On the 14th of October, Hon. Minister for Finance, Edward Scicluna presented the Budget for 2020. We have summarised the key take-away elements below.
The economy at a glance.
2018 was a good economical year for Malta. We have seen growth in the vast majority of sectors, a very slight increase in inflation, and we have very healthy prospects for 2019 with a continuation of positive trends.
Surplus amounted to €16.6m for 2018, with trends indicating a €33m figure for 2019. Government debt is at 46.8% of the GDP, with prospects of falling to 43.8% by 2019. This is significantly lower than the majority of European country debts, with countries such as Germany, Austria and the UK with larger debts, in relation to their gross domestic product. GDP for 2018 is estimated to be €12bn with an estimated €4.2bn of tax revenue. Unemployment is at 3.9%, and the rate of inflation is at 1.7% as at September, expecting to reach 1.9% in 2019. The cost of living for 2019 has increased by €2.33 a week, given in full to employees, pensioners and students on a pro-rata basis. We have also seen more imports than exports in 2018 from January to July, with a trade gap of €1.7bn when compared to the same period in 2017. Q2 2018 saw an increase in property index by 5.7% when compared to the same period in 2017.
The government will be granting the same tax refunds as it has done for the previous two years, for anyone earning less than €60,000 a year. The refund you receive will depend on your level of income and whether you are single, married or a parent.
The first 100 hours of overtime of an employee (not in managerial position) during 2020 shall be taxed at 15%, if not earning more than €20,000.
In an effort to make tax administration easier for everyone, new online measures shall be introduced, allowing individuals to register and de-register VAT and PE numbers, as well as setting-off of provisional tax for pensioners.
Income tax for pensioners
Exempt annual pension income will be increased to €13,798 to Single and Parent Rate, with the same amount for Married statuses, plus an added €2,000 from other sources.
Intra-family transfer duty rate reduced in 2020
The existing scheme for qualifying businesses transferring ownership from parents to children and paying a reduced stamp duty of 1.5% shall be extended into 2020.
Property Related Measures
Several measures have been put in place to assist individuals buying property, whether this is their first time or otherwise.
First-time buyers are exempted from paying duty on the first €175,000 (an increase from the previous €150,000). This scheme will continue being in effect in 2020.
Second-time buyers who sell their first house will be eligible on purchases extended into 2020, for a refund of stamp duty of €3,000 (increased to €5,000 in case of disability issues), if the individuals do not own any other property.
Buyers purchasing property in an Urban Conservation Area are subject to a reduced rate of 2.5% on stamp duty, which will be extended into 2020.
Property buyers in Gozo enjoy a reduced rate of 2% in stamp duty, also extended into 2020.
Stamp duty on inherited real-estate will pay a reduced stamp duty of 3.5% on a maximum property value of €175,000 (an increase over the previous €150,000).
Non-first time buyers looking to purchase another property classified as ordinary residence, will also benefit from a reduced stamp duty.
The government will also assist qualifying buyers with down payment with loans of up to €17,500 that have to be repaid over 15 years. The interest accrued shall be borne by the government.
Subsidies on rental costs will be given by the government to individuals earning not more than €19,000, and to couples with two children earning a combined income of €32,000. These figures have been increased from €14,500 for individuals and €28,600 to couples with two children. These subsidies can be availed of if other conditions are met.
€60 million will be invested in building 1700 new units of social housing. This is coupled with another project of 700 units. The maintenance programme run by the Housing Authority further supplements this investment. It will impact another 50 social housing blocks.
Given the current challenges with the construction sector, a dedicated authority will be created to oversee and further regulate this sector, while local councils will be empowered to take on projects meant to improve the life of the citizens in their respective locality.
The restoration scheme for one’s home will be extended into 2020.
On the first €100,000 of the profit made from a transfer of sale shall be subject to a reduced final tax rate of 15%. This will be in effect from the 1st of January 2020.
Value Added Tax Measures
VAT exemption on educational services shall, as of next year, also include various other aspects: the provision of education or educational research, including distance learning, relating to vocational training (as well as re-training), by a school or institution recognised for this purpose.
Measures have also been taken to promote a greener lifestyle.
A grant of 25%, capped at €1,000, will be available to individuals for the purchase of renewable energy battery storage. These individuals must have already installed solar panels and are no longer benefitting from the feed-in tariff scheme.
The existing grant of €400 will be extended for another year, for the purchase of motorcycles, scooters and electric bikes. Another similar grant scheme equivalent to a full VAT refund on the purchase price of bicycles and electric bicycles shall also be extended into 2020.
Persons with disabilities will find purchasing required, specialised equipment facilitated, with the existing grant increased to a maximum of €1,000 as from 2020.
Added security and scanning investment will be put into current processes in Malta Customs to prevent evasion of taxes and duties, but also illegal activities.
Business Growth and Competitiveness
More assurances and co-financing opportunities will be granted to SMEs by the Malta Development Bank in order to help with initial hurdles.
Green projects will be given the limelight, as more financing instruments will be introduced and promoted to these projects in particular.
2020 will also see Micro-Invest, Business Start and Start-Up Finance Schemes, as well as support and services from Start Up Malta Foundation, still on offer.