Malta Budget Highlights 2014

The following are the highlights of the 2014 Budget presented on the 4th November 2013 by the Minister of Finance.

Cost of living

The cost of living announced for next year will be of €3.49 per week. The minimum wage will in 2014 increase from €162.19 to €165.68. Stipends will be increased by 1.9% in line with the cost of living.

Taxation

Taxpayers earning up to €60,000 per annum will have their top rate of tax reduced to 29%, down from 32%. Dividends will continue to be taxed at the progressive rates of tax which were applicable prior to the introduction of the 32% tax rate.

The tax deduction to parents sending children to private childcare centers will be raised to €2,000 from the current €1,300.

The tax free bracket for parents will go up to €9,800 in 2014 from the current €9,300. Eligibility for the parents’ rates of tax will apply to parents with children at tertiary education who are up to 23 years old instead of the current 21. Qualifying tertiary educational institutions are to be extended to other institutions including MCAST and ITS.

Part-time employees will pay 15% tax on the first €10,000 of their income, up from the current €7,000. The reduced rate of tax of 15% for part time self employed persons, will apply to the first €12,000 in lieu of the current €7,000. Such individuals will be able to employ up to two part time employees without losing the right to benefit from the 15% tax rate.

Married women aged over 40 who return to work after at least five years of absence from work will not be required to declare their income in their joint tax computation together with their husband, provided their income does not exceed the minimum wage. This benefit would apply for a maximum period of five years.

The Budget includes a new system of incentives for both the unemployed and their employers to encourage the unemployed to take up internships and apprenticeships. A tax deduction of €600 for each work placement and €1,200 for each apprenticeship will be given to employers.

Footballers’ income derived from sports activities to be taxed at the preferential rate of 7.5%

Minimum wage earners and pensioners whose income does not exceed minimum wage will not pay income tax.

Married women aged over 40, who would have been unemployed for five years will get tax benefits when they go out to work.

People aged 45 to 65 who would have been unemployed for two years and who start to work will continue to receive their unemployment benefit at the rate of 65% for the first year, 45% for the second year and 25% for the third year. Employers would receive 25% of the unemployment benefit per annum for a three year period. Furthermore, the Government plans to introduce incentives through a reduction in income tax in the first two years of such persons’ employment. Employers will be assisted by means of a reduction in tax equivalent to 50% of the training costs, capped at €400.

People deriving rental income from immovable property rented out for residential purposes, will have the option to be taxed at a final withholding tax of 15% on the gross rental income, rather than be subject to progressive rates of tax, which can go as high as 35%.

An Investment Registration Scheme will be introduced which will give the opportunity to taxpayers to regularize their position with the Maltese Tax Authorities.

A person committing a second offence against the Income Tax laws within five years of being warned by the Court for committing the first offence, will no longer be sentenced to three days’ imprisonment but will be fined up to a maximum of €2,000.

The Micro Invest Scheme will be reintroduced, which will grant small enterprises and self employed individuals a 45% tax credit on eligible capital expenditure. The tax credit will increase to 65% if the activity is carried out in Gozo.

Value Added Tax

VAT rules will be simplified. Under the current provisions, when a payment of VAT is not effected in time, such payment will first be allocated against the interest due and then against the actual VAT. The law will be changed so that when a vat return is filed on time, the payment of vat will be allocated against the vat due for that vat return.

Another provision in the VAT law which is being removed is that which deems a vat return as not filed if it is not accompanied by the payment of vat due.

Duty on documents and transfers

First-time property buyers of immovable property to be used as a sole ordinary residence will pay no stamp duty on the value of their property on the first €150,000. Stamp duty is currently paid at 3.5%. The measure will however only be valid for one year. Value estimates of immovable properties will no longer be carried out by Government architects.

Stamp duty on the transfer of immovable property from parents to children with disabilities will be removed.

Interest payable by heirs on late payment of stamp duty arising upon ‘causa mortis’ declarations has now been capped so that the interest will not exceed the stamp duty payable.

Stamp duty which is currently payable amounting to 2.6% of the value of movable assets sold by auction has now been removed.

Other measures

Power tariffs to be reduced by 25%, water tariffs to be reduced by 5%.

The cost of a packet of cigarettes will increase by €0.30c. Prices for beer, alcohol, bunkering and cement will also increase.

A seven-year programme will be introduced for the refund of vat on registration tax paid on the registration of cars acquired for personal use between May 2004 and December 2008.

Incentives costing €1.5 million will be paid next year to encourage people to opt for private pensions.

Benefits will be given to single parents who follow courses.

Childcare centers will be made available for free as from next year in a scheme which will also involve the private sector.

Single parents who opt to follow intensive vocational courses will be paid a credit of up to €1,000.