Malta Budget 2020 – Main highlights

Written by Stephanie Aquilina Galea and William Cassar

Date: 15.10.2019

The Budget Speech for 2020 was held on the 14 October 2019 in Parliament whereby the Minister for Finance, Prof. Edward Scicluna delivered his annual speech.

The main highlights of the budget speech are listed below.  One will notice that the 2020 Budget did not incorporate any major fiscal measures, unlike in prior years.

Measures relating to Income Tax

  • As from 2020, a special reduced rate of 15% shall apply for the first 100 hours of overtime work. This measure is applicable to workers who are not in a managerial position and with a basic salary of not more than €20,000 in a calendar year.
  • Tax refunds shall be granted once again to employees earning less than €60,000. These refunds range between €40 and €68.
  • The introduction of more efficient tax compliance procedures. These will include increased online facilities and the set-off of provisional tax for pensioners.
  • With effect from 1 January 2020, a final tax of 15% will apply on the €100,000 of gains or profits derived from the transfer of a promise of sale. Any gains or profits over and the above the €100,000 will remain taxed at 35% in terms of the Property Transfers Tax.
  • The extension of fiscal incentives relating to contributions made to Third Pillar Pension Scheme and / or voluntary Occupation Pension Scheme by individuals.

Measures relating to Duty on Documents and Transfers Act

  • The extension of the reduced rate of duty of 1.5% applicable on the transfer of a family business or immovable property used in a family business donated to close family members.
  • The extension of the reduced rate of duty of 2.5% in relation to the acquisition of vacant immovable property situated within an Urban Conservation Area.
  • The extension of the reduced rate of duty of 2% in relation to the purchase of residential immovable property situated in Gozo.
  • The extension of the scheme whereby a refund of a portion of the duty paid by second time buyers upon the acquisition of their second immovable property situated in Malta.
  • The extension of the first-time buyers scheme, whereby first time buyers of immovable property are able to benefit from an exemption on duty on the first part of the consideration of the immovable property being purchased. The exempt portion has been increased to €175,000 from €150,000.  In addition, individuals acquiring property to establish their own residence and such property is acquired either by inheritance or when such individuals are not first-time buyers will now be able to benefit from the reduced rate on the first €175,000 (up from €150,000).

Measures relating to VAT and other indirect taxes

  • The VAT exemption on education shall as from 2020 be extended to cover a wider range of services including vocational training and other educational services.
  • A grant of 25% on the purchase of renewable energy battery storage shall be introduced in order to promote the use of renewable energy resources.
  • The extension on the scheme relating to the acquisition of bicycles, electric bikes and motorcycles.
  • Grant on the purchase of specialised apparatus bought for person with disabilities.
  • Investment to improve the Malta Customs, with a view to increase efficiency and improve processes.

Measures relating to Pensions and Social Security

  • No tax shall be due for pension income amounting to less than €13,798. Furthermore, any other income received by couples on a single pension up to €2,000 shall be exempt.  This means that the tax-free portion for such couples will be of €15,798.
  • Pensioners shall benefit from a weekly increase of €3.51 as from 2020. This increase is in addition to the COLA, resulting in an increase of €7 per week (or €364 per year).
  • A one-time bonus of €300 for each child born or adopted in 2020 shall be given to eligible families.

Other measures

  • The Cost of Living Adjustment (COLA) has been increased to €3.49 per week.
  • An additional day of leave to cater for public holidays falling on weekends.
  • A special grant to youths of €850 to study a foreign language overseas.
  • Assistance in real estate down payments whereby loans of up to €17,500 may be granted to qualifying buyers with initial down payments. The interest on such loans will be borne by the Government on the condition that the loan is repaid within 15 years.
  • Property rental subsidies introduced during 2019 shall be extended in 2020.
  • A €60 million investment is planned for the development of an additional 1,700 new units of social housing.
  • Maintenance of housing estates.
  • A dedicated authority to oversea the regulation of the construction sector.
  • The scheme of the restoration of one’s home shall be extended to 2020.
  • A plan to phase out the importation and eventually the use of vehicles propelled by pollutive engines.
  • Incentives for the use of electric cars.
  • As from 1 January 2021, the importation and manufacture of single use plastic shall be banned. The sale of such products shall be prohibited as from 1 January 2022.
  • Increase in the weekly allowance paid to widowers.
  • It is expected that an educational campaign on Artificial Intelligence (AI) shall be introduced, along with study grants to students seeking to specialise in AI, among other incentives.
  • Measures shall be introduced to assist operators within the video game development and Esports industry.
  • During 2020, Malta Enterprise shall introduce scheme targeting employers who hire persons with disabilities through the provision of grants.
  • Micro-invest, Business Start and Start-Up Finance schemes will continue to be available in 2020.
  • The existing vehicle scrappage scheme will be available for another year and capped at €1,500.
  • The Government has announced the setting up of a Financial Organised Crimes Agency to combat money laundering and tax evasion.
  • A cash limited of €10,000 shall be imposed on the acquisition of real estate, vehicles, boats, precious stones and works of art.