Source: Mrs Donna Greaves Bonello ACCA MIA CPA B.Com & Registered Auditor¸ PKF Malta¸ November 2012
On the evening of the 28 November 2012¸ the Minister of Finance¸ The Economy and Investment presented the budget for 2013.
The following is a review and commentary on how the Budget 2013 will affect you and your business.
Reduction of income tax rate for resident individuals
For individuals residents in Malta, the maximum income tax rate for chargeable income not exceeding €60,000 will be reduced gradually from 35% to 25% in three years. The maximum income tax rate for chargeable income up to €60,000 shall be reduced to 32% from 35%, by 3% for basis year 2013, by further 3% for basis year 2014, from 32% to 29% and by an additional 4% for basis year 2015 from 29% to 25%.
Reduction of income tax rate for resident individuals
A resident individual, in three years can save up to a maximum Euro 4,050 under the new tax bands. A married couple under the joint computation can save up to a maximum Euro3,130, while under the parental computations, parents can save up to a maximum of Euro3,880.
The Maltese economy is expected to grow by 1.2% this year. The deficit for 2012 is expected to reduce to 2.7% of GDP. In 2013, the deficit is expected to reduce to 1.7%. GBP for 2012 is expected to be €6,779 million representing an increase of 4.9% over 2011. Unemployment rate is 6.5%
Cost of Living Adjustment
The cost of living adjustment (COLA) has been announced at €4.08c per week. The pensioners will receive the full cost of living adjustment increase.
The present allowance of €300 to octogenarians who live in their own homes will be extended to persons aged 75 years upwards.
Incentives to the Industry
€42 million is allocated in existing schemes to support international competitiveness, innovation, e-Business, R&D, environment and start-ups.
- Extension of the Micro invest Scheme
The Micro invest scheme has been extended for a further 2 years for eligible businesses both in Malta and Gozo employing up to 30 people. The benefit of the scheme is up to 40% and 60% tax credit respectively on investment.
- New Scheme – B.Start
B.Start Scheme provides for a tax deduction up to Euro30,000 to existing enterprises in relation to seed capital investment in a new enterprise approved by the Malta Enterprise Corporation.
- Film Producers
Increase in tax rebates for the eligible costs of the filming industry from 20% to 23%. This rebate increases with a further 2% if the filming location would be Malta.
Property Related Measures – Income Tax and Stamp Duty
- As from 2013, the period on which a person has option to choose between paying the 12% final withholding tax or paying tax on capital gains is to be extended from 7 to 12 years.
- Administrative reform related to property valuation:
- Couples or persons purchasing the first residential home taking out bank loans will be able to provide the bank architect property valuation
- In case of properties whose value exceeds €250,000, before signing of contracts the seller and buyer may request the department to send its architect to issue price valuation on which stamp duty is paid. This valuation remains valid for 6 months from date of issue.
During the budget it was mentioned that such valuation shall be made for the purpose of calculating duty, it is likely that such calculation will also be used to calculate tax on capital gains.
- As from 1st January 2013, the transmission causa mortis or donation of immovable property from parents to children should no longer be subject to stamp duty.
- The 3.5% stamp duty ceiling for first time buyers is increased from €116,468.67 to €150,000.
Incentives for restoration and development of Properties
- Both companies and individuals that purchase properties outside urban conservation areas for the purpose of restoration will benefit from a reduced rate of stamp duty, 2%. A 20% tax credit of up to €200,000 related to restoration and development is also applicable.
- The introduction of schemes for the restoration of residential properties which are classified as Grade 1 and 2 in UCAs. This will include provision of 25% on expenditure on such works up to a maximum of €5,000 in refunds. Properties in Valletta benefit up to 30%.
- NGOs will also benefit from a similar scheme on buildings transferred to them from Government. Buildings classified Grade 1 and 2 in UCAs are eligible. 25% rebates up to €2,500.
- Vat exemption on diesel purchased by fishermen for the purposes of fishing to be extended to 2013.
- A scheme of relief the cost of fuel purchased by farmers (scheme similar to that in placed for fishermen).
- Vat refund on the purchase of sports equipment for personal use.
Excise Duty is to be increased as follows:
- 6% on cigarettes;
- 8% on tobacco;
- Euro 5 per tonne on cement and
- 2c per litre on fuels.
Motor Vehicle Registration Tax
- Registration tax of Euro 5 standard motor vehicles is to be reduced by a maximum of 30%.
- Registration tax of Euro 4 standard motor vehicles is to be increased by an average of 10%.
- Tax rate on N1 commercial vehicles is reduced by 12.5% to incentive purchase of new cars.
- A scrappage scheme of Euro 500 entitled for new private or commercial (N1) cars on scrappage of older vehicle.
- The registration tax on motorcycles with 250cc engine was removed and 25% reduction on other engine capacities.
- Removal of registration tax on classic cars aged 50 years and over.
- Removal of annual circulation licence for classic cars. Replaced by administrative fee of €8.
- Rebate scheme of €200 for conversion of cars to autogas.
- Reduction of annual circulation licence for autogas powered cars registered after 2009.
- Tax credits on 15% of capital expenditure.
- Tax deductions on investments in boutique hotels in Valetta.
- Reduced Gozo Channel tariff for those spending a night in Gozitan licensed accommodation in the winter period, between November and February.
Women and the job market
- Extension of up to €1,300 tax deduction for parents sending their children to child care centres.
- Women returning to work after 5 years or after having children will maintain one year tax free status.
- Maternity Leave up to increases 18 weeks.
- Children’s allowance increases by €100 (from €350 to €450). The rate of children’s allowance will also be increased for those families dependent on a minimum wage. The highest rate of children’s allowance granted is €1,155.90 per annum per child.
Digital Gaming Hub
A new physical and strategic hub to provide facilities enhancing the development of digital games.
Domestic Mergers and Group Restructuring
The introduction of an opportunity for a tax exemption with respect to both domestic divisions and mergers conditional to a number of conditions. These conditions are intended to ensure that the mergers and divisions are undertaken for genuine economic reasons.
Income Tax and Pension Incentives
Continuation of the pension reform; contribution credits will be provided to parents born between 1.1.1952 and 31.12.1961 that give up their job to raise their children. These parents will benefit from credited contributions for every child, and in case of children with disability will receive two years ‘contributions should the parent (mother or father) had quit their job to raise their children and eventually returned to work as is the case for parents born after 1.1.1962.
A maximum income tax deduction of €2,500 for fees paid in respect of residency services in respite homes or centres or for community support services available both to parents or relatives paying such fees.
Extension of the non-contributory pensions for disabled persons to cover other forms of disabilities.