· MALTA BUDGET 2020 OCUS . TABLE OF CONTENTS ... Other Measures 03 05 10 12 14 18 22 Contact Us....
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1 MALTA BUDGET 2020 IN FOCUS www.arqgroup.com
Transcript of · MALTA BUDGET 2020 OCUS . TABLE OF CONTENTS ... Other Measures 03 05 10 12 14 18 22 Contact Us....
TABLE OF CONTENTSHighlights
Economy
Tax Measures
Environmental Measures
Social Measures
Other Measures
030510121418
Contact Us22
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HIGHLIGHTS ECONOMY TAX MEASURES ENVIRONMENTAL SOCIAL MEASURES OTHER MEASURES
BUDGETHIGHLIGHTS
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The cost of living allowance will be €3.49 per week.
COLA
Pensions will increase by €7 per week
(including the COLA).
PENSIONS
Exemption on the stamp duty increased to
€175,000(instead of €150,000).
FIRST-TIME BUYERS
Extension of the 1.5% duty rate on donations
of shares.
FAMILY BUSINESSES
Flat rate of 15% will apply on overtime for
the first 100 hours (basic salary not exceeding
€20,000).
OVERTIME
Final tax of 15% will apply on the first
€100,000 of gains or profits.
TRANSFERS OF PROMISE OF SALE
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HIGHLIGHTS ECONOMY TAX MEASURES ENVIRONMENTAL SOCIAL MEASURES OTHER MEASURES
ECONOMY
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REAL ECONOMIC ACTIVITY
The Maltese economy has been growing at an annual average rate of 7% for the past six years. Economic activity over the coming years is expected to remain strong, with moderate growth rates of around 4.4% between 2019 and 2021.
The gaming sector has been the largest direct contributor towards the Maltese economy and is estimated to have generated 22.7% of total economic growth over the past six years, followed closely by professional service activities (21.1%) and growth in tourism & distributive trade. Government spending continues to play a significant role in the economic activity, contributing towards 14% of growth during this period.
The Maltese economy has been growing at an
AVERAGE RATE OF7% PA FOR THE
PAST SIX YEARS.
MAINECONOMICDRIVERS GAMING
SECTOR
22.7%PROFESSIONAL SERVICES
21.1%
DISTRIBUTIVE TRADE, ACCOMODATION &RESTAURANTS
20%
14%PUBLICADMIN
OTHERSECTORS
15%
7.2%ICT
4.3%
6.0%
4.6%
3.6%
8.8%8.0%
7.2%
11.0% 11.3%10.6% 10.6% 10.8%
7.9%
5.1% 5.0% 5.1%
7.3% 7.4% 7.1%
5.2% 5.0%
7.1%7.7%
7.1%
5.4%
4.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016 2017 2018 2019
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SALARY GROWTHSectorial contribution to annual salary growth - 2018 vs 2017
0% 5% 10% 15% 20% 25% 30% 35%
Agriculture & fisheries
Energy & waste management
Manufacturing
Construction
Distributive trade, accommodation and restaurants
Information and communication
Financial and insurance activities
Real estate activities
Professional services
Public administration
Gaming
Public administration registered the highest contribution to aggregate salary income growth during this period, reflecting both the increase in headcount numbers and the improved collective agreements of public sector employees. Professional services, distributive trade and tourism related activities and the gaming sector contributed close to 50% of annual growth in salary income.
Notwithstanding the increase in overall salary outlays the distribution of economic wealth between salaries and operating profits continues to widen.
Between 2017 and 2018
SALARY OUTLAYSINCREASED BY 7.5%across all sectors of theMaltese economy.
42%
44%
46%
48%
50%
52%
54%
56%
58%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016 2017 2018 2019
Distribution of economic wealth
Operating profits Salaries
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OTHER ECONOMIC KPI’S
PRIVATECONSUMPTION
• Private consumption grew by 8% during 2018.• In the first two quarters of 2019 household consumption continued to grow
steadily by 6%.
INFLATION• General consumption prices are gradually picking up but still lower than the 2%
price stability threshold.• The headline rate of inflation by August 2019 was 1.7% compared to 1.6% during
the same period last year.• In light of this the cost of living adjustment this year will be €3.49 per week.
EMPLOYMENT• Employment in Malta increased by 5.4% or 12,260 during 2018. • The number of unemployed as at June 2019 hovered around 8,815 or 2.1%.• Foreign workers in Malta amount to around 20% of total workforce.
NET EXPORTS • Net exports remained positive during 2018 with an overall balance of €2.6 billion, up 9% over 2017.
GENERALGOVERNMENTBALANCE
• General government balance remains in surplus, mainly explained by increased tax revenue generated through increase in economic activity and proceeds from Individual Investor Programme.
• Fiscal surplus in 2018 was 2% of GDP and expected to fall to 1% by the end of 2019. Public debt as a percentage of GDP is projected at 43.2%.
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€1.94 bnINCOME TAX
€ 1.15 bnSOCIAL SECURITY
€ 350mCUSTOMS & EXCISE DUTIES
€ 420 mLICENSE, TAXES AND FINES
€ 1.10 bnVAT
€497 mNON TAX REVENUE
€ 1.85 bnSOCIAL SPENDING AND PENSIONS
€ 749 mEDUCATION
€ 753 mHEALTH
€ 698 mPUBLIC DEBT SERVICING
€ 267 mTRANSPORT AND INFRASTRUCTURE
€ 1.02mOTHERS
INCO
ME
€5.4
5 BN
(+7.
3%) SPEND €5.34 BN
(+6.1%)
€413 mBORROWING
BUDGETARY FLOWS
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HIGHLIGHTS ECONOMY TAX MEASURES ENVIRONMENTAL SOCIAL MEASURES OTHER MEASURES
TAXMEASURES
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A flat rate of 15% will be applicable on the first 100 hours of overtime for employees earning a basic salary of not more than €20,000. This will not apply in the case of managerial positions.
A tax refund, ranging between €40 - €68, will for the second year in a row be given to individuals earning less than €60,000 per year.
Income which is exempt from tax in cases of couples receiving one pension will increase to €15,798 (+€2,000).
INCOME TAX
DUTIES
The beneficial rate of 1.5% duty in cases of transfers of family businesses will be extended by another year.
An extension of the reduced rate of stamp duty for first time buyers and an increase of the capping to the first €175,000, instead of the first €150,000.
15% tax on first 100 hours of overtime
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HIGHLIGHTS TAX MEASURES SOCIAL MEASURES OTHER MEASURES
ENVIRONMENTAL MEASURES
ENVIRONMENTALECONOMY
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A national strategy will be presented on the long-term vision for a climate-neutral economy by 2050.
A number of machines will be installed to encourage people to make use of the Beverage Container Recycling Scheme.
The importation of single use plastic including straws, bags, cutlery and disposable plates will be banned from 1 January 2021 and the sale and redistribution of single use plastic will be banned from 1 January 2022.
An investment of €2 million will be made on the Ta’ Qali National Park.
A grant of 25%, capped at €1,000, will be given to people who had invested in solar panels and who were benefitting from feed-in tariffs, for the acquisition of renewable energy batteries.
During the course of next year, the government will confirm a date as of when the importation of combustion engines will be banned.
A preferential electricity rate will be payable to charge electric vehicles, which will be of less than €0.13 per unit.
Incentives will be introduced for the acquisition of low-emission vehicles and acquisition of bicycles or pedelecs.
Malta Enterprise will provide an incentive of up to €200,000 to contractors for the acquisition of new machinery with low emissions.
ENVIRONMENTAL MEASURES
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HIGHLIGHTS ECONOMY ENVIRONMENTALTAX MEASURES OTHER MEASURES
SOCIALMEASURES
SOCIALMEASURES
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FAMILY
Individuals above the age of 75 and who live in their own home or with relatives will be given a grant of €300. This will increase to €350 if the individual is above the age of 80. This will also apply to those residing at a retirement home.
For every new-born or adopted child, a one-time €300 bonus will be granted.
Pensioners who are widowed, with children under the age of 18 will receive the full children’s allowance of €10 per week, irrelevant of whether they are employed or not.
Families will be granted a one-off payment of €35 (€15 for singles) for the purpose of covering the increase in the prices of certain products, having no effect on next year’s COLA.
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HEALTH & DISABILITIES• The government will cover the first 3 days of sick leave for patients undergoing
regular treatments for certain illnesses, such as cancer.
• Persons unable to work due to a disability will receive an increase in the minimum wage per week from €150 to €161.
• The VAT exemption on the purchasing of certain disability equipment will increase to €1,000.
• Parents unable to work due to their children having rare diseases will be granted 8 years of NI accreditations, so as to ensure they will be eligible for a better pension when the time comes – this is the same as parents of children with a disability.
• A helpline for those persons with a disability as well as their family members will be set up to guide them accordingly.
• The criteria covering the list for those suffering with a disability to be entitled to receive benefits, will be broadened.
• Those persons unable to work due to suffering from the conditions of Fibromyalgia and ME will receive medical assistance. To avoid abuse of such a scheme, this will be granted subject to a number of stringent tests carried out by medical professionals.
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• Pensions will increase by €7 a week (incl. COLA).
• Service pensions will increase by €200 and such increase will be exempt from tax.
• In the case of low-income earners €150 per year will be granted as a form of supplement.
• Another savings bond for pensioners, similar to Bonds 62+ will be launched.
• Minimum Invalidity Pensions will be increased, similar to the increase in the case of persons with a disability.
• For another year, a bonus will be given to individuals who do not qualify for the minimum pension.
PENSIONS
• Leave entitlement will increase by a day for the third year in a row.
• Incentives introduced in the past in relation to Third Pillar Pension Schemes and Voluntary Occupational Pension Scheme will continue to apply.
WORK RELATED Leave entitlement will increase by a day to 27 days per year.
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HIGHLIGHTS ECONOMY ENVIRONMENTALTAX MEASURES SOCIAL MEASURES
OTHERMEASURES
OTHERMEASURES
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An interest-free loan of €17,500 will be granted to persons under 40 years of age who cannot afford a mortgage. The eligibility for an interest-free loan will be means tested and the loan would be repayable over 15 years.
Property initiatives including the equity sharing scheme for persons over 40 years will be rolled over to next year.
A subsidy will be given to tenants paying more than 25% of their household income on rent.
PROPERTY
Interest-free loan of €17,500 will be granted to persons under 40 years of age who cannot afford a mortgage.
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As from next year, free public transport will be offered to pensioners over the age of 75.
The €700m road project will continue as planned in previous budgets, with the hope of reducing emissions.
New ferry landing points will be constructed at different locations in Malta and also in Gozo.
Charging points for vehicles running on alternative energy will need to be installed at every fuel station in Malta and Gozo.
TRANSPORT
GOZO
The first reverse osmosis plant will be constructed at Hondoq ir-Rummien.
A further investment in road works in Gozo will be undertaken next year.
Despite the introduction of the fourth ferry, the plan to build a tunnel between Malta and Gozo is well underway – a feasibility study will be concluded in the coming months.
The government will continue to offer incentives for private investments, and a number of fiscal incentives will be introduced to companies relocating to Gozo.
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EDUCATIONOne tablet per child will be rolled out for middle schools as from the next scholastic year.
Drinking water fountains will be introduced at every school to reduce the use of single use plastic bottles and to also avoid children having to carry water bottles to school.
A VAT Exemption on Vocational learning will be introduced.
A grant of up to €850 will be given to students who learn a foreign language outside of Malta.
AML MEASURES
A limit of €10,000 on cash transactions for high-value purchases, such as real-estate, vehicles, art, precious metals and yachts, will be introduced.
A new Financial Organised Crimes Agency will be launched next year. This will work in collaboration with the Economic Crimes Unit and is part of the government’s detailed plan in relation to the Moneyval report recommendations.
New Financial Organised Crimes Agency will be launched next year as part of government’s detailed plan in relation to the Moneyval
report recommendations.
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COMPETITIVENESS
The Malta Stock Exchange will launch a green bond listing
The Government is set on developing the esports sector
A National Space Strategy will be launched next year
Malta will try to attract and develop a drone cluster of excellence
A new strategy for tourism will be launched in 2020
A disused landfill in Marsa will be rehabilitated into an industrial and sports park
A reform in the agricultural market of Pitkalija will be implemented
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IF YOU WOULD LIKE TO KNOW MORE...
NICKY GOUDERPartner - Tax & Private ClientsFCCA, FIA, CPA, Dip.Tax, IMCMAn accountant specialising in international and domestic taxation, Nicky leads the group’s tax and private clients practice handling a wide portfolio of local and international clients across various sectors, including investment migration.
JP FABRIDirector - Regulatory & AdvisoryMA (Econ), B.Com (Hons) Econ, ICIR
An economist with both local and international experience, JP leads the Economic & Market Intelligence and Digital Economy Unit at ARQ. Previously part of the private cabinet of the Prime Minister of Malta, JP is also a certified blockchain strategy advisor.
GLENN FENECHSenior Manager - Economic & Business Intelligence MA (Econ), B.Com (Hons)
An economist by profession, Glenn has been involved in a number of significant engagements for both public and private sector clients, including economic impacts, public policy and multiple scenario assessments.
LUANA FARRUGIASenior Manager - TaxB.Accty (Hons.), MIA, CPA, Dip.Tax, ADIT, IMCM
Luana is an accountant specialising in domestic and international tax planning and tax restructuring. She has implemented solutions to ensure clients’ processes remain compliant with the requirements of tax law and consistent with common tax practices.
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The notes outlined in this document are for information purposes only and do not constitute any legal or regulatory advice.
