31/10/2023 – 3a Malta

The thrust of the 2024 Budget presented in Parliament by the Minister of Finance, focused on delivering social justice to a society that is increasingly becoming more unequal and hence to strive to continue sustaining the Malta’s economy through incentives, social justice and sustainability.

Fiscal and Economic Review

After a severe contraction in between 2020 to mid-2022 due to the COVID-19 pandemic, the Maltese economy recovered as expected in the second half of 2022 and throughout the whole of 2023. During 2022, GDP increased by 6.9 per cent whilst in the first half of 2023 registered a growth rate of 4.4 per cent over the same period in 2022. The overall expected GDP for 2023 will be in the region of 4% and this growth rate is expected as well to be maintained in 2024.

As a result of the recovery from the repercussions of the COVID-19 pandemic, the number of employed persons increased and the overall employment as of June 2023 accounted to 78,8 per cent employment rate, indicating an increase of 1.3 per cent from 2022. The employment rate is expected to continue to grow by a further 4.7% in the coming year.

After years of strong improvement in its public finances, deficit and debt metrics saw a dramatic downward swing from 2020 onwards, as the COVID-19 pandemic forced the government to shore up the economy. The government expects to end 2023 with a deficit of 5 per cent and the forecast is for the deficit to continue shrinking by 0.5 percentage points each year up to 2026.

As debt grows, so will the country’s interest payments to service it: Malta paid €173.6 million in interest on its debt in 2022, will spend €209 million this year and €270 million in 2024. Perhaps more concerning is the expectation that interest rates on that debt will rise from 1.1 per cent this year to 1.5 per cent in 2026.

The government deficit is set to remain relatively high in 2023, as the Government seeks to allocate 600 million to energy support measures and pledges to maintain local energy prices unchanged Government expenditure is projected to amount to €6.9 billion in 2022, increasing to €7.3 billion in 2023, compared to revenue of €5.9 billion by the end of this year, rising to €6.3 billion next year.

Malta’s debt to GDP ratio is expected to continue to increase in 2023 and 2024 but will still remain below the 60% Maastricht criteria threshold. When compared to other countries, Malta’s debt-to-GDP ratio appears relatively healthy, well below the Euro Area average of 95.7%.

Malta’s capital account has been in a net payment position over time as outward capital transfers significantly outweighed inward transfers. While the government will have forked out just over €1 billion in capital expenditure this year (5.6 per cent of GDP), spending will be trimmed to €905 million in 2024 (4.5 per cent of GDP) before resuming an upward trend in the following two years. By 2026, the government expects to be spending €1.1 billion (4.8 per cent of GDP) in capital expenditure.

The fiscal and financial measures in summary include:

Pension income will increase by €15 per week. This includes the €12.81 weekly COLA adjustment and a €2.19 increase in pension.

As from 2024, individuals born pre 1962 will receive an increase in their pension income to align them with the pension income received by individuals born on or after 1962.

Widow’s pension received by individuals who have not attained the age of 61 will be exempt from tax.

Similar to previous years, the portion of any service pension which is not to be reduced from the social security pension will be increased by a further €200.

Widows of officers who were in disciplined forces will be provided with a pension.

Individuals who choose to serve the disciplined forces for more than 29 years will receive a 23% increase in the service pension.

As from 2024, individuals who choose to postpone their retirement pensions will be entitled to an increase in their pension as follows:
1. If retirement is postponed by 1 year – 6.5% increase in pension (an increase of 1.5%)
2. If retirement is postponed by 2 years – 13.5% increase in pension (an increase of 3%)
3. If retirement is postponed by 3 years – 21% increase in pension (an increase of 4.5%)
4. If retirement is postponed by 4 year – 29% increase in pension (an increase of 6%)

Individuals who have reached retirement age but do not qualify for a pension due to insufficient social security contributions paid will receive a bonus increase of €50 per year in the following manner:
1. Individuals who paid less than 5 years’ worth of social security contributions will receive a bonus of €500 per year (from €450)
2. Individuals who paid more than 5 years’ worth of social security contributions, but less than 10 years will receive a bonus of €600 per year (from €550)

Similar to previous years, the bonus given to families (according to their income stream) will continue to be given in 2024. The benefit ranges from €100 to €1,500 every year.

An increase in children’s allowance of €250 per child per year.

A special allowance of €500 per year for 3 years, will be given to parents having children who live with them and who continue to study full time (after the compulsory age).

From 2024, families will be receiving a bonus of €500 for their first born (in or after 2024) and a bonus of €1,000 for their second child. These bonuses are also available for families who adopt a child.

Elderly people who still live in their own homes or live in homes for the elderly (paying from their own pocket) will receive allowances as follows:
1. Individuals who paid less than 5 years’ worth of social security contributions will receive a bonus of €500 per year (from €450)
2. Individuals who paid more than 5 years’ worth of social security contributions, but less than 10 years will receive a bonus of €600 per year (from €550)

An Increase in the Carer at Home allowance to €8,000 annually.

The Carer Allowance and Additional Carer Allowance will increase in line with the COLA adjustment. The Additional Carer Allowance will increase to €173.78 per week while the Carer Allowance will increase to €120.68 per week.

There will be Increases in the unemployment benefit depending on the period of unemployment.

As from 2024, parents who are unemployed in order to take care of their adult children suffering from severe disability will see an increase the annual benefit they receive by €487 to just below €5,000.

The aid for people with disabilities has increased in line with the minimum wage and COLA increase. In addition to this increase due to COLA, the Aid for Sever Disability will increase by €12.81 per week, while the Aid for Disability will increase by €8.54 per week.

As from 2024, the tax credit to parent of children with disabilities who attend therapy (other than that offered by the Government) will increase to €500 (from €200) per year.

The social aid for people undergoing a rehabilitation programme will increase to €50 per week.

The subsidy given to tenants under the Private Rent Housing Benefit Scheme will also increase.

No income tax, capital gains tax or stamp duty will be charged on the first €200,000 of the value of the property which is transferred to the tenants having previously been leased the same property for a number of years or where the property was under the scheme administered by the Housing Authority for which rent was being subsidised.

The first-time buyers and second-time buyers Scheme will be extended for another year as follows:
- No income tax and stamp duty will apply on the first €750,000 of the value of the property transferred when such property:
  1. has been constructed more than 20 years ago and has been vacant for more than 7 years; or
  2. is situated in an UCA.

First time property buyers will continue to benefit from a yearly grant of €1,000, for a period of 10 years.

First time property buyers who build or renovate their homes will continue to benefit from assistance by way of VAT refund. This will be made beneficial for single persons as it is for couples.

As from 2024, the reduced rate of stamp duty on the acquisition of immovable property in Gozo will no longer apply.

The incentives given to individuals who purchase or sell property which is more than 20 years old and has been vacant for more than 7 years or where the property is located in a UCA will continue to be given as follows:
1. Exemption from capital gains tax on the first €750,000 of the value of the property.
2. Exemption from Duty on Documents on the first €750,000 of the value of the property.
3. VAT refund of a maximum of €54,000 on restoration and renovation expenses.
4. First time buyers will receive a grant of €15,000 if the property is situated in Malta and €40,000 if the property is situated in Gozo.

To encourage pensioners to continue working beyond retirement age, pension income has been, gradually excluded from taxable income. As from 2024, the amount of pension income to be excluded from taxable income will amount to 60%.

Like previous years, the tax refunds will be extended and will be paid again to individuals earning less than €60,000 per year.

Tax Refunds are expected to be distributed between €60 and €140 as follows:

Single Tax Computation	Tax Refund
Taxable Income	2024
€0 – €15,000	€125
€15,001 – €30,000	€95
€30,001 – €59,999	€60

Married Tax Computation	2024
Taxable Income
€0 – €20,000	€140
€20,001 – €40,000	€110
€40,001 – €59,999	€65

Parent Tax Computation	2024
Taxable Income
€0 – €15,000	€135
€15,001 – €30,000	€105
€30,001 – €59,999	€60

The in-work benefit will increase by €50 for every child under the age of 23 years.

Employees working atypical hours and having a basic annual salary not exceeding €20,000 will continue receiving a grant of €150 per year.

The minimum wage will be increased between €12 to €18 a week, excluding COLA. As from 2024, the minimum weekly wage will increase to €213.54 (including COLA).

Stipends will also increase in line with the COLA adjustment.

Tax credits will continue to be given to students studying for a Masters Degree or Doctorate and through the Get Qualified and Higher Education Qualification schemes.

The current fiscal incentives applicable to certain highly qualified persons will be revised and harmonised to cater for the skills required by the Maltese economy.

New medicines and services will be provided free of charge to patients including IVF, asthma and Pulmonary Fibrosis, mental health and ophthalmology.

A Common Central Data Repository will be created to facilitate the process of identification of applicants who carry out their businesses in Malta.
Ongoing consultation with local banks so that companies can have a basic bank account.

New online portal for the Malta Registry of Companies so that partnerships, companies and their branches can be registered and submit documents online with a qualified and certified electronic signature.

The Venture Capital Fund was introduced to help start-ups, particularly those with investment in innovative technological products, in their first years.

The Seed Investment Scheme will be extended – this scheme grants tax credits to Maltese companies after they have invested in start-ups and passed the required due diligence.

Malta Enterprise is extending the following schemes for another year: iStartup Finance Scheme, iSkills Development Scheme, Rent Subsidy Scheme, Innovate, the Smart & Sustainable Scheme and Investment Aid for Energy Efficiency Projects.

Scheme whereby consultancy and advice is given to small and medium-sized companies regarding ESGs and how to better their sustainability of their operations will be extended to 2024.

A number of workshops will be organised during 2024 on green transition schemes offered by the Government and how these can be implemented by small enterprises.

As the Aviation Industry is expanding in Malta, earlier this year, Taxiway Lima was inaugurated so that bigger aircraft can be maintained in Malta. In the coming year, there will be more investment in parking facilities for aircraft.

OECD have continued working on the Two Pillar Solution: Pillar 1 relates to the reallocation of taxing rights between the countries and Pillar 2 relates to the minimum global tax which is an effective tax rate of 15% for those companies that form part of a multinational group whose revenue is €750 million or more. The minimum global tax under Pillar 2 is already underway in EU Member States who agreed to this directive and countries have already started the implementation of these regulations. This Directive comes into force in 2024, however, Member States have the option not to implement the minimum tax for a period of six years if certain criteria apply, particularly if there are not many multinational companies present in the Member State. Malta will not be adopting the top-up tax so that the minimum tax is 15% under the measures of Pillar 2, namely, the Income Inclusion Rule (IIR), the Undertaxed Payments Rule (UTPR) and the Qualified Domestic Minimum Top-up Tax (QDMTT). In this way, Malta will be able to act accordingly after considering the tax developments taking place. The Malta tax imputation system will remain in place and will remain unchanged.

More tax incentives and grants will be introduced, Qualified Refundable Tax Credits (QRTCs) in line with EU regulations and the OECD, however, in this transition period the tax may increase slightly.

The concession on the reduction of duty from 5% to 1.5% on transfers inter vivos in family businesses will be extended again.

Registered family businesses may benefit from a higher capping on tax credits.

New Family Offices will be targeted by changes in the Wealth Management sector so that wealthy individuals and families will be attracted to invest in Malta.

Consultations will be carried out on fiscal incentives for Real Estate Investment Trusts (REITs). These trusts are vehicles whereby small investors can invest in shares of companies whose portfolio consists of rented immovable properties and who are bound to distribute dividends of at least 85% of their profits annually.

The Government is working on a framework and regulations to facilitate the finance of aircraft leasing.

Proposals are underway for fiscal incentives when Green Bonds are issued for sustainable finance.

Cash grants under the Business Enhance Scheme will be available for Startups, the development of enterprises, diversification and to assist companies enter new markets.

Invest EU will be offered to small and medium sized Maltese businesses to facilitate the granting of finance from local banks by reducing the loan interest rates and collateral requisites.

In 2024, a number of changes will be carried out in the Merchant Shipping Act and will also include Superyachts.

An agency will be set-up to register the rents of Agricultural land and to protect the environment. A number of financial measures will also be introduced to help young farmers buy agricultural land.

Owners of agricultural land will benefit from the exemption of succession tax on rented agricultural land or agricultural land which is farmed by professional farmers.

A scheme will be introduced as an incentive to fishermen who own more than one boat so that they employ young people who are interested in working in this sector.

Another scheme will be introduced to fishermen who wish to purchase their fishing boat.

Schemes aimed at incentivising investment in renewable and efficient energy sources, including incentives for the installation of solar panels, heat pump water heaters and solar water;

Incentives related to renewable power storage batteries.

Incentives for the restoration of wells in old houses.

The continuation of incentives aimed at encouraging private investors to develop large scale renewable energy installations and an additional scheme to be launched for installations generating more that 1MWp.

Free energy audit and subsequent guidance for the application of the relevant schemes for SMEs

The extension of existing schemes aimed at incentivising the purchase of electric cars, motorcycles, e-bikes and pedelecs.

A scheme for the scrappage of old motor vehicles and grants for those who convert their vehicles to run from petrol to LPG.

Schemes for vehicles that are wheelchair accessible and that will be used for the transportation of passengers.

Financial aid for purchasers of e-scooters for personal use.

Extension of the exemption from registration tax and annual licence fees for the first 5 years after registration for electric and hybrid vehicles that can run autonomously on electric energy for 50km.

Further extension of schemes intended to incentivise the installation of PV panel, DPF and SCRs on motor vehicles and the conversion of ICE vehicles to electric vehicles.

Introduction of licences for contractors which will become effective as of this year.

Capital Gains and Duty exemption on the first €750,000 for those purchasing or selling property that has been built for more than 20 years and vacant for more than 7 years or properties located in Urban Conservation Areas (UCA).

VAT exemption up to a maximum of €54,000 on the first €300,000 on restoration expenses for the above-mentioned types of property.

Financial aid in relation to the restoration of facades and specific properties of a certain value

Plans for amendments to the Condominium Act.

Possible changes to the fees related to the renewal of a Single Work Permit and permits for the engagement of foreign workers.

Regularisation of outsourcing and temping agencies, including the introduction of a licensing process for these agencies.

Revisions to Wage Regulations Orders with the aim of clarifying anomalies in relation to certain employee entitlements.

Minister very briefly announces various restoration projects of public places of cultural and national heritage interest.

The reduced income tax rate of 7.5% currently applicable to players, coaches and athletes will be extended to other individuals who are employed during sport events.