The Minister of Finance presented a budget surplus for the third consecutive year. In 2019, the surplus is expected to grow to around €33 million,an increase of 1.1% of the GDP compared to last year (2018 – €16.6 million). The labour market conditions are predicted to be favourable once again with the unemployment rate for 2019 set to be at 4.1%, remaining below the EU average rate. The estimated tax revenue is expected to increase by €0.4 billion, to €4.6 billion by 2019. As at end of 2018, the public debt is expected to amount around 46.8% of the GDP and is expected to reduce to 43.8% of the GDP by 2019. Inflation is set to rise from 1.7% in 2018 to 1.9% in 2019. The cost of living adjustment (COLA) is set to be €2.33 a week a week for the coming year.
Below is a summary of the salient points announced in the Budget speech 2018:
- Workers will get an additional day off next year, bringing the total number of leave days to 26 days a year.
- Tax refunds between €40 and €68 will be available to employees earning less than €60,000, with the lowest income earners getting the highest amounts.
|Income (€)||Benefit (€)||Income (€)||Benefit (€)||Income (€)||Benefit (€)|
|0 – 15,000||60||0 – 20,000||68||0 – 15,000||64|
|15,001 – 30,000||50||20,001 – 40,000||56||15,001 – 30,000||52|
|30,001 – 59,999||40||40,001 – 59,999||44||30,001 – 59,999||40|
- Children of workers on minimum wage will benefit from an increase in children’s allowance. A maximum of €96 per year for every child will be available to such workers as from next year.
- A reduction of tax will be applicable next year for certain individuals registered as single tax payers deriving income from part-time work.
- Voluntary organisations whose income does not exceed €10,000 will be exempt from income tax.
- Reduced stamp duty rate of 1.5% on family business transfers will be extended for another year.
- Pensions will increase by €2.17 per week (excluding COLA). The amount equivalent to maximum pensions will remain tax free.
- Pensioners will get an average increase of €11 per week because of a change in assessment on social security pensions for service pensioners.
- Tax exemption for voluntary third pillar pensions increased to €2,000.
Persons with disability
- Children with disability will benefit from an allowance increase of €25 per week.
- A reduced 5% VAT rate will be applicable to electronic publications (including electronic newspapers and magazines).
- VAT refunds up to €400 will be available on bicycles, electric bicycles, motorcycles and cycle racks.
- The existing VAT refund on wedding expenses is being increased to €2,000.
- A grant, equivalent to the VAT element, will be available on the purchase of musical instruments from abroad.
- Rent subsidies will be increased from €1,600 to €3,600 annually for single persons, and from €2,000 to €5,000 annually for families with 2 or more children.
- The reduced stamp duty rate for first time and second time buyers will be extended for another year. First time buyers will keep being exempted from stamp duty on first €150,000 up to €5,000. Second time buyers will keep benefitting from a reduction in stamp duty up to €3,000.
- Buyers of property in Gozo as well as buyers of vacant property in urban conversation areas will continue benefitting from a reduced stamp duty rate.
- Gozitan students studying and living in Malta will be eligible for housing subsidy.
- Employers creating new jobs in Gozo with a 3-year contract or more will continue to be eligible for 30% refund on wage, up to a maximum of €6,000.
- Public sector workers from Gozo using collective transport from Cirkewwa to their place of work will be entitled to €1.50 daily allowance.
- With effect from 1 January 2019, the ferry ticket fare refund of the ‘Gozitan Works Subsidy’ will be extended to Gozitan employees working in Malta employed with the private sector
- Free public transport to people between 14 and 20 years of age and to all full-time students who are over 20 years old.
- Tax refund for independent schools increased by €300 per year.
- €100 million will be allocated to the upgrade of road infrastructure.
- Electric vehicles will continue to be exempted from registration tax.
- The Anti-Tax Avoidance Directive 1 (ATAD 1) shall be implemented into Maltese law as from 1 January 2019. ATAD 1 will introduce the following measures:
- Interest limitation rules
- Exit tax rules
- General anti-avoidance rules
- Controlled Foreign Company (CFC) rules
- ATAD 2, which will include provisions on anti-hybrid mismatches, shall replace ATAD 1 and is expected to be implemented into Maltese tax law within the deadlines stipulated in the Directive, these being 1 January 2020 and 1 January 2022.
- MATSEC and SEC examinations will be free of charge.
- All museum entrances will be free of charge to all students up to secondary level.
- Refund of up to €70 will be available to households on the purchase and installation of reverse osmosis and equipment to reduce the use of plastic bottles.
- Persons over 40 years of age will be eligible for equity sharing programme where they will be able to take a mortgage for half the value of property, with the Government paying interest.
Author: William Cassar, Senior Tax Accountant, Tax Compliance Department