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Malta: Release of the 2017 budget

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The main theme of the Malta's 2017 budget, from a commercial perspective, is to incentivise the markets, boost business creation and attract foreign direct investment. At the core of the budget document are a number of tax measures and incentives.

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Mark Galea Salomone

Kirsten Cassar

Malta's Minister of Finance Edward Scicluna presented the 2017 budget to parliament on October 17 2016.

As of next year, shareholders holding no more than 0.5% of the nominal share capital of companies listed on the Malta Stock Exchange may claim a refund for tax paid at source upon receipt of dividends from such qualifying holdings. This will be applicable to distributions made from profits derived after January 1 2017. In addition, fiscal incentives for the sale of shares on the Malta Stock Exchange will be extended.

To date, domestic tax legislation has exempted from income tax gains or profits arising from the transfer of shares listed on the Malta Stock Exchange, provided that they are not securities in a collective investment scheme. The exemption will also apply where the transfer is made by an individual who held the shares immediately prior to listing. This is a departure from the previous 15% tax on such gains or profits. This incentive will also be applicable to listings on alternative trading platforms.

Separately, the budget has proposed the introduction of the concept of fiscal consolidation into Maltese income tax legislation. This will allow companies forming part of a group to be treated as a single taxpayer, thus, computing their taxable income on a consolidated basis. Moreover, amendments to existing legislation are expected in order to strengthen insurance, collective investment schemes and securitisation products, as well as to grant the same tax benefits, currently provided to debt, to equity investments.

A host of tax credits have also been proposed in order to incentivise the markets, including:

  • Establishing the risk investment scheme, targeting investment in small and medium-sized enterprises (SMEs) and prospects (a scheme designed for SMEs to raise capital through the market) with the possibility of benefitting from a tax credit of up to €250,000 ($274,000);

  • Establishing a research scheme whereby researchers can claim a tax credit of between 25% and 45% on their research costs; and

  • Introducing a gaming scheme where developers of games may benefit from a tax credit of up to 30% on development costs.

Other notable tax measures include:

  • Tax credits for employers that invest in private pension plans for their employees;

  • Removing income tax on pensions for pensioners over 61 years of age, whether the pension is local or foreign, the exempt ceiling is being set at a maximum of €13,000;

  • Introducing a 12-month concession whereby stamp duty will be reduced from 5% to 1.5% when there is a transfer of business from a parent to his descendants;

  • Reducing the duty on the acquisition of residential immovable property in Gozo from 5% to 2%; and

  • Establishing the joint enforcement taskforce in the fight against unfair competition, income tax and VAT evasion.

Mark Galea Salomone (mark.galeasalomone@camilleripreziosi.com) and Kirsten Cassar (kirsten.cassar@camilleripreziosi.com)

Camilleri Preziosi

Tel: +356 2123 8989

Website: www.camilleripreziosi.com

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