Budget 2012

Main Highlights & Proposals

As per our continuous assistance to our existing clients and potential new ones we are summarizing the main highlights and proposals passed this month during the Budget speech for the coming calendar year 2012.

Key or High Quality Labour – Income Tax Incentives

In 2011, incentives were announced in the financial services and i-gaming industries wherein certain individuals could avail from a low income tax rate of 15% subject to certain conditions being met. Such incentive will now be extended to professionals such as game directors and game designers.
Furthermore, incentives will now be also introduced to Maltese professionals returning to Malta, Foreign highly qualified individuals needed in the local industry and other individuals coming to Malta for research and commercializing of invention or technology in Malta. More details will be announced at a later stage.

Income Tax Exemptions & Credits

Income derived from intellectual property and copyrights will be exempt from income tax in Malta. This is an extension of the already exemption to income from patents on inventions. Further guidelines are expected to be issued soon. This could enhance Malta’s position for competitive tax structures.
An income tax credit will be made available to companies engaged in the development of educational digital games. This is subject to a maximum of €15,000 and will be based on the expenditure incurred on such development costs.

VAT

No VAT rate changes were announced. Hence, maximum VAT rate at 18% still stands, making it the second lowest in Europe.

Penalties & Interest Amnesty announced
Penalties & Interest refund scheme has been notified for taxable persons whose returns prior to November 2012 have not been filed, or amounts have not yet been settled. A number of criteria are to be met. Further details have been included in legal notice 456.

Excise Duties

An increase in some excise duty rates has been announced.
Excise duty on cement to increase by €3 per tonne;
Excise duty on duel sold outside Maltese Territorial Waters to increase by €5 per tonne;
Excise duty on cigarettes to increase by 5.8% whereas on tobacco by 8.5%.

Property Taxes & Incentives

The main aim of such incentives is for the restoration and conservation of certain types of property, mainly being grade 1 or grade 2 scheduled properties and properties in urban conservation areas.

Incentives on rental income or tax on disposal for persons investing the restoration of such buildings:
10% Final Witholding Tax on the rental income for residential purposes;
15% Final Witholding Tax on the rental income for residential purposes;
10% Final Witholding Tax on the sale of such property (previously 12%) or 30% on the capital gain (previously 35%).

Stamp Duty Exemption
Stamp Duty will be exempted in respect of transfers of such properties between heirs up till 31st December 2013.

Tax Credit on restorations
A Tax Credit of 20% on qualifying expenditure for the restoration of properties of a commercial nature;
A Tax Credit of 30% if such property falls to be a grade 1 or grade 2 scheduled property.

Refunds
A refund of 20%, capped at €5,000, of the expenses incurred for the restoration of privately owned property.

Other Incentives

Micro Guarantee Scheme
Micro businesses (employing 20 persons or less) will be provided by bank guarantees of up to 90% (between €2,500 and €100,000) on loans taken on investment or working capital, by the government. Certain conditions apply for qualifying companies.
An investment of €30 million in the pharmaceutical and life sciences sector through BioMalta Campus.

Cultural Education
Companies involved in cultural education will benefit from new companies’ registration fees as well as the annual registration fee for a three year period.

Soffit & Aperture Insulation
A refund of 15.25% of the eligible expenses, capped at €1,000. A budget of €400,000 shall be allocated for this scheme.

Personal Income Tax & Other deductions

The Government introduced a new scheme for parents with children aged under 18 (or 21 if they are in tertiary education). This could potentially benefit parents by up to €840 per annum tax savings, given that both parents work and earn at least €21,200 each.
Tax allowances for parents who send their children to private fee schools will increase by €100 (day care, reception & kindergarten), €400 (primary school) and €700 (secondary school) to €1,300, €1,600 and €2,300 respectively per child.
Parents whose children attend educational courses at cultural and creative teaching institutions will get a further deduction of €100 on their income tax dues.

15% Tax Rate on Part Time Work
The 15% tax rate will now be available to pensioners opting for the 15% tax rate in respect or part time employment or self-employment with the government;
The 15% tax rate will now be also available for individuals who work with different government entities, having a full time job with one of the entities and a part time job with another, subject to certain conditions being met;
The deadline for the payment of the 15% tax will be extended from 15th February to 15th June.

Maternity Leave

Maternity Leave entitlement will be extended by two weeks in 2012 and a further two weeks in 2013, bringing a total of 18 weeks in 2013. Additional cost of €160 is expected to be borne by the government. Further talks to be held on the subject matter.

Social Security Contributions
No changes were announced in the current budget. Children allowance will be increased by €100 to €350 per annum per child.

Disclaimer
The main budget highlights are to solely serve as an indicative measure and not as final tax advice.  Should you require any professional advice or further clarifications from our office kindly contact: www.ecovis.com/malta