Malta Budget 2021

Income Tax

Extension of partial exemption on Property Transfers Tax

• The Scheme originally contemplated in Legal Notice 241 of 2020, which provides for a partial exemption on property transfers tax levied on the transfer of immovable property such that tax is levied at the rate of 5% instead of at 8% for the first €400,000 of the amount or value of the consideration for transfers of immovable property, will be extended to promise of sale agreements registered until 31 March 2021 insofar as the final deed of sale is made by 31 December 2021.

Extension of final tax on transfers of the promise of sale agreements

• ·With effect from 1 January 2021, a final tax of 15% will apply on all of the gains or profits derived from the transfer of a promise of sale agreements. This extension will apply until 31 December 2021.

Final rate of tax on royalty income

• As of 1 January 2021, royalty income received by authors / co-authors from the sale of books will be subject to a final tax of 15%.

Extension of tax rebates

• Individuals whose income is less than €60,000 will continue to benefit from a refund of tax. Individuals whose income falls within the tax-free bracket will also benefit from such refund. This refund will be increased to €45 - €95, with the highest refund being provided to the lower-income earners.

Broadening of tax rebates for pensioners

• The tax rebates on pension income will increase; the first €14,058 of pension income will now be exempt from income tax.
• Moreover, the further tax rebate which may be claimed by pensioners bringing to charge their pension income at the married rates and earning another source of income will be increased as well, such as that now the first €3,600 of other income will be exempt from income tax.

Fiscal incentives for private pensions

• As from next year, the amount of annual financial investment in a pension scheme in respect of which there is an exemption from income tax will be increased by €1,000 per annum to €3,000 per annum.

Voluntary Organisations

• Registered voluntary organisations that are compliant with the relevant laws will be exempted from income tax insofar as their annual revenue does not exceed €50,000.

Duty on Documents and Transfers

Extension of various schemes

• The following existing tax schemes will be extended for another year:
  • the Scheme originally contemplated in Legal Notice 59 of 2016 providing for a reduced rate of duty of 2.5% on the higher of the amount or value of the consideration paid upon the acquisition of vacant immovable property situated within an Urban Conservation Area.
  • the Scheme originally contemplated in Legal Notice 384 of 2016 providing for a reduced rate of duty of 2% on the higher of the amount or value of the consideration paid upon the purchase of residential immovable property situated in Gozo.
  • the Scheme originally contemplated in Legal Notice 131 of 2017 providing for a reduced rate of duty of 1.5% on the real value of shares held in a family business or immovable property used in a family business donated to close family members.
  • the Scheme originally contemplated in Legal Notice 39 of 2018 providing for a refund of a portion of the duty paid by second-time buyers upon the acquisition of their second immovable property situated in Malta.
• The Scheme originally contemplated in Legal Notice 240 of 2020 providing for a reduced rate of duty of 1.5% for the first €400,000 of the amount or value of the consideration for transfers inter vivos of immovable property will also be extended for promise of sale agreements registered until 31 March 2021 insofar as the final deed of sale is made by 31 December 2021.
• The first-time buyers' scheme providing for an exemption from duty on the first part of the consideration introduced by Legal Notice 393 of 2013 has been extended. In addition, the exempt portion has been increased from €175,000 to €200,000.
• Those individuals acquiring property for the purpose of establishing their own residence, who are either acquiring the property by inheritance or are not first-time buyers will now be subject to duty at the reduced rate of 3.5% on the first €200,000 instead of €175,000.  

Increase in exempt portion on donations

• Direct descendants who are gifted immovable property for the purpose of establishing their own residence shall now be exempted from duty on the first €250,000 (increased from €200,000) of the value of the property so transferred. The duty to be charged on the remaining value shall remain to be charged at the reduced rate of 3.5%.

Value Added Tax

Small Undertakings registration threshold increased

• Eligibility criteria allowing persons to register under Article 11 of the VAT Act have been relaxed. Taxable persons registering under Article 11, colloquially referred to as ‘VAT exempt persons’, do not charge VAT on their outputs and are not entitled to claim back input VAT. Similarly, Article 11 registrants are subject to a simplified reporting framework (consisting in a single annual declaration of sales/purchases as opposed to the four quarterly VAT Returns filed by Article 10 VAT registered persons). The eligibility turnover threshold has been increased from €20,000 to €30,000 enabling even more taxable persons to qualify for this simpler type of VAT Registration.

Extension of the reduced VAT rate on bicycles

• The VAT refund scheme associated with the acquisition of Bicycles and Pedelec Bicycles as per Government Notice No. 1,470 dated 15 November 2019 published in Government Gazette No. 20,296 will be extended for another year.

Targeted COVID-19 Measures

Government vouchers

• Government vouchers of a €100 will be issued once again to individuals aged 16 or over. €60 of these vouchers may be used for accommodation, hotels and restaurants, whilst €40 may be used in retail stores and for other services.

Wage supplement

• The COVID Wage Supplement will be extended until the end of March 2021.

Other measures

• The COVID liquidity measures announced by the Government, including the tax deferrals, the moratorium, the Guarantee Scheme and Interest Rate Subsidy Scheme, will be retained. These schemes will be evaluated at the end of March 2021.

Other Measures

Fiscal incentives

• The Minister for Finance announced that the Malta Enterprise will be assisting the productivity sector with innovative schemes.
• The Government will be allocating grants worth €220 million under the Recovery and Resilience Facility for investments in the environment and climate sectors and towards the change to digital reality.
• The Government will work on attracting start-ups wishing to operate in Europe to Malta by, amongst other, the establishment of a Government fund to be invested in Venture Capital Funds targeted at establishing such an industry in Malta.
• A new scheme targeting companies employing less than 50 people and which will be undertaking innovative projects will be introduced by the Malta Enterprise. Such a scheme will be open for a year and will cover up to 50% of the investment cost incurred, capped at €200,000 per company. Companies collaborating with domestic and international research institutions will benefit from an additional €35,000.
• The Malta Enterprise will be extending and enhancing existing schemes and introducing new schemes aimed at existing operators and attracting new ones. These schemes include the Micro Invest, the Business Development and Continuity Scheme, the Research & Development 2020 Scheme, the R&D Feasibility Scheme and the Business Start Scheme.
• The Government will be using tools afforded by the European Union’s Temporary Framework to attract industrial investment by facilitating loans and tax credits scheme.   
• The various schemes aimed at job creation in Gozo, namely the Employment Refund Scheme, the Teleworking Scheme and the MICE in Gozo Scheme, will be extended. Conversely, the Back office Employment Refund Scheme and schemes targeted at Gozitan enterprises, especially those who operate in the digital innovation and internet sector and the tourism sector will be enhanced.
• The Government will be allocating a budget contemplating a cash grant of €10,000 for a number of persons scrapping certain old taxis and replacing such with new wheelchair accessible taxis.  

Environmental grants

• The Malta Stock Exchange will develop an attractive package for investors to issue ‘Green Bonds’, to be used to finance projects which promote renewable energy and which reduce air pollution.
• A number of environmentally friendly schemes will be extended, including:
  • schemes to install PV panels, heat pump water heaters, solar water heaters, batteries to store renewable energy;
  • schemes to restore wells and to install reverse osmosis,
  • schemes to scrap older vehicles and to invest in electric vehicles.
• Schemes will be made available for private residences and enterprises to introduce ‘Green Walls’.
• Grants equal to the tax due on the sale of produce will be provided to the agriculture and fisheries sectors for sales made at Pitkalija and Pixkerija. The grants will be tied to investment in projects aimed to reduce wastage of produce.
• A plan is in the works for tourism establishments to start generating clean energy.

Environmentally friendly vehicles / Registration tax

• As from 1 January 2021, the Vehicle Registration Tax and annual license fee will be calculated with reference to the Worldwide Harmonized Light Vehicle Test Procedure (WLTP) Test. The revision should not result in an increase in the existing rates. Actually, the majority of consumers will benefit from a reduction in the relevant rates.
• The acquisition of electric vehicles (including electric plug-in vehicles) will be encouraged through vehicle registration tax exemptions and a 5-year annual registration tax exemption.
• Earlier on this year, Enemalta had launched a pilot project concerning residential charging of electric vehicles. The Pilot Project provided for a fixed (beneficial) rate applicable to the consumption of electricity during the off-peak period.  The Minister announced that the system will remain in force.