On the 11th of October 2021, the Minister of Finance and Employment, Clyde Caruana, on behalf of the Government of Malta, presented to the Maltese Parliament the Budget for the year 2022.
The Budget focused on a number of matters relating to medical treatments, donation and succession, social housing, tax, financial services, tourism, the economy in general and sustainable development, amongst others.
Malta has anticipated a reduction of 11.1% in GDP this year, almost 1% less than that predicted in April 2021. However, debt is expected to increase to 61.3% of GDP. Next year, deficit is expected to go down to 5.6% whilst debt is expected to marginally increase to 61.8% of GDP. By 2024, deficit is expected to decrease to 2.9% of GDP, and debt is expected to be at 62.4% of GDP in the same year.
Pensions and Elderly
A €24 million increase will be provided towards pensions. This will result in 95,000 elderly persons benefiting from an increase of €260 per year or €5 per week, of which €1.75 are the COLA increase, and the remaining €3.25 per week is the additional increase.
Moreover, the Supplementary Allowance will be increased to all those receiving such benefit, being pensioners, elderly and people having a low income who are not in receipt of Children’s Allowance. Couples or married persons whose income in 2022 will not be more than €14,318 will be receiving an increase in such benefit which varies between €3.47 and €6.50 per week, depending on their income. Furthermore, single persons, including widowers, whose income does not exceed €10,221 will receive an increase which varies between €4.10 and €5 per week.
Due to the increase in pensions and in the Supplementary Allowance, many pensioners will benefit from an increase of over €500 per year.
The maximum income from pensions will be increased to €14,318 in order for the above benefits provided to pensions not to be subject to tax. Additionally, the rate of pensions for widowers will be gradually increased in order for their pension to be the same as that of their late partner, resulting in 12,000 pensioner benefiting from a maximum increase of €5 per week.
There will also be an increase of €150 in annual bonus for persons who have reached the age of retirement but did not qualify for pension due to them not having enough social security contributions. Thus, the bonus for those who have paid less than 5 years’ worth of contributions will increase to €400 per year, whilst the bonus of those who have paid more than 5 years’ worth of contributions will increase to €500 per year.
The bonus given upon the birth or adoption of a child which was introduced last year will be increased by €100, and therefore such parents benefiting from this bonus will now be receiving €400 in total. This measure is expected to benefit around 4,000 parents.
The allowance given to children with disabilities will be increased by €5, which will benefit around 1,700 families. This allowance will thus increase to €1,560 annually. This is almost double the allowance that was given in 2013, since in the last 8 years this allowance was increased by a total of €676 annually.
The grant for carers of severely disabled persons will see an increase from €200 to €500, which will benefit around 450 parents. Moreover, the Carer at Home benefit will be increased from €6,000 to €7,000 annually, which will encourage more elderly people to live in their community and aid informal carers to remain actively in employment.
In addition, 10,000 euros will be granted to every head of school, totalling an amount of €1 million expenditure put forward in order to ensure that vulnerable children under their supervision do not miss out on having indispensable basic needs met, such as food.
Various medicinal treatments will start being provided for free without the requirement of the means test. This includes psychological and oncological medicine, and free medicine for fibromyalgia, anaphylaxis, inflammatory and rare diseases, IVF patients and medicines for elderly people aged 80 years and over.
Donations and Succession
Amendments in the law will be put forward relating to those persons who will receive an inheritance after they started receiving non-contributory pensions for at least 5 years, in order for the capital limit to be increased from €23,300 to €50,000 for married persons and from €14,000 to €30,000 for single persons.
Moreover, formal donations of €20,000, including airspace, shall be excluded in calculations of pension purposes.
In order to have a better pension, those workers working more than one part-time job will be allowed to pay social security contributions on more than one job up to a maximum of 40 hours per week. This measure is set to benefit up to 10,000 persons.
A benefit of €150 will be granted to persons working atypical hours. This is aimed at workers in hotels, restaurants, administration, manufacturing and storage, who have been in employment for at least 6 months. Around 40,000 people will benefit from this scheme.
Additionally, the In-Work Benefit will be improved, whereby those couples who are both in employment, the income limit will increase from €35,000 to €50,000 per year, those couples where only one parent is in employment, the income limit will increase from €26,000 to €35,000 per year, and in regard to single parents who are in employment, the income limit will increase from €23,000 to €35,000 per year.
Free childcare service will be extended in order to help persons who cannot work evenings, weekends and shifts due to lack of childcare. Therefore, childcare will now also be provided for free to those parents working such hours.
Through the Regeneration of Property schemes, 2,022 intergenerational accommodations will be initiated, while 500 apartments are being finalised and another 700 are moving at a good pace.
The Home Assist Scheme will remain open throughout the next year to assist low-income families taking loans. Such persons will also benefit from advantageous repayment terms being introduced.
The Equity Sharing Plus Scheme will be extended to allow persons aged 30 years and above to benefit from such scheme. This will increase their access to the property market, allowing them to become owners of their own homes. Therefore, persons aged 30 years and above will now be able to purchase at least 50% of their property and the Housing Authority will pay the remaining amount. Such amount is to be paid back to the Housing Authority at a later stage.
Furthermore, the property industry will see a reduction of tax by half on property sales of up to €200,000 in value after being rented for more than 10 years. If the property is being sold to the same tenant, there will be no tax on the sale and acquisition made.
Capital Gains tax and Stamp Duty will be waived on the first €750,000 when purchasing residential properties which have been built for more than 20 years and have been vacant for seven years, as well as properties in Urban Conservation Areas as well as properties built in a traditional architectural Maltese style. First time buyers of such properties shall receive a grant of EUR 15,000 for Maltese, and rises to EUR 30,000 for Gozitans who acquire properties in Gozo.
Furthermore, a VAT refund of a maximum of EUR 54,000 on the first EUR 300,000 spent on restoration and finishing shall be available.
A further reduction of tax on overtime will be introduced for those receiving an annual income not exceeding €20,000 annually, excluding managers. Such persons will be taxed at 15% on the first €10,000 hours of overtime worked. More than 30,000 persons will benefit from this scheme.
Tax on part-time employment will be reduced from 15% to 10%. Around 5 million Euro are being budgeted for this reduction and around 23,000 people will benefit.
Moreover, in order to encourage more pensioners to remain in employment after retirement, for a period of 5 years starting from 2022, the income from pensions will no longer be calculated as income for tax purposes. Due to this measure, around 8,500 pensioners who have an additional income apart from their pension will see a substantial decrease in paid tax whilst another 8,200 pensioners who have an additional income apart from their pension will no longer be paying tax.
The Tax Refund that has been issued in past years will not only be issued again this year, but will be increased to between €60 and €140. Around 250,000 persons will benefit from this measure, with a total of €24 million being budgeted.
As of June 2022, interests on unpaid tax and VAT payments will be set at 7.2% – a clear statement that the government aims at safeguarding the country’s fiscal morality at all costs.
In addition, the rate of tax for artists will be reduced to 7.5%.
Students will be receiving an increase of 10% to their stipends. They will also be allowed to work up to 25 hours per week and still be eligible to receive a stipend. These measures will result in an additional €5 million annually given to students.
Furthermore, students will sit for their SEC exams in the same school which they attend, in order to reduce the increased stress in students due to them taking an exam in an environment which they are not familiar with.
There will also be an investment to improve the schools’ infrastructure, including electricity in order to provide better air conditioning.
In a continuous effort to attract start-ups to Malta, Malta Enterprise will work with Community Malta to develop a programme for a ‘start-up visa’ to attract non-EU entrepreneurs. Furthermore, new incentives will be introduced to make up for an increase in international traffic of goods. This will include an increase in subsidies for rent of storage facilities.
A temporary scheme will see enterprises being incentivised to invest in order to help with COVID-19 recovery. Incentives will include capital allowances benefits in favour of tax on companies which remained ongoing.
Groups of companies having capital allowances which were not used during 2020 due to losses made throughout the pandemic will be able to use such capital allowances in another company within the same group.
A Malta Enterprise scheme will grant a tax benefit on a percentage of an enterprise’s profits which is re-invested in the same business, as long as the investment is done within 2 years from 2022.
A reduction from 5% to 1.5% in stamp duty applicable on the transfer inter vivos of family businesses will be introduced to assist in family business planning.
The SME Tailored Facility will be extended to include green businesses, in particular small and medium, who want to diversify and be able to conduct green and sustainable projects. Such a scheme will incentivise further investment from the private sector.
All residents in Malta and Gozo will benefit from Free Public Transport from 1st October 2022.
Buyers of plug-in hybrids and electric cars will benefit from a 3,000 euro increase in subsidies, raising the amount provided to such owners from 8,000 to 11,000 euros, and up to 12,000 in case of scrappage of old vehicles. Moreover, a special rate of electricity for charging electric cars will remain in place as from 1st January 2023.
A reverse osmosis plant will start working from Hondoq ir-Rummien, in order to expand the reverse osmosis project and improve the drainage system. Meanwhile, improvements on the Sant’Antnin plant are in their final stages.
The incentives designated for the purchasing of electric vehicles include tax exemption upon registration and relief from payment of the annual road license for the duration of 5 years commencing from the date of registration. The above measures are applicable to both electric cars as well as pug-in vehicles. The capping of plug-in hybrids is to increase from 30 to 50 kilometres of autonomy over the battery as from 2023. The scheme for charging batteries overnight at residential houses shall remain in operation. Furthermore, the VAT reimbursements of bikes and electric bikes will also be distributed this year.
Other Salient Points
Investments will be made towards improving maritime infrastructure, as well as urban and rural roads. In view of the largest amount of European funds obtained, more than 2.27 billion Euros will be allocated for such projects to be completed.
In investing in the country’s touristic product, an agency will be set up to regenerate touristic zones. Such agency shall be working on a number of projects inducing a holistic plan for the North region of Malta.
The Advocate General’s office is to improve prosecution and reduce the time in which this is done, in addition to new appointments of judges. Additionally, a new digital system for legal help will be introduced so that applications may be conveniently done online.