Malta Budget 2021 Snippets: How will you Benefit?

The Minister for Finance and Financial Services presented the Budget 2021 on 19^th October 2020 in the House of Representatives of Malta. With the theme of this year’s budget speech being “Strongly Moving Forward”; saliently for the fourth consecutive year no new taxes were introduced with a view for strong economic growth projected in 2021. Prioritising the economic recovery most of the tax-related measures were positive extensions of the existing measures, rather than introduction of new ones.

The Minister announced that the Government will increase tax refunds for all categories of taxpayers (single rate tax computation taxpayers; married rates tax computation taxpayers and parent rate computation taxpayers). Furthermore, tax rebates for pensioners will also be increased in conformity with the announced increase in pensions.

From an indirect taxation aspect this Budget has delivered an increased VAT exempt threshold from the current €20,000 to €30,000. This is a welcome development since this eases red tape for SMEs and increases consumption. Meanwhile, the 1.5% reduced stamp duty rate on transfers of qualifying family business transfers to descendants will continue through 2021 to ensure that family businesses continue to thrive.

The lion share of tax incentives were through the scheme extensions pertaining to transfers of immovable property. The Covid-19 regeneration plan which provided for reduced rates on the first €400,000 both on stamp duty and property transfer tax will now continue to apply to promise of sales registered until 31 March 2021 provided the contract of sale is concluded by 31 December 2021. Similarly, all other schemes which were originally in force till the end of this year have been retained into 2021 including the Gozo and UCA schemes respectively. In the case of the first-time buyer scheme, stamp duty is now exempt on the first €200,000 as opposed on the first €175,000 of the transfer value.  Similarly, the Minister announced reductions on the 3.5% stamp duty on the acquisition/inheritance of the sole ordinary residence which will now be extended to a maximum property value of €200,000 in a similar fashion.

Interestingly, with respect to assignments of promise of sales, the previous 15% final withholding tax has now been uncapped and hence the tax is on the gross amount for the whole consideration during 2021. This might not be of interest to the taxpayer in all cases since this does not necessarily mean a reduction of overall taxation.

The retention of the Micro Invest incentive, the Business Development and Continuity Scheme, the Research & Development 2020 Scheme, the R&D Feasibility Study Scheme and the Business Start Scheme is an important development. Coupled with the development of other innovation schemes on this front, we believe that these incentives together with the government’s reaffirmed commitment to renewing Malta’s digital strategy will be key to the regeneration of the Maltese economy in 2021.

Should you require further information related to the above, please get in touch with our tax and financial advisory teams on tax@gvzh.mt