Malta: Malta Budget 2016: New and revised tax measures
Mark Galea Salomone
Malta's Budget for 2016, presented to Parliament on 12 October 2015, includes a number of measures which will have an impact on the tax landscape. The Bill incorporating a number of the measures announced in the Budget was put forward to Parliament on October 13 2015 but it is still subject to parliamentary approval. An outline of the salient features of some of the measures contemplated in the Budget, as well as measures that have already made their way into the Bill, are discussed below.
The Budget announced that the income tax brackets for individuals are to be widened, resulting in tax savings for individuals whose annual taxable income is within a specific range. Furthermore, the reduced rate of tax on the income of footballers and waterpolo players at a flat rate 7.5% is also to be extended to players and coaches of all types of sport. These have both been reflected in the Bill.
With respect to companies, the Bill has included an amendment to the definition of 'company' found in the Income Tax Act, clarifying that cells of a securitisation cell company are to each be deemed to constitute a separate company for tax purposes.
The Budget also considers the possibility of introducing the concept of fiscal consolidation into Malta's income tax legislation. This will allow companies forming part of a group to be treated as a single taxpayer and therefore compute their taxable income on a consolidated basis. This proposal is expected to develop in the coming months.
It has been announced that the 'Micro Invest' scheme to promote investment in businesses has been extended, with a maximum €50,000 ($56,000) tax credit to be made available for female entrepreneurs. Moreover, a maximum tax credit of €10,000 will likely be introduced in respect of research and development for companies employing individuals who have, or are reading for, a doctorate in science, IT or engineering.
Property specific measures
From January 1 2015, the final withholding tax on transfers of immovable property acquired after January 1 2004 was reduced from 12% to 8% of the transfer value, while the rate in respect of transfers of immovable property acquired before January 1 2004 was of 10%. The Budget has announced a further reduction in the property transfers tax rate, from 8% to 5% on transfers of regenerated properties in urban conservation areas. Duty on transfers of regenerated property in urban conservation areas is also expected to be reduced, with the rate likely to halve from 5% to 2.5%.
The Bill includes the proposed widening of the 15% final tax regime relating to rental income. This regime has been extended to cover income from the rental of commercial property. The opt-in may also be availed of by companies, however, intra-group rentals are to be excluded from this measure.
The Bill has put forward the proposed reduction in VAT on sports activities from 18% to 7%. The Budget also announced that the VAT refund on registration of cars registered between 2005 and 2008 will continue to be refunded. With respect to eco-contribution tax and excise duties, the Budget announced the continuation of the phasing-out process of the eco-contribution tax. Certain products, which are seen as harmful to the environment, will no longer be subject to eco-contribution and will instead be subjected to excise duty.
Of corporate interest
Other non-tax specific measures mentioned in the Budget that are of relevance from a wider corporate perspective include a reduction in the initial registration fee for companies registered in electronic format. The Budget also announced that reforms are expected to Maltese insolvency legislation. Moreover, the Budget re-affirmed the Malta Stock Exchange's commitment to continue working on developing a capital market in Malta. These measures are expected to make their way into local legislation during 2016.
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