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European Commission Endorses Maltese Budget

by Lorys Charalambous, Lowtax.net, Cyprus
18 November, 2015

Malta has welcomed a positive assessment from the European Commission of its budgetary plans.

The Commission said Malta's draft Budget is "broadly compliant with the provisions of the Stability and Growth Pact (SGP)." The SGP seeks to ensure EU countries pursue sound fiscal policies. According to the Commission, the deficit is expected to fall to 1.7 percent in 2015 and to 1.2 percent in 2016. The Commission is expecting the debt ratio to fall to 65.2 percent in 2015 and to 63.2 percent in 2016. These are in line with the targets projected by Malta, the Government said.

The Maltese Government welcomed the announcement, stating: "The Commission confirms Malta's buoyant economic performance in 2015 and describes the macroeconomic scenario for 2015 and 2016 as plausible. The Commission also confirms that Malta has [lowered the] tax burden on labor, also on the back of the lowering income tax rates announced in the last three budgets. It also acknowledges that the country's policy initiatives are in line with the Commission's recommendations and acknowledges the various measures announced in the 2016 Budget, particularly those related to the pension reform."

Minister for Finance Edward Scicluna said: "The Government has every reason to be delighted that its 2016 Budget is compliant, as are its expenditure, deficit, and debt trajectories."

Malta announced a number of new incentives for companies in its 2016 Budget. Companies will gain from a number of incentives, including tax credits of up to EUR10,000 (USD11,350) when they employ (for no less than 12 months) persons holding or studying for doctoral degrees in science, information technology, or engineering.

Malta Enterprise will newly offer tax credits for companies making energy efficiency improvements and will offer 10-year loans of up to EUR500,000 for innovative start-up companies.

Changes to the Micro Invest scheme will encourage women to launch businesses. Female entrepreneurs or businesses that are majority owned by women will be eligible for a maximum tax credit of EUR50,000 (up from the normal credit of EUR30,000).

The cost of registering a company with less than EUR1,500 in capital will fall from EUR250 to EUR150, and the Government will introduce new legislation to allow groups of companies to file consolidated returns.

For individuals, income tax thresholds have been revised. The income tax-exempt threshold has been raised from EUR8,500 to EUR9,100. Malta will expand its special 7.5 percent income tax rate to cover all sportspeople. The income tax deduction for donations of art will be increased to 150 percent, and tax rate on rental income from commercial property (currently 25 percent) will be aligned with that for residential property (15 percent).

From April 1, 2016, all tourists over 18 will pay EUR0.50 per night (up to a maximum of EUR5 per visit) as an "environmental contribution." The Government is also to introduce a scheme for scrapping old, energy-inefficient vehicles, with tax concessions for environmentally friendly vehicle purchases.

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