On 11th October 2021, the Minister for Finance and Employment presented the Budget for 2022. This summary highlights the salient tax measures presented to Parliament by the Minister for Finance and Employment in the Budget Speech.
Enhanced Capital Allowances
In year of assessment 2022, companies will be able to apply to transfer capital allowances which arose in 2020 and 2021 and remained unabsorbed due to reduced profitability caused by the COVID-19 pandemic to other group companies.
Reduction of Tax (Tax & Duty) on Sale of Affordable Rented Property
The tax and duty on the transfer of property that was rented out for at least 10 years to tenants eligible to assistance in terms of the Private Rent Housing Benefit Scheme administered by the Housing Authority, will be reduced by half up to the first €200,000 of the transfer value. If the property is transferred to the previous lessee, the transfer will not be subject to Property Transfers Tax and Duty. In the case of properties that have been rented out to lessees as their primary residence for more than 3 years but less than 10 years at affordable rates, Property Transfers Tax and Duty will be reduced by half.
Tax Exemption (Income Tax & Duty) on Certain Properties
Transfers of properties built over 20 years ago and which have been vacant for more than 7 years and transfers of properties situated in an Urban Conservation Area, or which are newly built with traditional Maltese features, will not be subject to tax or duty on the first €750,000 of their transfer value. Furthermore, first-time buyers acquiring these types of properties will also receive a grant of €15,000. This grant will be doubled to €30,000 in the case where the relevant property is situated in Gozo. These two measure will remain in force for three years, starting from 12 October 2021.
Reduction of Tax on Part-time Work
The special rate reduced 15% tax rate applicable to qualifying part-time income will be reduced to 10%.
Reduction of Tax on Employment Income from Over-time
Individuals working in a non-managerial position and earning an annual base wage of not more than €20,000 will be taxed at the rate of 15% on their first €10,000 of overtime income.
Adjustment of Taxation on Pension Income
The tax rebate on pension income will be increased such that pension income of a maximum of €14,318 will not be taxed. Married couples applying the married rates will have also benefit a further tax rebate with respect to additional income of up to €3,600.
Reduction of Tax on Income Received by Pensioners
Pension income derived by pensioners who will remain active after reaching retirement age will not be treated as taxable income during the five-year period starting as from next year implying a mitigation of the overall effective tax burden.
Reduced Tax Rates for Artistes
As from next year, income derived by artistes will be subject to a reduced rate of 7.5%. Moreover, artistes’ income will also be established over a 3-year average in line with a new mechanism.
Increase in Tax Refunds
The tax refunds receivable by individuals earning not more than €60,000 in annual income will be increased. Individuals subject to tax at married rates will see their tax refund range between €65 and €140, whereas individual subject to tax at the single and parents rates will benefit from a tax refund ranging from €60 to €125 and €60 to €135 respectively.
Duty on documents and transfers
Extension of various schemes
- The reduced rate of duty applicable for first-time buyers, second-time buyers and properties situated in Gozo will be extended for another year. Existing measures introduced during the COVID period will not be extended beyond their June 2022 expiration date.
- The reduced rate of duty of 1.5% on inter vivos donations of family businesses will also be extended.
Value added tax
VAT Refunds on Restoration Costs
A new VAT refund scheme capped at €54,000 (€300,000 *18%) will be introduced with effect from 12 October 2021 on restoration and finishing costs incurred on specific types of property, namely properties built over 20 years ago and which have been vacant for more than 7 years, properties situated in an Urban Conservation Area and properties which are newly built with traditional Maltese features. A set of rules will be introduced to limit speculation and abuse to ensure that the measure reaches its intended scope.
Extension of various schemes
- The VAT refund scheme associated with the acquisition of Bicycles and Pedelec Bicycles as per Government Notice No. 1,480 dated 18 December 2020 published in Government Gazette No. 20,541 will be extended for another year.
- The refund scheme associated with the acquisition of Pedelecs and Category L Vehicles (such a Mopeds, Motorcycles with or without Side-cars, Tricycles and Quadricycles) as per Government Notice No. 481 dated 9 April 2021 published in Government Gazette No. 20,605 will be extended for another year.
- The refund scheme associated with the conversion of vehicles to autogas as per Government Notice No. 479 dated 9 April 2021 published in Government Gazette No. 20,605 will be extended for another year.
Modernisation of the Tax System
The Minister announced that he will be forming a Committee that will reform existing financial services laws, modernize tax laws and encourage new talent in the financial sector. Malta has developed a plan for the relevant authorities to address the action points outlined by the FATF. Work on these action points is progressing with a good pace.
Interest on the Late Payment of Income Tax and VAT
The remission of interest charged on the late payment of tax will only be allowed in the cases referred to in rule 2 of the Remission of Interest Rules, (S.L. 372.26), that is, only in instances where the Commissioner is satisfied that the tax due was not paid within the prescribed period due to a reasonable clause. With effect from 1 June 2022, the rate of interest on the late payment of income tax and VAT will be increased to 0.6% per month or part thereof (7.2% per year).
Enterprise Support Measures
- The rent subsidies scheme will be extended to more eligible enterprises.
- Enterprises will continue to benefit from the Change to Grow and Smart & Sustainable Investment schemes. Enterprises which incurred heavy losses may continue to benefit from the ReStart Scheme.
- A Seed Fund catering for researchers and entrepreneurs engaged in the innovative and sustainable development sector will be established in collaboration with Malta Enterprise and the University of Malta.
- With the aim of attracting further start-ups and entrepreneurs, Malta will be launching the Start-Up Visa.
- The Malta Development Bank SME Tailored Facility will be extended to cover loans for green and sustainable projects.
- Malta Enterprise will be establishing the Blue Med Hub with the aim of attracting start-ups and SMEs.
- The Government will be launching a project to assist companies evaluating the environmental or social impact of their projects. Such information will be made public for private investors wishing to take into consideration the ESG score of potential investees.
- The Minister announced the launching of a process leading to a Carbon Credit Trading Scheme for public and private entities.
- The Government will be launching schemes aiding investments in photovoltaic panels and battery energy storage systems. Domestic homes restoring their wells and acquiring solar water heaters, heat pump water heaters and reverse osmosis systems will also benefit from grants.
- The grant applicable on the acquisition of new electric vehicles or Plug-In Hybrids will be increased to €11,000. Persons benefitting from the vehicle scrapping scheme will get a further €1,000.
- Persons scrapping old cars in terms with the vehicle scrapping scheme will see their grant doubling to €2,000.
- The exemption from registration tax and license fees applicable on the acquisition of electric and plug-in electric vehicles for a five year period will be renewed for another year.
- Owners installing photovoltaic panels on large vehicles will benefit from a grant of €900. Such owners may also benefit from another grant when installing DPF and SCR systems on their vehicles.
- Malta Enterprise will be launching a new scheme to assist enterprises replacing their conventional vehicles with electric vehicles.
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