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Increased tax credit on private pension contributions

Deloitte Malta Tax Alert

21 January 2021

Earlier this month, and following the announcements made by the Minister of Finance on 19 October 2020 during his Budget 2021 speech, the Government of Malta published two legal notices further enhancing local incentives afforded within the Personal Retirement Scheme Rules (‘PRS Rules’) and the Voluntary Occupational Scheme Rules (‘VOPS Rules’), respectively.

Legal Notice 2 of 2021 increased the maximum annual tax credit granted in terms of the PRS Rules. Previously, an individual who contributes to a qualifying personal retirement scheme, could be eligible for an annual tax credit equivalent to 25% of contributions made, capped at €500 per annum. Through the abovementioned change, the maximum tax credit has been increased from €500 to €750 per annum.

Similarly, Legal Notice 3 of 2021 also increased the maximum annual tax credit afforded in terms of the VOPS Rules to employers who contribute towards a qualifying scheme for the benefit of their employees, as well as employees who voluntarily contribute to the same scheme set up by their employer. The maximum annual tax credit has been increased to €750 from €500 for both the employer and the employee on qualifying contributions made. As a result, with the annual tax credit being equivalent to 25% of contributions made, or €750, the annual contributions which may be made into a qualifying scheme and which will be eligible for an annual tax credit has increased to €3,000 from €2000.

The changes brought about by the abovementioned legal notices shall apply for the year of assessment 2022 onwards.

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