Malta Budget 2023

On 24th October 2022, the Minister for Finance and Employment presented the Budget for 2023. This summary highlights the salient tax measures presented to Parliament by the Minister for Finance and Employment in the Budget Speech.

Income Tax 

Adjustment of taxation on pension income

Recently, budget measures have been targeting pensioners and this year’s budget enhances the tax rebate on pension income which was originally introduced in 2017 via the Tax Rebate (Pensioners) Rules, (S.L. 123.174). The tax rebate will be increased such that pension income of a maximum of €14,968 will not be taxed (up from €14,318). Married couples applying the married rates will also benefit a further tax rebate with respect to additional income of up to €3,600.
Moreover, per Legal Notice 98 of 2022 (as amended by Legal Notice 220 of 2022), a proportion of the pension income derived by pensioners who remain active after reaching retirement age will be exempt from tax. The exemption will amount to 20% of the pension income during 2022 (capped at €2,864), and 40% of pension income during 2023 (capped at €5,727).

Extension of the tax refunds scheme

The tax refund concession granted to individuals earning not more than €60,000 in annual income will be granted again. Individuals subject to tax at married rates will see their tax refund range between €65 and €140, whereas individuals 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.

Reduced tax rate for authors and co-authors

In last year’s Budget Speech, the Minister for Finance and Employment had indicated that royalty income derived from qualifying literary work by authors and co-authors will be subject to a reduced rate of 15% and Article 31F was subsequently introduced in the Income Tax Act, Cap. 123 of the Laws of Malta via Act XVIII. The Minister for Finance and Employment has indicated that this rate will be now reduced to 7.5%.

Tax credits for therapies for children with disabilities

Tax credits of €200 per child will be given to parents of children with disabilities.

Increase in tax deduction with respect to sports, artistic and cultural activities
Budget Speech 2023 increases deductions with respect to fees paid by parents of children attending sports activities and cultural activities (originally introduced in Budget Measures Implementation Acts of 2008 and 2012). These tax deductions will be increased from €100 to €300 per annum per child.

Strengthening scholariship programmes and related tax credits

Existing scholarship programmes and tax credits for students pursuant Masters and PhDs will be strengthened, including through the European Social Fund.

Overhaul of the expatriates’ tax schemes

Over the years, a number of tax schemes applying to individuals taking up residence in Malta have been introduced. Such schemes include the Global Residence Programme Rules (contemplated in S.L. 123.148) and the Residence Programme Rules (contemplated in S.L. 123.160), amongst others. In view of international pressures, the Minister for Finance and Employment has indicated that these schemes will be evaluated with a view to determine whether they need to be updated. Any change to the main tax schemes must be managed carefully because, in practice, tax schemes are used by the competent immigration authorities to determine economic self-sufficiency for (immigration) residence purposes.

Intra-group surrender of unabsorbed capital allowances

One of the measures announced by the Minister when delivering last year’s budget was the introduction of a new scheme allowing groups of companies which may benefit from group loss relief to surrender capital allowances arisen in the financial years 2020 and 2021 and which, owing to losses incurred due to the COVID pandemic, couldn’t be absorbed during the said years. The measure was introduced with effect from the year of assessment 2022 by virtue of the Group Deductions (Income Tax) Rules, (S.L. 123.205) and, amongst other, the said rules capped the total allowable deductions that could be claimed thereunder at €1,000,000 per group of companies.

The Minister announced that this measure will also be extended to the year of assessment 2023

Duty on documents and transfers 

Beneficial schemes linked to immovable properties

The Minister for Finance and Employment has indicated that the following schemes will be extended:

  • Relief from Income Tax and Duty on Documents and Transfers on Certain Property Transfers, Rules (S.L. 123.203): These rules provide that transfers of properties built over 20 years ago and which have been vacant for more than 7 years and transfers of properties situated in Urban Conservation Areas 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 if the property is located in Malta or €30,000 if the property is located in Gozo. A Board is expected to be established to enable those who build new builds with traditional Maltese features to apply these same benefits. This scheme will continue to apply for the next two years.
  • The First Time Buyers’ Scheme, contemplated in rule 3 of the Exemption of Duty in Terms of Article 23 Order, (S.L. 364.12) will be extended for a further year. This scheme provides for an exemption on duty which would otherwise have been charged on the first €200,000 transfer value upon the inter vivos acquisition of the first immovable property, which property is to be used for residential purposes. In addition, with retrospective application from 1 January 2022, a grant of €10,000 will be given to first-time buyers over a 10-year period.
  • The Second-Time Buyers’ Scheme, contemplated in the Duty on the Acquisition of the Second Immovable Property to be used as Sole Residence (Exemption) Order, (S.L. 364.17) will be extended for a further year. This scheme provides for a refund of duty paid on the first €86,000 of the transfer value of the newly acquired property for individuals who transfer their first residential immovable property and acquire the second one within a 12-month period.
  • The Gozo Properties Scheme, contemplated in rule 4 of the Exemption of Duty in Terms of Article 23 Order, (S.L. 364.12) will be extended for a further year. This scheme provides for a reduced rate of duty of 2% with respect to inter vivos transfers of residential property situated in Gozo.

Extension of the reduction on duty on transfers of family businesses

The Minister for Finance and Employment has announced that the beneficial rate of duty of 1.5% on donations inter vivos of marketable securities to descendants and family members will be extended. This beneficial regime was originally introduced in 2017 via the Duty on Donations of Marketable Securities and Immovable Property used for Business Exemption (Order), (S.L. 364.15) and has since been extended on a yearly basis. 

Value added tax 

VAT refunds on restoration costs

The VAT refund scheme on restoration costs which was issued last year will be extended. In terms of this scheme VAT refunds capped at €54,000 (€300,000 *18%) may be claimed with respect to 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. 

Social Security Contributions 

National Insurance credits for mental health patients

Given that persons who, because of mental illness, were temporarily out of work could risk losing their pension entitlements, the Minister announced the introduction of a special adjustment measure. A two-year national insurance credit will be granted to persons who prove that they were absent from work when they were between 18 and 30 years of age due to mental illness certified by a qualified person.

National Insurance credits for carers

To date, individuals who qualify for “Allowance tal-carers mizjuda” and “Allowance tal-carers mhux mizjuda” qualify for credits with respect to social security contributions if they would have paid at least 20 social security contributions as from the age of 18 years. As from next year, the 20 contribution quota will be reduced to 15 contributions in a year. Those persons who do not qualify for these credits will still receive 4 years credit with respect to social security contributions. In addition, any individual benefitting from such allowances can opt to pay 5 years’ social security contributions when they reach the age of 59 to increase their retirement pension.

Other measures 

Cost of Living increase

The cost-of-living adjustment, calculated on inflation showing in the Retail Price Index and according to the methodology agreed upon by social partners, will be €9.90 a week.
A new cost of living adjustment mechanism will be introduced for most vulnerable persons

Assistance to SMEs

Cash grants worth €40 million will be made available to Small and Medium Sized Enterprises (‘SMEs’) under the Business Enhance Schemes.

Incentivising digital and sustainable business models and other projects

Enterprises investing in digital and sustainable business models will see their cash grants double. Such enterprises will now be eligible to a cash grant equal to 50% of the eligible investment, capped at €100,000.

Enterprises and Start-ups in Gozo will continue to benefit from an additional tax credit of 10%, with this increasing to 20% for investments leading to a reduction in their carbon footprint.

Enterprises, including SMEs and family-owned businesses, investing in digital projects, energy & water saving projects or efficiency enhancing projects will benefit from a tax credit of up to €40,000.

Extension of rent subsidies

Enterprises eligible to rent subsidies by virtue of their facing rising transportation costs will see their annual benefit ceiling doubling from €25,000 to €50,000 for the first three years. Similarly, the maximum benefit period will be doubled from 3 years to 6 years.

One-stop shop for Start-ups and others

Malta will be launching a one-stop shop for Start-ups. This will be branded as ‘Start in Malta’ and its aim will be to support Start-ups in setting up shop in Malta and with their applications for schemes administered by Malta Enterprise and other local entities.

Separately, Malta will also be investing in a new Business Incubation Centre and the Digital Innovation Hub.

Encouraging digitalisation

Entities within the private sector, including small self-employers, investing in digitalisation will benefit from grants in terms of the Business Enhance Programme.


Environmental, Social & Governance

Malta Enterprise will be publishing guidelines to assist companies to obtain ESG credentials and also technical support in this regard to SMEs.

Venture Capital Fund

Malta is also currently exploring the establishment of a Venture Capital Fund aimed at the development of industries in Malta.

Extension of certain schemes to Social Enterprises

Social Enterprises will now be able to benefit from a number of schemes which till now have been only made available to commercial enterprises, including Micro Invest. Such enterprises can now benefit from a tax credit of up to €70,000 over a three-year period.

Tourism in Gozo

New incentives aiming to attract tourists to Gozo during the low season will be launched in collaboration with the Gozo Tourism Association and Gozitan tour operators. 

For further information kindly contact:

Dr. Robert Attard, Partner | robert.attard@mt.ey.com 

Saviour Bezzina, Senior Manager | saviour.bezzina@mt.ey.com 

Silvio Camilleri, Senior Manager | silvio.camilleri@mt.ey.com 

Bernard Bonnici, Senior Manager | bernard.bonnici@mt.ey.com

Miraine Falzon, Manager | miraine.falzon@mt.ey.com

Kurt Cuschieri, Senior Manager | kurt.cuschieri@mt.ey.com