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Budget Measures Implementation Act and other recent changes

Deloitte Malta Tax Alert

This tax update will highlight the salient legislative measures brought into force through Act XVI of 2017, Budget Measures Implementation Act, 2017 (the ‘Act’) enacted to implement the measures announced by the Minister of Finance during his budget speech for the financial year 2017. This tax update also outlines other key relevant legislative amendments enacted in 2017 through various legal notices.

Measures amending the Income Tax Act

  • The re-introduction of the tax exemption on capital gains realized upon the transfer of shares listed on the Malta Stock Exchange which were held prior to listing (such gains were previously taxed at 15%).
  • 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.
  • Transfers of immovable property that was acquired causa mortis on or after the 25 November 1992 where such transfer is effected by means of a judicial sale by auction shall be subject to tax at the rate of 7% on the transfer value. Such transfers were previously taxed at 12% final tax on the difference between the transfer value and the value as declared in the causa mortis declaration.
  • Married women over the age of 40 years returning to employment after an absence of at least 5 years from gainful occupation, and earning not more than €9,450 could benefit from a 5 year tax exemption. This measure has now been extended to any married person returning to employment after an absence of at least 5 years from gainful occupation (subject to certain conditions).
  • Any person registered with the Housing Authority for the purpose of renting out immovable property for at least 7 years under a scheme administered by the said Authority, shall be chargeable to 5% final tax on the gross rental income derived from such immovable property (subject to rules yet to be prescribed).
  • Pensioners of at least 61 years of age and who are in receipt of a pension earned on or after 1 January 2017 are eligible to a tax rebate to be set off against their tax charge. This rebate is calculated at 15% of the difference between the pension income and the exempt portion of their income, depending on their tax status. The rebate is capped at amounts which vary according to the tax status of the recipient.

Measures affecting the Duty on Documents and Transfers Act

  • Individuals buying their first residential property will continue to benefit from a duty exemption on the first €150,000 for acquisitions taking place during 2017.
  • Individuals acquiring a residential property in Gozo by the end of 2018 will benefit from a reduction in the duty rate from 5% to 2% provided that the promise of sale is registered with the Inland Revenue Department by 31 December 2017.
  • An exemption from the payment of duty has been introduced in the event that an undivided share of the dwelling house is transferred from the heirs of the deceased co-owner to the other co-owner, provided that duty has been paid by the heirs on the transmission causa mortis. This applies only in the event that the co-owners had declared, when acquiring the said property, that they acquired such property for the purpose of establishing therein or constructing thereon their sole ordinary residence.
  • Duty upon a transmission causa mortis of a dwelling house which was the ordinary residence of both the deceased and the heir shall be charged at the rate of 3.5% on the portion of the said property value which exceeds €35,000 but not €150,000 (previously €70,000).
  • Duty upon a transmission causa mortis of a dwelling house which was the ordinary residence of the heir but was not occupied by the deceased, shall be charged at the rate of 3.5% on the first €150,000 (previously €70,000).
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