2016, this being 1.5% higher when compared to the corresponding quarter in 2015. Growth in employment is expected to remain strong. The unemployment rate dropped from 5.4% in 2015 to 4.9% in July 2016.

Fiscal Measures

Government announced various fiscal measures as part of the reform of the eco-contribution tax. These include the removal of this tax from various products, the introduction of levies on other products in particular on construction materials, toiletries, cosmetics and an increase in the levies on tobacco and non-alcoholic beverages.

Refund of tax on listed shares dividends

With effect from 1 January 2017, persons who hold up to 0.5% of the issued shares in companies listed on the Malta Stock Exchange can apply for a refund of tax on dividends declared in their income tax returns, according to their personal income tax rates.

Transfer of business to one’s children

Through 2017, should any parents decide to transfer their business to their children, duty on such transfers shall be charged at 1.5% instead of the current 5%.

The Property Sector

First-time property buyers shall once again be exempt from the payment of duty on documents on the first €150,000 of the value of the property. Should such first time buyers purchase property in Urban Conservation Areas or Grade 1 or Grade 2 scheduled properties, they will be entitled to a refund of up to EUR 100,000 on refurbishment expenses carried out on such properties.

Minimum Pensions for Married Couples and Pension Taxation

Minimum pensions for married couples will increase, whereas pensioners whose pension exceeds the minimum pension slightly will have a pro-rata increase. Pensioners over 61 years of age will not pay income tax on the first €13,000 of pension income. The benefit is spread over two years.  The  €300 grant per year to pensioners who are 75 years of age and still living in their home will be extended.

Employment of Care Workers by Elderly Persons

Elderly people who are on the waiting list for a place in a Home for the Elderly have the possibility to engage a care worker (full-time or part-time) and avail from financial aid up to a maximum of €5,200 per year.

Preferential Rates on Rents

Landlords who rent property to low income earning families will pay tax on rental income of 5% instead of 15%, if they enter into a 7 year lease agreement. This does not apply for properties situated in Special Designated Areas.

Traffic Management

Companies providing free transport to employees will benefit from a tax credit of 150% of the transport expense capped at Eur35000 per annum if provided alone and at Eur50000 per annum if provided together with other companies.

International Business Accelerator

An International Business Accelerator shall provide professional assistance to local start-ups. They will be tasked with seeking economic niche markets, especially in the technological fields and with attracting entrepreneurial networks to assist in the growth of local start-ups.

Incentives to Employers Investing in Private Pensions

Fiscal incentives in the form of tax credits are to be granted to companies that invest in private pension schemes on behalf of their employees.

Malta Enterprise Programmes for Businesses

Malta Enterprise will be offering a number of programmes to businesses. One such programme will offer financial assistance of an amount of up to EUR 25,000 per business to disadvantaged individuals who set up a sustainable business. By means of a tax credit scheme in respect of research, the incentive covers from 25% to 45% of the expenses incurred in this regard.

Reducing Bureaucracy to Start a Business

From 1 January 2017, shops and other commercial businesses will no longer need a Trading Licence to carry out their commercial activity.

Tourism

Malta Enterprise will be offering financial assistance to hotels and restaurants carrying out renovation works by means of a tax credit of a maximum of €50,000 for restaurants and €200,000 for hotels.

Employment Industrial Relations

In terms of equal payment for the same work carried out, a process of consultation with stakeholders will be carried out in 2017 in order to ensure that the pay and conditions of work of contract workers will be the same as those of employees employed at the same work place.

Small Start Ups

Post-secondary school institution graduates starting a company with a turnover of not more than €80,000 per year may opt to either be exempt from auditing the company’s financial statements for the first 2 years or else benefit from a tax deduction equivalent to 120% of the audit expense, up to a maximum of €700 per year.

People at Work Consultancy are a multi-disciplinary organisation specialising in conducting healthy industrial relations.  Should you wish further information about these measures and how these may affect you and your business please do not hesitate to contact People at Work Consultants by e-mail  [email protected]