On the 14th of October 2019, the Minister for Finance, on behalf of the Government of Malta, presented to the Maltese Parliament the Budget for the year 2020.
The Budget focused on a number of key issues relating to sustainable development, the environment, technological innovation including E-Sports, employment related tax incentives, disability subsidies and extended the duty reductions on the 1st and 2nd time home buyers, as well as other incentives relating to property.
The Environment and Sustainable Development have taken centre stage with proposals aiming at prohibiting the importation and production of single use plastics by January 2021, the increase of charging points and subsidies for electric vehicles and alternative means of transport together with educational courses aimed towards increasing the work-readiness of individuals in the blockchain and AI industry.
The Minister has announced that a surplus has been registered for the 5th consecutive year and for the first six months there has been a 4.7% growth in the Maltese economy, three times higher than the average rate within the EUwhich stood at 1.4%. The real economic growth averaged 7% between 2013 and Q2 of 2019 with the latest growth figure reported at 4%. Moreover, with a 4.5% increase in private consumption, which contributed to the overall economic growth, the Minister has proposed that no new taxes be levied for the 2020 Budget..
The Budget highlighted that a total of 230,000 individuals are now in employment in Malta with the lowest unemployment rate in the European Union (3.3%). A 9.5% increase in profits has been registered in private companies with over 90% increase of new employment in the private sector. Through numerous previous incentives, women and elderly particpation has increased which has led to a 74.7% total participation rate in employment, higher than the European average and leading Malta to register the 3rd largest increase in the rate of vacant employment at 0.4%.
Importation has increased by 2.2% while exportation has increased by 1.5%. With regards to international commerce, during the first half of the year, an 8% surplus has been registered. From the year 2013, the Gross Domestic Product (GDP) has doubled from seven to fourteen billion Euro. Public debt has decreased to 45.8% at the end of 2018 and is expected to decrease to 43.1% by the end of 2019. On macro-economic stability levels, the World Economic Forum has ranked Malta in the first position.
The Financial, iGaming and Tourism industries remain the biggest growth contributors in the increase of 1.6% exportation for the Maltese economy. Importation is expected to grow by 2%, which reflects the investments being made towards the importation of new equipment and machinery. Prosperity in economic growth spread across all sections of society and it is expected that there will be an increase of 4.1% in employment, while unemployment looks to remain at a low rate of 3.5%. Inflation is expected to hover around 1.6%. For the year 2020, public funds are estimated to reach a surplus of 1.4% and public debt is expected to decrease to 40.4% of the GDP.
The Government has announced a € 3.49 increase as a cost of living adjustment (COLA) to all workers, pensioners, students and individuals who are assisted by any social benefits. Moreover, families of one shall be receiving a bonus of €15 and a bonus of €35 for families of more than one. Furthermore, an extra day of leave as well as another tax refund shall once again be given to all workers.
The Minister announced that workers with a basic pay that does not exceed € 20,000 p.a. and do not hold a managerial position shall only be taxed 15% for the first 100 hours of overtime as from the year 2020. Furthermore, employers shall be given an opportunity to regularise themselves and comply with all social security obligations.
Couples may now also be assessed for tax separately, while an interim tax assessment shall be issued which is then to be confirmed by the tax payer himself.
Pensioners shall benefit from a € 7 increase per week, while the tax exemption threshold shall also be increased. The Government also proposed that an additional € 300 shall be given as from 1st January 2020 to families who give birth or adopt a child. Moreover, disability assistance is to be increased in order to equal the minimum wage.
With regards to indirect tax (VAT), as from January all individuals or companies can register, de-register or cancel applications online and receive prompt acknowledgement.
In relation to property, the Government has acknowledged the difficulties in this sector and has made it a priority to offer alternative rental as well as increase transparency in rental agreements for both lessor and lessee. Furthermore, the 1st time and 2nd time home buyers scheme on In continuation, a reduced rate of tax duty of 3.5% shall apply for inherited residential properties. Profits derived from the assignment of rights on a promise of sale relating to immovable property shall be taxed at 15% on the first € 100,000, and 35% for the remaining.
Moreover, the previous scheme introduced to lower the tax duty to 1.5% for the transfer of shares in family businesses shall be extended through the year 2020.
Finally, with the salient points from this Budget 2020, the current scrappage scheme shall be extended for another year with an exemption on registration tax for hybrid and electric cars. Lastly, education and educational related research, vocational training, distance learning and institutes recognized for this training shall be exempt from the payment of VAT.
Other salient points by Industry
Economy and Technology
- Malta Development Bank (MDB) – Increased assistance for SMEs to obtain bank loans together with reduced interest for such loans.;
- Increased cooperation between other banks and MDB to offer guarantees and co-financing for SMEs;
- Consultation with private entities for increased financing for infrastructure improvements;
- Malta Stock Exchange – Increase of 25 new instruments on their list;
- Green Bonds to be issued as of next year to incentivise investment in the environment and sustainable development;
- Finance Conference to be hosted in Malta next year by the Malta Stock Exchange in collaboration with the World Federation Stock Exchanges;
- Financial Services – Continued growth despite struggles across Malta and the world;
- Continued development on strategy for Fintech, Regtech and blockchain within the economy;
- Artifical Intelligence – Campaign to attract more AI talent and companies;
- AI Taskforce to develop strategy on AI and help place Malta amongst the ten best countries for innovation in AI;
- Education and AI Innovation Hub for the increased use and infrastructure of AI;
- ‘Internet of Things’ – Investment and launch of Pilot Project to make use of this technology in the community;
- Cyber Security – Experts must be given the best technology and equipment in order to tackle the increased possibility of cyber security. Funds to be allocated to MITA;
- Space Innovation – Development of legislation for companies to invest in Malta and increased research and innovation;
- E-Sports – New measures to help this new sector. Digital Arts, Games Programming and Media Production to attract companies for game manufacturers. Specialised educational courses to be launched to help this industry grow;
- Business Invest and Start Up – Assistance to start-up companies shall be extended;
- PV panels – Pilot project for green infrastructure in industrial areas;
- Malta Enterprise – Funds for research and development for advisory and support services towards companies of Agriculture and Fisheries;
- Agriculture and Fisheries – Innovation aid for SMEs and the installation and machinery for better use of energy;
Environment and Sustainability
- Acnkowledgement that sustainable development is a key part that falls on all members of society (public and private);
- National strategy geared towards carbon neutrality by the year 2050;
- Developments on infrastructure for a Waste to Energy plant;
- Environment Resource Authority to conduct further bio-diversity studies;
- Electrical and Hybrid cars – Increased charging ports in all fuel stations and around Malta and Gozo. Special tariff rate for owners of such vehicles so that charging can take place from household;
- Date to be announced next year whereby the importation of fuel powered cars shall be prohibited;
- Single-use plastic (plastic bags, straws, amongst others) importation and production shall be prohibited from January 2021;
- Government shall assist shops to develop a dedicated ‘green area’ corner for people to take their own re-usable containers;
- Two million investment towards the development of Ta’ Qali national park;
- Malta Enterprise incentives and financial assistance to private companies to change old manchinery to new, less environmentally harmful machinery;
- Contruction vehicles shall also be eligble to apply for the above scheme;
Energy and Infrastructure
- Subsidy scheme on PV panels, Solar water heaters, Heat Pump water heaters and better Insulation shall be further extended;
- Renewable Energy – 25% of the payment for the purchase of batteries for the storage of renewable energy shall be subsidized by the Government (capped at € 1,000);
- Gas pipeline connectivity with the rest of Europe by the year 2024;
- ARMS to offer a more effective and affordable system for payments of water and electricity bills;
- € 130 million investment, co-financed by the EU, for the development of a water management system for better quality and sustainability of water in Malta;
- Promotion of alternative means of transport and increase in use of public transport;
- Free public transport has now been extended to the elderly while free transportation for students at public, church and independent schools has been renewed;
- Marsa flyovers (7) to be finalised by the end of next year;
- Upon conclusion of Marsa flyovers, work is to start on road infrastructure in Msida, St. Julians and Pembroke areas to reduce bottlenecks;
Maritime and Aviation
- Continued incentives towards getting more shipping companies and increase in Merchant Registry;
- New Agency set up for the improvement of security in sea and air transportation;
- Increased use of Ferry transportation around Malta;
- Improvement of ferry landing sites and identification and development of new Ferry landing sites;
- Increased connectivity by sea;
- Cruiseliner increase of 75% these past 6 years;
- New and updated regulations on the aviation industry to increase competitiveness;
- Increased public transport routes;
- Addition of 40 new buses;
- Extention of bicycle rack grant for private companies;
- Electric bikes and motors total refund on VAT shall be extended as will the scheme to incentivize the purchase of motors, scooters and bikes of an electric motor with a € 400 grant;
- All fuel stations to be equipped with charging points.
Medicine and Health
- Malta has been classified in the 9th position for the best health services from 195 countries;
- Completion of Outpatients building together with continued investment in equipment for robotic surgery;
- Inclusion in the European Reference Network – All individuals/patients to benefit from access to health services across this network;
- Investment and educational campaigns on mental illness (identified as the biggest struggle/illness in the future);
- Continued investment and subsidies in Medical Research;
- Development in Organ Donation awareness.
- Blockchain courses – official certificates to be issued directly from approved academic institutes for recognition;
- Introduction of pilot project to report and recommend the increased use of technology in academic institutes for educational purposes;
- Increased investment in University and MCAST;
- Funds to be allocated in order to shift people towards new technology and innovative research;
- Development of an online Maltese language spell checker for the increased use of the Maltese language;
- Drinking water fountain to be placed in every school for the reduction of water bottles;
- Introduction of ‘Reach Out’ programme to help identify and assist students with their struggles and avoid dropping out of post-secondary courses;
- ITS – Increased participation and development of Master’s programme on hospitality;
- Development of campus and hotel in Smart City to be managed by students of this institute as part of their studies;
- Education and practice to work hand in hand in order to make sure that students/graduates are work-ready.
Tourism and Aviation (2)
- 7 million tourist visit to Malta (4.5% increase from the year 2018);
- Increase in conferences and business visits held in Malta;
- Increased amount of nights and money spent in Malta;
- Development of new routes to and from Malta;
- Use of digital marketing and 3D Technology;
- Air Malta to increase operations in Europe and North Africa. Development of medium to long-haul flights;
- Drones – Master plan for airport being developed as well as studies into drones for the investment in this new industry;
- Malta Air Traffic Services – Investment in new technology for air traffic management and expansion of runway and taxiways;
- Research and Development on Drones for increased economic activity.
Bureaucracy and Gozo
- Development of Business Portal – Use of new technology for the reduction of bureaucracy and increased efficiency for private and public sector;
- Economic growth in Gozo has been larger than Malta;
- Development of Fin Fund for Gozo;
- Identifying Gozo as a destination for conferences;
- Start up tax credit for incorporation or re-location of private companies to Gozo;
- Tax benefits for teleworking and backoffice services located in Gozo;
- Development of Tunnel between Malta and Gozo – Studies to be concluded in the coming months (preliminary designs and environmental and social impact studies);
- Infrastructure Malta to issue technical requirements for the tunnel project in the coming months.
Justice and Foreign Affairs
- Pending cases have now gone down and are now 22,510 cases;
- State Prosecutor and Advocate General roles to be separated into two distinct offices;
- Cross-border co-operation and improvements to the Asset Confiscation Bureau;
- Development of a building for the preservation and recovery of confiscated assets with increased efficiency;
- Mediation and settlement being promoted ahead of court proceedings;
- TAXUD– Malta ranked in 4th place for least evasion of VAT. An 8 point reduction in evasion of fiscal tax;
- MONEYVAL report – 58 points that need to be implemented to make authorities more efficient in the fight against money laundering and combatting of financing of terrorism. Plan has been developed and the National Coorindation Commission is to implement these recommendations;
- Financial Organised Crime Agency – to assist the Police Economic Crimes Unit;
- Assistance from numerous countries, namely the United Kingdom and United States to help this Agency;
- MFSA and FIAU have implemented new reforms to help become more effective and efficient in tackling money laundering and combatting of financing of terrorism;
- Malta Customs Department – new technology and surveillence systems adopted;
- The purchase of immovables and movables, such as houses, cars, yachts, art and furniture and other items, may no longer be paid by cash if over € 10,000.
- Campaign on Brexit for assistance to individuals and enterprises;
- Immigration remains a top priority;
- Development of Embassies in Tokyo and South America;
- Increased bilateral and multilateral agreements to help Maltese companies with foreign investment.