Key points. The Economy Income Tax Measures Duty on Documents and Transfers Transport VAT Measures Social Benefits Other

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1 MALTA BUDGET 2015

2 Key points The Economy Income Tax Measures Duty on Documents and Transfers Transport VAT Measures Social Benefits Other

3 The Economy The Maltese Economy continued to grow in It is expected that economic growth will reach 3% in 2014 and 3.5% in 2015; The deficit for the current year is expected to be reduced to 2.1% of the GDP with a further reduction of 1.6% in 2015; The GDP is expected to be 7.9bn in 2014, an increase of 4.9% over Real GDP is expected to grow by 3.5% in 2015; The cost of living increase for 2015 shall be of 0.58 per week.

4 Income Tax Measures The rate of tax for individuals will be reduced as from 1 January 2015 from 29% to 25% on income less than 60,000. The non-taxable income portion will be adjusted to take into consideration the cost of living adjustment. This will be adjusted for pensioners and also low income earners; Companies that donate an amount exceeding 2,000 to the Malta Community Chest Fund will be eligible for a tax deduction of half the amount donated; The reduced rate of tax of 7.5% applicable to professional football players introduced in 2014 will also be extended to waterpolo players as from 2015; The Family Business Act will be introduced in 2015 to facilitate the transfer of business between family members; As from 2015, the existing capital gains regime on transfers of immovable property will be radically changed. A default final tax rate of 8% is being introduced on the transfer value. Different rates are applicable to individuals who do not trade in immovable property. A 10% final tax on the transfer value for immovable property acquired before 2004 and a 5% final tax on the transfer value for transfers by individuals who are non-traders made within 5 years from the acquisition of the said property. Opting out of the final tax system will no longer be an option. The new final tax system will always apply.

5 Income Tax Measures The current rules will continue to apply for transfers of immovable property if the Commissioner has been notified through a promise of sale notice up to 17 November 2014; Existing exemptions on transfers of immovable property will continue to apply; A number of fiscal measures and incentives will be introduced in favour of Trusts and Foundations set up for the benefit of persons with disability. A number of measures will also be introduced to incentivise employers to employ individuals with disability. One of these measures will be an exemption from payment of social security contributions in respect of such individuals and a tax credit equivalent to the employee s wage, capped at 4,500 for each employee with disability; An introduction of a tax exemption on students stipends as from 2015; Following the enactment of the Civil Union Act a number of amendments to the Income Tax Act will follow to ensure that parties to a Civil Union will be treated like spouses; A new Tax programme will be introduced for retired employees of the United Nations. The new tax programme will be similar to existing tax residence programmes; No capital gains tax on transfers of property between co-owners acquired by two individuals to establish their main residence; A tax credit will be introduced to promote investment in start-up companies equivalent to the capital invested up to a maximum of 250,000.

6 Duty on Documents and Transfers The exemption from stamp duty on the first 150,000 for first time buyers will be extended till 30 June This exemption was introduced in 2014 and will be extended for another 6 months; Increase of stamp duty on insurance documents from 0.10 to 0.11 for every euro or part thereof of the agreed yearly premium, subject to an increased minimum duty of 13; No stamp duty on transfers of property between co-owners acquired by two individuals to establish their sole, main residence; No stamp duty will apply on transmission causa mortis of assets held in a trust where the beneficiary is a disabled individual.

7 Transport Reduction to the registration tax on quad bikes and vintage motor bikes will also be introduced; Increase in vehicle license rates as from 1 January 2015, some exceptions apply depending on the year of registration and the vehicle s carbon emissions; A tax deduction of 150 for parents of children who attend church and private schools and make use of school transport; The vehicle scrappage scheme will continue to apply with effect from 1 December 2014; VAT payments on vehicle registrations made between May 2004 and December 2008 will continue to be refunded over a 7 year period.

8 VAT Measures The exemption from registration for persons whose threshold is less than 7,000 per annum has been removed. All persons must who exercise an economic activity must register for VAT and issue fiscal receipts accordingly; Guidelines will be introduced on persons seeking to obtain an exemption from the requirement to issue fiscal receipts which will include the requirement of a systems audit; Reduced rate of Vat on e-books and on books published on CDs, DVDs, SD-Cards or USB drives of 5% from the previous 18%. This measure brings the VAT treatment of such books in line with that applicable to books published in paper format; New VAT refunds for non-eu tourists to be introduced.

9 Social Benefits The Maternity Benefit payable by the Government for the last 4 weeks of maternity leave will increase by more than 6 per week to bring this in line with the National Minimum Wage. A fund will be set up in 2015 which will be financed by all private employers in accordance with the number of employees. The aim of this fund will be to cover the costs payable by employers in respect of maternity leave benefits and to ensure that the burden is spread equally and is not solely borne by employers who employ women. From 2015 unemployed single parents who commence work will continue to receive a portion of their unemployment benefits during the first three years. The benefits received will be; 65% in the first year; 45% in the second year; and 25% in the third year. Employees will also benefit from 25% of the unemployment benefit for the first 3 years. Extension of leave entitlement in case of parents who have adoptive children to be in line with maternity leave A number of fiscal incentives will be introduced during 2015 in respect of the Third Pillar Pensions. The government is committed to ensure the sustainability of pensions.

10 Others From 18 November 2014 excise duty on cigarettes and tobacco products will be increase by 6% to 12% depending on the type of product. An excise duty is also being introduced on wine and feeds used in fish farms; Following the success of the film industry, a number of incentives will be introduced to continue to promote and boost revenue from this sector; The government will be introducing a number of amendments to the Islamic banking sector. This is being done to attract more financial institutions to Malta; The Lotteries and Gaming Authority will be replaced with the Malta Gaming Authority which will set up an academy to ensure that industry demands, particularly with regards to the availability of skilled employees, are being met; The Authority will continue to promote Malta as a primary jurisdiction where the gaming industry is concerned; By % of the Maltese islands are to be covered with free wi-fi spots; A one-time non-taxable additional bonus of 35 will be granted to employees who will not benefit from the income tax reductions.

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