ECONOMIC UPDATE 0.70% 9.3bn 4.9% 1.1% 3.3bn. 5.9bn

Transcription

1 MALTA BUDGET 2017 Nexia BT is: a leading company in Malta offering corporate and private client advisory, audit, accounting and tax services a member of Nexia International

2 ECONOMIC UPDATE On the 17 th October 2016, the Minister for Finance, the Hon. Professor Edward Scicluna presented his speech for the 2017 budget. This document highlights the main fiscal measures and economic updates. 0.70% 9.3bn 4.9% 1.1% 3.3bn 5.9bn 2016 deficit is being forecast to 0.4 percentage points lower than expected, thus resulting in 0.7% of GDP. GDP for 2016 is expected to reach 9.3bn, a 5.8% increase in nominal terms and 3.5% in real terms. The number of people registering for employment amounted to 4.9% of the labour supply - June Inflation stood at 1.1% in August % higher than that registered in August In 2017, the rate of inflation is being forecast to reach 1.5%. In 2016, tax revenue is expected to register 3.3bn, a figure which is expected to reach the 3.9bn mark by At the end of 2016, government debt is forecast to amount to 63.3% of GDP (i.e. 5.9bn). It is expected to reduce to 56.5% of GDP by Closer to you

3 HIGHLIGHTS COLA 1.75 per week Tax deduction to companies providing free transport to their employees Removal of ECO-tax on selected products Incentives for renovation of property in UCAs Tax credits to companies who invest in pension schemes for their employees Incentives by Malta Enterprise for investment in energyefficient equipment Setting up of Property Malta in collaboration with MDA Launch of the Risk Investment Scheme for investment in SMEs such as Prospects on the Malta Stock Exchange Increase in excise duty on cigarettes and non-alcoholic drinks; introduction of excise duty on construction materials Reduced stamp duty rate on 1.5% of transfers of business to children Removal of income tax on pension income up to 13,000 Reduction in stamp duty upon acquisition of property in Gozo

4 COLA The cost of living adjustment for 2017 shall be of 1.75 per week. This will increase the weekly minimum wage to The COLA shall also be applied in full to pensioners and given pro-rata to students receiving a stipend. ENERGY Incentive schemes to encourage the use of heat pump water heaters, double glazing, roof insulation, solar water heaters and well renovations will be extended. A scheme will also be launched to issue ECO-cheques to incentivise the more economically vulnerable to replace their refrigerators, air conditioners, and tumble dryers to more energy-efficient appliances. Solar bonds will be offered for purchase to the public. These will finance the leasing of solar panels in commercial establishments. In this manner, companies that invest in solar panels will have another form of financing. The bonds will also be used to finance solar systems in identified public zones. Malta Enterprise shall also be working on the development of a scheme that provides assistance to businesses which consume a lot of energy. Such a scheme will promote investment in systems and machinery which will improve the efficient use of energy. A new scheme for hotels will be put into place between the Energy and Water Agency and the MHRA where members will benefit from gains on savings registered in their energy consumption. EMPLOYMENT Other Jobsplus incentives such as Work Exposure, Investing in Skills, Work Placement Schemes, Training Pays and Community Work Schemes will be continued. A consultation process has been launched for the introduction of a measure whereby those receiving cancer treatment will be given additional paid medical leave. Closer to you

5 EDUCATION As from 2017, full time students who are under 24 years of age and who perform work on a self-employment basis will be able to pay social security contributions pro-rata at a rate of 15% on their net earnings. Introduction of the use of tablets in classrooms for students in the 4 th year of all primary schools. The government is also committed to improve the infrastructure and WIFI access in schools and invest in new computers. Supplementary Maintenance Grant The income thresholds for eligibility to the supplementary maintenance grant shall be revised. Furthermore, students that suffer from a disability, or those living in orphanage or church homes, will be automatically eligible for a supplementary maintenance grant. Educational Stipends In the case of students who complete an additional year of studies, a stipend shall also be granted for such additional year of studies. Students who turn 16 and continue to study in Alternative Education Programmes in Paola, equivalent to level 3 in hospitality, customer care, welding and fabrication will also be eligible to receive a stipend. Furthermore, students who, for any reason, opt to pursue a lower qualification, will also be eligible to receive a stipend. Sabbatical Leave A fund of 400,000 will be allocated for persons opting for sabbatical leave to further their studies.

6 PROPERTY MEASURES The first time buyers scheme shall be extended for another year. Couples and individuals who purchase their first residential property shall remain exempt from stamp duty on the first 150,000. Two new schemes will be launched to assist first-time buyers in the restoration of property situated in Urban Conservation Areas, or schemed buildings in grade 1 or grade 2 areas. The maximum benefit is of 100,000 on expenses incurred on such restoration works. Those who purchase residential property in Gozo shall benefit from a reduction in the rate of stamp duty, from 5% to 2%. This applies to buyers who enter into a promise of sale in 2017, which is registered with the Inland Revenue Department by the 31 st December 2017, and only if the contract is concluded by the end of For those having a right of temporary emphyteusis over property, that has either expired, or is due to expire, such emphyteusis shall be renewed under the same conditions. However, such renewal shall be subject to a revision of the ground rent payable. The scheme for shops located outside Valletta will be re-launched and will apply to government-owned shops that are held under a title of lease or emphyteusis. The current recognised tenant or third party operator can benefit from a 45-year temporary emphyteusis provided that certain terms and conditions are satisfied. Property inherited after November 1992, and which is being transferred by means of a judicial sale by auction, will now be taxed at a final tax rate of 7%, as opposed to the current system whereby the gain is taxed at the marginal rates. As of 2017, a new system shall be introduced whereby contracts of rent entered into for a period of 3 months or more, including renewals, must be registered with the Inland Revenue Department. Both the lessor and the lessee may register the contract, however, in case of failure of registration, the lessor will be subject to the penalties as contemplated in the Income Tax Act. Closer to you

7 Lessors who lease property to low-income earners for a period of seven years or more can now benefit from a reduced final tax rate of 5% instead of 15%. The applicability criteria for such measure will be announced in the coming weeks, however, such reduction will not apply to property located in a Special Designated Area. Agricultural land Legal provisions will come into force aimed to facilitate the transfer of government-owned agricultural land between farmers, especially between family members. Legal provisions will also facilitate the transfer of agricultural land between young farmers, whereby the lease will be subsidised for the first five years. TRANSPORT Ex-gratia payments on excess registration tax will continue to be refunded in full. A tax deduction equivalent to 150%, up to a maximum of 35,000 per annum will be given to companies that provide free transport to their employees. The capping is increased to 50,000 for companies that operate such free service jointly with other companies. Government entities employing more than 50 persons will have to provide a sustainable transport plan for their employees. Those who turn 18 years of age in 2017 will benefit from one year of free public transport, amounting to a maximum benefit of 312 per person. The scheme relating to the incentives for the investment of bicycle racks by companies for use by their employees will be extended by another year. The unpaid registration tax upon the acquisition of a motor vehicle by a disabled person who had benefited from an exemption, will be clawed back over a period of ten year upon the eventual sale of the same vehicle to a person who does not qualify for the said exemption.

8 TAX MEASURES Shareholders of companies listed on the Malta Stock Exchange, having not more than 0.5% shareholding will now be entitled to declare the dividend and claim a credit or refund of the underlying tax paid by the company on dividends distributed from profits earned after 1 January Currently individuals are exempt from tax on dividends in excess of the prescribed thresholds meaning that the underlying tax is not available as a credit or refund to the shareholders. During 2017, qualifying transfers of businesses from parents to children will be subject to a reduced stamp duty rate of 1.5% instead of 5%. Social measures An increase in the supplementary benefit ceiling from 11,089 to 13,000 will be given to married couples. Single persons who are in employment, live independently and whose net earnings are less than 9,012 as well as other single persons earning the minimum wage will also have an increase of in their supplementary benefit. Both the respective ceilings of the In-Work-Benefit schemes for parents shall be extended. The rate of the applicable In-Work-Benefit shall be raised for every child under the age of 23 and as a result, the benefit will increase from 1,000 to 1,200. Employed single parents will benefit from a further increase of 50 per annum, whereas for couples where only one of the spouses is in employment, the benefit shall be increased from a minimum of 150 to a maximum of 350 per annum, depending on their level of income. The subsidy on rental of residential homes to vulnerable families is being doubled from the current threshold to The benefit will depend on the income and size of the family. Further enhancement to the Maltese tax system in general, which were mentioned in the Budget speech include a system of fiscal consolidation whereby group of companies will be able to compute their taxable income on a group level. A tax deduction of 120% up to a maximum of 15,000 of the costs incurred will also be introduced to those businesses who undertake projects which Closer to you

9 enhance a locality. This will be subject to approval form the respective local council. Indirect tax measures Removal of ECO-contribution on batteries, mattresses, detergents, toiletries and vehicle filters as well as plastic containers and utensils which are used in the kitchen. Some of these products will instead be subject to excise duty. The price of cigarettes and cigars have been increased by an average of 3.76%, whilst the price of rolling tobacco shall be increased by 5.5%. The excise duty on non-alcoholic drinks shall be raised by two cents per litre. The rate of excise duty on water shall remain unchanged. Excise duty on toiletries shall be introduced as from 1 st January Excise duty on black garbage bags that are not bio-degradable shall be increased. Introduction of excise duty on certain materials used in the construction industry such as pre-fabricated structural components, float glass, ceramic tiles, iron and steel bars and rods. Excise duty is also being extended on cement products acquired from outside Malta. Measures supporting SMEs A new fiscal incentive in the form of a Risk Investment Scheme are being introduced which shall be available for those investing in SMEs or in a fund of several SMEs which are registered on the Alternative Trading Platform such as Prospects on the Malta Stock Exchange. Such investors shall be eligible for a maximum tax credit of 250,000 yearly. The 15% tax rate currently applicable to gains arising on a disposal of shares listed on the Malta Stock Exchange by persons who held the shares prior to listing is being removed. This will also be extended to those who list their shares on the alternative trading platform depending on the amounts of shares offered to the public.

10 Malta Enterprise shall introduce a number of schemes for businesses. (i) a financial assistance scheme of up to 25,000 aimed at helping individuals requiring special assistance to set up their business. (ii) a tax credit ranging between 25% to 45% on expenditure incurred on research and (iii) a 30% tax credit for the developments of cultural themed digital games. Another grant shall be introduced aimed at incentivising post-secondary institutional graduates in setting up their own business. Those who have graduated in the last three years and who have incorporated a company having a turnover of not more than 80,000 per annum can opt for either being exempt from the statutory audit for the first two years or carry out the audit and benefit from a 120% tax deduction on the first two years audit fees, up to a maximum of 700 per annum. Malta Enterprise shall launch a tax credit scheme for restaurants and hotels carrying out renovation works, up to a maximum of 50,000 or 200,000 respectively. Furthermore, those local restaurants engaging chefs with international expertise may also benefit from grants up to 10,000. PENSIONS AND THE ELDERLY In addition to having contributions made by employers to private pension schemes a tax deductible expense, employers will also now benefit from a further tax credit amounting to 150 for each 1,000 contributed. Apart from this, the amount contributed shall not be considered as a fringe benefit in the hands of the employee. This will further complement the deduction of up to 150 per annum given to those who invest personally in a private pension plan. As from January 2017, the minimum retirement pension is being increased by 4 per week (an increase of 208 per year). Pensioners who are over the age of 61 will no longer be subject to tax on their pension income including pensions from Social Security, the Treasury of Malta and other local or foreign sources up to a maximum yearly pension of 13,000. This measure shall be implemented over a period of two years as follows: Closer to you

11 Pension income up to 10,500 will be exempt from tax during 2017 for persons subject to tax under the single rates. This threshold will be increased to 13,000 during 2018; Persons subject to married rates of tax will be granted the full exemption in the year 2017; Married persons subject to tax under the single rates shall have a further exemption of 500 from their other income during This increases to 1,000 during 2018; and Pensioners who qualify under the parent rates of tax shall have 11,500 of their pension income exempt in 2017 and 13,000 of their pension income exempt during Elderly married couples who are in receipt of low income, shall also benefit from the supplementary aid granted to employed persons receiving the minimum wage. Persons aged 75 and over shall still benefit from the 300 grant for living in their own home. The annual bonus given to those persons who have not reached 75 years of age and who do not have the minimum paid contributions to be eligible for a retirement pension is being increased by 50. As from next year, service pensions will be increased by 200, which amount shall be reduced from the social security pension. Carers allowance taking care of persons with medium dependency will be increased by 14 weekly to a total of 90 per week. Elderly persons who are on a waiting list for admission to an elderly home can employ a carer on a full-time or part-time basis and benefit from financial aid of up to 5,200 per annum or half the minimum wage equivalent. The disability pension will be reformed so as to introduce different levels of disability pension providing in general for a wider entitlement in general. There will be the introduction of a Savings Bond for pensioners which will offer higher interest rates than the market rates. The period of free medical coverage will be extended from three months to one year for persons with disability under the Pink Form scheme.

12 Why choose Nexia BT? Established by Brian Tonna, managing partner, Nexia BT is a corporate and private client advisory, audit, accounting and tax firm. Our clients are local and international blue chip companies, financial and other institutions, SMEs, high-net-worth-individuals, the public sector and high-end organisations. As a reputable organisation of over 20 years standing, and forming part of a worldwide network of independent business advisors, consultants, auditors and accounting firms present in over 120 countries, we are optimally positioned to offer global expertise. Along these years, we have built client loyalty around a credible reputation for delivering results whilst working to the highest professional standards. Nexia BT s strength lies in the technically competent staff with experience across a varied range of industry sectors. We deliver solutions to our clients through a high calibre customised service reflected in the professional work approach and ethics of our staff and driven by our ethos Closer to you. With the backing of this business approach, we confidently present you Nexia BT as your trustworthy, dependable and reliable partner in Malta. CONTACTS For further information please contact: Karl Cini Partner karl.cini@nexiabt.com The Penthouse, Suite 2 Capital Business Centre Entrance C, Triq taz-zwejt San Gwann SGN 3000 Malta EU Antoinette Scerri Senior Manager antoinette.scerri@nexiabt.com T: F: Find us on The material has been prepared by professionals in the firm of Nexia BT. It is intended as a general guide only, and its application to specific situations will depend on the particular circumstances involved. Accordingly, we recommend the readers seek appropriate professional advice regarding any particular problems that they encounter. The information should not be relied upon as a substitute for such advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, Nexia BT accepts no responsibility for any errors or omissions it may contain, whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies upon it. Nexia BT is a member firm of the Nexia International network. Nexia International Limited does not deliver services in its own name or otherwise. Nexia International Limited and the member firms of the Nexia International network (including those members which trade under a name which includes the word NEXIA) are not part of a worldwide partnership. For the full Nexia International disclaimer, see