Fiscal incentives

Malta Budget 2017

Deloitte Malta presents a summary and analysis of the Malta Budget 2017 speech presented to the House of Representatives by the Hon. Prof. Edward Scicluna, Minister of Finance on 17 October 2016.

Malta Stock Exchange

Individuals are exempt from tax on dividend income in excess of prescribed thresholds. As a result, the tax on the underlying company profits being distributed is not available as a credit / refund at individual shareholder level. However with effect from 2017, shareholders who do not own more than 0.5% of the nominal share capital and dividend rights of a company listed on the Malta Stock Exchange will be entitled to declare the relevant dividends and claim a credit / refund of the underlying tax paid by the distributing company on profits generated on or after 1 January 2017.

The Government also intends promoting investment by the public on the Malta Stock Exchange whilst encouraging entrepreneurs to raise finance through stock exchange listings. As part of this initiative the Minister has announced a number of a fiscal incentives that include:

  • An annual tax credit of up to €250,000, in terms of a Risk Investment Scheme, that shall be afforded to persons who invest in Small or Medium Enterprises (‘SMEs’) that are registered on an alternative trading platform, such as ‘Prospects’, or in funds that invest in a number of SMEs  that are so registered; and
  • The re-introduction of the tax exemption on capital gains, realised upon the sale of shares to the public through a listing on the Malta Stock Exchange. Under current regulations, such gain would presently be taxable at the rate of 15%. A similar exemption shall also be introduced in respect of the sale of shares to the public through a listing on an alternative trading platform. The benefit afforded in this case may however be dependent on the percentage shareholding offered to the public.

The Minister also announced that the above measures are intended to complement a number of initiatives that the Malta Stock Exchange shall be introducing.

Private pensions

In order to encourage contributions to private pensions by employers, such contributions will be considered as a tax deductible expense. In addition, the employer will also be entitled to a further tax credit amounting to €150 for each €1,000 contributed.

Employers’ associations will be permitted to administer these collective pension schemes on their members’ employees’ behalf, thus facilitating the take up of these fiscal incentives by small businesses and the self-employed.

The investment in a pension scheme by an employer on his employees’ behalf would not constitute a taxable fringe benefit for the employee. In addition, the employee will be allowed a tax deduction of up to a maximum of €150 against their income when investing in this same scheme.

Malta Enterprise

A number of schemes will be introduced by Malta Enterprise, including:

  • Financial assistance of up to €25,000 to help disadvantaged individuals to set up a business;
  • A tax credit amounting to between 25% and 45% of the expenses incurred on a research project;
  • A tax credit amounting to a maximum of 30% of the expenses incurred in the development of digital games with a cultural theme; and
  • A scheme will be launched by Malta Enterprise consisting of a tax credit in relation to costs incurred on renovation works undertaken on hotels and restaurants, capped at €200,000 and €50,000 respectively.

Transport for employees

Companies that provide free transport to their employees will be entitled to a deduction representing 150% of the expense incurred for the provision of the service up to a maximum of €35,000 for companies providing this service on their own and up to €50,000 for companies offering this service in conjunction with another company.

Stamp duty on business transfers

During 2017, the rate of duty applicable to a qualifying transfer of a business by parents to their children will be reduced from 5% to 1.5%.

Disclaimer: This publication reflects high level announcements made in the Budget Speech on 17 October 2016, which are typically implemented through detailed legislative amendments and tax guidelines that have yet to be published. Clients are advised to seek appropriate professional advice following the publication of such detailed amendments or guidelines and prior to implementing any actions based on the information given in this publication.

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