Malta’s 2018 Budget

This week saw Finance Minister Edward Scicluna reveal Malta’s 2018 budget.

Here are just a few highlights of what this budget means for you, your business, and your staff.

Cost of Living Adjustment (COLA)

A €1.75 weekly wage increase will be given as a cost of living adjustment. This is also attributable to pensioners in full and pro-rata to students.

Income Tax

Income Tax Benefits

Individuals whose income is less than €60,000 per annum, will receive a one-time tax refund ranging between €40 and €68, depending on the level of income as shown below:

Single Computation
Income (€)	Refund Amount (€)
0 – 15,000	60
15,001 – 30,000	50
30,001 – 59,999	40

 

Married Computation
Income (€)	Refund Amount (€)
0 – 20,000	68
20,001 – 40,000	56
40,001 – 59,999	44

 

Parent Computation
Income (€)	Refund Amount (€)
0 – 15,000	64
15,001 – 30,000	52
30,001 – 59,999	40

 

MicroInvest Tax Credits

MicroInvest is being extended to undertakings which employ less than 50 full-time employees (currently 30). In addition, the tax credit capping is expected to rise from €30,000 to €50,000 for undertakings based in Malta and from €50,000 to €70,000 for undertakings based in Gozo and for undertakings with women holding the majority of shares or self-employed women.

Tax Evasion

Fines payable by companies or individuals which have been found guilty of tax evasion shall be increased. Moreover, more resources shall be allocated to Joint Employment Task Force to combat tax evasion.

Employment Measures

Increase in Minimum Wage

Minimum wage earners will receive an increase of €3 per week from the second year of employment and an additional €3 per week from the third year of employment. Such employees will also be entitled to the increase in COLA.

Additional one day leave

An extra day of vacation leave shall be granted to all employees.

Value Added Tax (VAT)

VAT Exemption

The VAT exemption threshold below which a taxable person registered under Article 11 does not need to charge VAT has increased from the current €14,000 to €20,000.

VAT Grouping

The Government is proposing the introduction of VAT Grouping for sectors such as financial services and gaming. Through VAT grouping, entities which are legally independent, have a permanent establishment in Malta and engage in related economic and administrative activities, can register as a single entity. This would mean that supplies between group members will fall out of the scope of VAT.

Reduced VAT Rate on certain means of Transport

The VAT rate for hiring bicycles will be reduced to 7% and the VAT refund scheme on motorcycles, scooters and pedelec bicycles will be extended.

VAT Refund on Car Registration Tax

During 2018, VAT will be refunded to those who registered their vehicle in 2007.

Offset of Payments

A new system will be introduced which will allow the offset of payments due to/from Government. This will be applicable for companies that offer services to Government.

Property Measures

First-Time Buyers Scheme

The tax scheme for first-time buyers resulting in no duty due on the first €150,000 will be extended for another year.

Second-Time Buyers Scheme

Individuals who sell their first residential home, being their sole owned immovable property, and acquire another shall benefit from a refund of a maximum of €3,000 of the duty on documents paid on the acquisition of their second home. This refund shall increase up to a maximum of €5,000 in the case of disabled persons and their parents.

White Paper on Property Rental

A white paper to reform the rental market shall be published in the coming months. This white paper will necessitate the public registration of all rental contracts and that rent increases are regulated through conditions in the contracts made. This will be done to protect the rights of both the lessor and the landlord.

Social Measures

• The maximum ‘in-work benefit’ applicable to parents where only one parent is employed, will increase from €350 to €450 per child per year depending on the annual income of the family.
• The €300 annual grant for persons over the age of 75 who still live in their personal home, will continue to apply next year.
• In order to incentivise the use of environmentally friendly vehicles, an exemption from registration tax for electric/hybrid vehicles will be introduced. No road licence shall be paid on such vehicles during the first five years from registration.

Pensions

• All pensions, both contributory and non-contributory are set to increase by €2 per week.
• As of 2018, individuals aged 61 or over who are in receipt of a pension and who are still in employment, and thus paying contributions, shall be entitled to have their pension recalculated at the age of 65 to include the contributions paid between the age of 61 to 65. Such an entitlement shall be available to pensioners who have not paid their complete social security contributions during their employment.
• Self-employed and part-time pensioners who have not reached the age of 65 shall be entitled to pay their social security contributions at the rate of 15% on the net income on a pro-rate basis.