2018 Budget Highlights

Malta has experienced continued economic growth, going from strength to strength; with real GDP rising from 5.5% in 2016 to 6.3% in June 2017. Additionally, employment figures remain positive, with a 3.1% increase in female participation in the workforce, unemployment reduced to a record low of just 4.1%, and the employment market registering a total increase of 9,500 jobs across the board, 8,500 of which are in the private sector. Moreover, public debt decreased to 57.6% of GDP for 2016, and is projected to decrease even further to 50.8% of GDP in 2018. Inflation has been contained and remains stable at around 1.2%. 

In its 2018 Budget, presented on the 9th of October, the Maltese Government has renewed its focus on social justice, with particular emphasis on the housing market. Notably, the Government introduced no new taxes within its 2018 Budget, while retaining many positive measures and schemes employed in previous budgets, which have contributed towards Malta’s growth over recent years. The main aspects of the budget include:

A.    Social Measures:
•    Retention of the First-time Buyer scheme originally introduced in 2014;
•    Introduction of Second-time Buyer scheme which will consist in a duty rebate up to €3000 for home-owners who sell their primary residence in order to acquire another (extended to €5000 in the case of disabled persons or their parents);
•    Retention of reduced rate of duty on acquisitions of immovables in Urban Conservation Areas (applicable rate being 2.5%);
•    Retention of reduced rate of duty on acquisitions of immovables in Gozo (applicable rate being 2%);
•    Expansion of the rent subsidy programme;
•    Financial assistance of up to €25,000, for private property owners of abandoned properties who choose to rehabilitate their property for social housing purposes;
•    Launch of a white paper on the rental market to explore amendments and simplification to the legal framework to protect both landlord and lessee;
•    The introduction of a framework for equity release schemes;
•    Extension of social loan programme for those looking to buy property but facing financial difficulties.

B.    Fiscal Measures
•    Services registration threshold for small undertakings increased from €14,000 to €20,000;
•    Introduction of VAT grouping - entities having an independent legal personality and a Maltese fixed establishment with a common financial, economic and organisation relationship and which are regulated to operate in the financial and gaming sectors will have the opportunity to register as a single taxable person for the purposes of VAT, in order to ensure intragroup supplies fall outside the scope of VAT;
•    Tax deductions for persons earning up to €60,000 per annum. The deductions range between €40 and €68, depending on the individual’s income, whether they are married and whether they have any children, and will be paid out in the form of a cheque refund;
•    Tax credit up to €60,000 for persons who elect to follow a Masters or PhD Degree;
•    Increase in pension tax-free bracket up to pension incomes which do not exceed €13,200;
•    Increase in penalties for Tax offences;
•    Facility to submit social security forms and VAT returns electronically will be extended to cater for enterprises employing 10 or more persons;
•    Persons investing in electric, hybrid or other forms of green vehicles will be exempt from paying the vehicle license tax on such vehicles for the first five years, while commercial companies will likewise benefit from the said scheme up to a maximum amount of €200,000.

C.    Other Measures:
•    Retention of the Malta Individual Investor Program;
•    Extension of the Government Microinvest and Business START schemes. Increase in assistance from €30,000 to: 
- €50,000 for enterprises based in Malta;
- €70,000 for enterprises based in Gozo; and
- €70,000 for enterprises owned, in majority, by women;
•    Government to set up a task force to evaluate proposals relating to the implementation of a national Blockchain strategy, to complement investments in a Blockchain lab and training programmes for civil servants. Government will also set up a Blockchain Hub in order to assist and support start-ups utilising such technologies;
•    Introduction of a system which will allow companies which owe money to and are owed money by Government to offset these amounts directly;
•    Private entities in Gozo will benefit from a 30% refund of the average wage of an employee up to €6,000 for each employee employed on a minimum contract of 3 years.