An insightful and comprehensive summary of Malta's Budget for 2021. Tax News would like to thank Zampa Debattista for sharing its expertise with our readers.

INCOME TAX AND V.A.T.

Tax refund to Employees

The tax refund will be granted again to employees and will vary between EUR 45 and EUR 95 depending on the level of income and tax status of the employee.

Tax on assignment or cessation of rights over property

As from 1 January 2021 any profits or gains arising on the assignment or cessation of any rights acquired under a promise of transfer of immovable property or any rights thereon will be subject to a tax at the rate of 15%.

Voluntary organizations

The government is aware of the contribution that voluntary organisations give to society. In this regard they are exempt from tax on any profit they make during the year, provided the annual income does not exceed 50k.

Book Royalties

In order to continue to grow the cultural heritage of our country, from next year, any profits that an author or coauthor brings in as royalties on sales of books are taxed at the final withholding tax rate of 15 per cent.

Property Transfer Tax

The reduced rate of 5% (reduced from 8%) on the purchase of property on the first EUR 400,000 introduced post COVID-19 will be applicable on all contracts signed by 31 December 2021.

VAT Measures

An increase from EUR 20,000 to EUR 30,000 will be reflected in the VAT Exemption threshold for both businesses and selfemployed individuals.

STAMP DUTY MEASURES

First-time Buyers Scheme

First-time buyers of immovable property will now be exempt from stamp duty on the first EUR 200,000 of the value of the property (previously EUR 175,000).

Second-Time Buyers

Extension of reduction or refund of stamp duty on the purchase of a new residential home for 'Second-Time Buyers', in Gozo (reduction from 5% to 2%) and in Urban Conservation Areas (reduction from 5% to 2.5%).

Reduced Rate on Inheritance of Property

The reduced rate of 3.5% on inherited immovable property being the residential property of the heirs shall now be applicable on the first EUR 200,000 of the value of the immovable property.

Extension of Reduced Rate of Purchase of Property

The rate of 1.5% (reduced from 5%) on the purchase of property on the first EUR 400,000 introduced post COVID-19 will be applicable on all contracts signed by 31 December 2021.

Donations of properties

The first EUR 250,000 (increased from EUR 200,000 of the value of property donated by parents to their children, where the property is used as their sole ordinary residence, is exempt from stamp duty. The difference is taxed at 3.5%.

Extension of Reduced Duty Rate

An extension of the reduced duty rate on intra-family transfers of business property and securities.

SOCIAL MEASURES

Cost of living increase

The cost of living increase for 2021 amounts to EUR 1.75 per week. This increase will be granted to all employees, to pensioners and to those receiving social benefits. Student stipends will also be adjusted pro-rata.

Pensions/ Pensioners

All social security pensions to be increased by EUR 3.25 per week. Thus, together with the cost of living adjustment of EUR 1.75, the weekly increase for pensioners should be of EUR 5.

The maximum amount of exempt pension income will be increased to EUR 14,058 with persons claiming married rates being entitled to a further EUR 3,600 tax free in respect of income from other sources.

Any service pension which is not to be reduced from the retirement pension is being increased by a further EUR 200 to a total amount of EUR 2,866.

Re-issue of Government Savings Bonds for pensioners who are over 62 years of age.

The maximum amount of tax credits on private pension plans and voluntary occupational pension schemes are being increased. Fiscal measures providing for a further maximum tax saving of EUR 1,500 for single individuals and EUR 2,250 for married couples who contribute towards Voluntary Occupational Pension Schemes and Personal Retirement Scheme.

Adoption Grant

The grant for local adoption shall benefit from an increase of up to a maximum of EUR 1,000.

Carer at home

The supplement granted to the elderly who choose to stay at home and employ a full time carer will be increased by EUR 700 to EUR 6,000 per annum.

Health Measures

New medicines for chronic or mental illness will be added to state-provided medicines.

New center for palliative cancer care.

Introduction of education campaigns to eliminate hepatitis C.

Increase in Children's allowance

Families earning less than EUR 25,318 per year, children's allowance will be increased to EUR 70 per child per annum. For families earning more, the supplement will amount to EUR 50 per child per annum.

Free Tal-Linja Card

Free public transport to the elderly shall be extended to persons aged 70 years or older.

Foster Care Allowance

Increase in foster care allowance by EUR 520 to a maximum benefit of EUR 5,720.

Education

Government will provide free internet access for a full year to those students continuing their post secondary studies.

Additional day of leave

An additional day of vacation leave shall be added to the current leave entitlement of employees.

COVID-19 MEASURES

Wage Supplement Extension

Following conversations with different stakeholders, the Covid-19 wage supplement has been extended up until March 2021.

Government Vouchers

All Maltese residents over the age of 16 will be entitled to EUR 100 worth of vouchers, EUR 60 of which can be spent at restaurants or accommodation and EUR 40 can be spent at retail outlets.

Tax Deferrals and Loan Moratoriums

Benefits granted such as the tax deferrals and loan moratoriums will still be applicable in accordance with was already announced beforehand. An evaluation will then be taken into consideration with the relevant stakeholders at the end of March 2021.

Air Malta EU State Aid Application

An announcement was made that the government will submit a further EU state application in order to maintain Malta's National Airline.

ENVIRONMENTAL MEASURES

Green Bonds

The Malta Stock Exchange will offer what will be known as 'Green Bonds', such bonds will be provided in order to finance projects which promote the use of renewable energy and low emissions.

Single-Use Plastic to be banned

As from January 2021, the importation of single-use plastic will be banned. This will be followed by a ban on the sale of such products as from January 2022.

Government Schemes have been extended

Government schemes currently available with respect to investments in renewable energy sources such as: solar panels, heat pump water heaters, solar water heaters and electrical batteries will all remain in effect. Furthermore, schemes such as restoration to residential wells, appliance changes to families in need and grants provided for the purchase of reverse osmosis have all been extended.

Eco-Intermodal Hubs to be installed

'Eco-Intermodal Hubs' will be installed in 5 different strategic places in Malta where access to information about different transport available together with the renting of e-scooters and e-bikes and mobile charging bays will be available.

Vehicle Scrappage Scheme

The Scrappage scheme currently available will remain in effect such that the amount given to any person will be dependent on the level and category of the scrapped car. The maximum benefit received from such scrappage will amount to EUR 7,000.

Extension of Exemption for Electric Vehicles

Measures with respect to the exemption of registration tax together with the annual licence fee for the period of 5 years from date of registration with respect to electrical vehicles has been extended.

Extension of Refund for Bicycles and E-Bicycles

The Scheme currently in place with respect to the full refund settlement with respect to bicycles and e-bicycles will be extended. Furthermore, the scheme which provides a maximum incentive of EUR 400 to the purchase of electric motorcycles, scooters, and bicycles will be extended.

Increase in Grant with respect to Vehicle Changes

The grant provided to an individual who changes his/her car from petrol to gas, will be increased to that of EUR 400. Such grant is dependent on the fact that the emissions must be reduced by 25%. Such scheme will also be extended to all vehicles in the transport sector, however in this case the maximum grant will be that of EUR 800.

Tourism Industry to switch to Net Zero Carbon Neutral

An implementation action plan will be introduced in order to switch the tourism sector from its current operations to that of a 'Net Zero Carbon Neutral'.

OTHER MEASURES

Weekend and Holiday Drivers

All vehicle owners, including motorcycles, registered with Transport Malta, will be able to apply for their vehicle to be licensed for use on weekends and public and National Holidays only. In this case, they are to benefit from a reduction of thirty-five percent of the licence fee.

Infrastructure

Continuation of construction projects on arterial roads, regeneration of ports and improvement of maritime facilities, will further strengthen the infrastructure in Malta.

Good Governance Practice

A new cabinet committee has been set up, tasked with ensuring that Malta complies with recommendations on good governance and rule of law set forward by the Venice Commission, GRECO and Moneyval. Following the report released by Moneyval in July 2019, Malta presented its report to Moneyval, showing how all 58 recommendations were addressed.

Citizenship

New identity documents will be equipped with the latest technological features to prevent further identity fraud.

Revision and introduction of new and more rigorous criterion to the Malta Residence by Investment Program.

Sports

In preparation for the Games of the Small States of Europe 2023 edition, new sport discipline facilities will be introduced. These include the building of a new indoor rowing tank, an outdoor velodrome and a new rugby complex.

Boosting Gozo Economy

The numerous schemes which have been implemented throughout these years for Gozo based companies, namely: the Employment Refund Scheme, MicroInvest Scheme, the Teleworking Scheme and schemes enacted through the MICE have all been extended in order to further create more job opportunities in Gozo.