The Minister of Finance, the Hon. Prof. Edward Scicluna, presented his 2014 Budget Speech on 4 November 2013.
Cost of Living Adjustment
Cost of Living Adjustment will be €3.49 per week. Consequently, the minimum wage will increase from €162.19 to €165.68 per week. Tax law will be amended so that all persons earning the minimum wage will not be subject to income tax. Pensioners, the only income of whom is a pension that does not exceed the minimum wage will be tax exempt as from 2014.
Personal Income Tax
The tax bracket of 32% will be reduced to 29% in 2014 and there will be an increase in the tax-free bracket to €9,800 in relation to parental rates.
The progressive tax rates applicable prior to the introduction of the 32% tax rate will be applied on dividends received.
In the case of individuals maintaining children in tertiary education and benefitting from the parental computation, the qualifying age of the children will be increased from 21 years of age to 23, and the MCAST and ITS will be also considered as tertiary educational institutions for this purpose.
|2014 Tax Rates||Single Rates €||Married rates €||Parental rates €|
|0%||0 – 8,500||0 – 11,900||0 – 9,800|
|15%||8,501 – 14,500||11,901 – 21,200||9,801 – 15,800|
|25%||14,501 – 19,500||21,201 – 28,700||15,801 – 21,200|
|29%||19,501 – 60,000||28,701 -60,000||21,201 – 60,000|
|35%||60,000 +||60,000 +||60,000 +|
Part time employment
In the case of part time employees, the maximum limit on which the income tax rate of 15% is to be applied is to be increased from €7,000 to €10,000, whereas as for part time self employed persons, the income ceiling is to be increased from €7,000 to €12,000.
Business owners who are part time self employed will be able to employ two part time employees and still apply the 15% income tax rate on their income.
The tax rate of 15% will be applied in the case of pensioners who are part time self employed given that their income does not exceed the minimum income on which they would pay the lowest rate of social security contributions.
In the case of footballers, a preferential tax rate of 7.5% is to be applied on their part time income resulting from the sport.
Working women over 40 years of age
Women over 40 years of age returning to work after an absence of five years or more and whose income will not exceed the minimum wage will not be required to declare their salary in the joint tax computation with their husbands. Such measure is to be applied for a maximum period of five years resulting in an annual tax saving of approximately €800.
Employment of middle aged individuals
Incentives for training and employment of unemployed persons between 45 and 65 years of age will be introduced by means of a reduction in income tax for the first two years of such person’s employment. Employers that will engage middle aged employees will be benefitting from a reduced rate equal to 50% of training cost to such persons, capped at €400.
Incentives for individuals wishing to work
In order to assist unemployed individuals to enter into the workforce, such persons will still benefit from 65% of the umeployment benefit during their first year of employment, 45% during the second year and 25% during their third year. Moreover, 25% of these annual benefits will be received by the employer over the three years.
Incentives for the employment of apprentices
Employers will be benefitting from a tax deduction of €600 for each work placement and of €1,200 for each apprenticeship offered.
Benefits for single parents
A credit between €200 and €1,000 will be granted to single parents in receipt of social benefits who opt to enrol for vocational courses or full-time education.
Tax deduction on fees paid for child care centres
The maximum tax deduction for the use of child care centres is to be increased from €1,300 to €2,000.
Electricity and water
As from March 2014, the residential electricity tariff is to be reduced by an average of 25% and the price of water is to be reduced by an average of 5%. As for businesses, these tariffs will be reduced in 2015.
Vehicles and motor cycles registration tax
There will be a decrease in the registration tax of certain vehicles imported from outside the European Union, and which have CO2 emissions not greater than 150g/km, and which are not older than eight years. In the case of motor cycles, having an engine capacity of 250cc or more is to be reduced by 25%.
Car registration tax refund
A sum of €3.5 million will be allocated for the granting of registration tax refunds to those who registered a vehicle for personal use between May 2004 and December 2008. Such refunds will be spread over a period of seven years.
Excise duty and other taxes
Excise duty on fuel, tobacco, cement and alcoholic beverages and motor vehicle registration and licence fees and tax rates applicable to bunkering of fuels will be revised. The result of such measures will be an increase in Government revenue of approximate €21.4 million.
The reintroduction of the MIcroInvest Scheme will allow small enterprises and self employed individuals to benefit from a 45% tax credit on eligible capital expenditure, and such tax credit increases to 65% in the case of small enterprises and self employed individuals carrying out activities in Gozo.
As from January 2014, there will be a change in the allocation of payments of VAT. On filing the VAT return on time and the corresponding VAT is paid, such payment will be appropriated against the VAT due as per that VAT return and the older VAT balances, interest and penalties would remain outstanding so that no further interest continues to accumulate on such VAT balances. Changes of a similar nature will be implemented so that payments are not appropriated to VAT still in dispute by the VAT registered person.
Currently, a VAT return is deemed not to have been filed if it is not accompanied by the full VAT payment declared to be payable in the VAT return. Such provision is to be removed from the VAT legislation. The current rate of interest on late payment of VAT of 9% per year is to be reduced as may be determined by the Minister of Finance from time to time.
Offences against the income tax legislation
Currently, in the case of a second offence against the provisions of the Income Tax legislation occurring within five years from when the individual has been warned by the Court following the first offence, the Court is obliged to sentence the person to three days imprisonment in addition to any other punishment. Such provision will be amended so as to allow the Court to decide at its discretion as to whether to sentence the person in question or to impose a fine of €2,000.
Combating the tax evasion
A system to encourage persons who consume construction related services to substantiate the estimated value of works carried out through the presentation of receipts will be introduced. Failure to present such receipts might result in liability to pay VAT due thereon.
Illegal cases where foreigners operating in Malta that do not abide to fiscal or employment statutory obligations, resulting in gaining unfair competitive advantage, can be reported through an new online system that will be introduced.
Investment registration scheme
This Budget saw the re-introduction of the Investment Registration Scheme whereas individuals who have undeclared stock, investments or funds, locally or overseas will be given the chance to regularise their position through this scheme.
Withholding tax on rent
The landlords of residential property will have the option to be taxed at 15% on the gross rental income of such property. Undeclared income derived from rent will be subject to a final tax of 35% on the gross rental income, and further penalties and interest would be imposed in such circumstances. There will be greater enforcement in this sector and the Government has warned of a zero tolerance towards tax evasion.
Duty on documents
Exemption to first time property buyers
Individuals who never owned any immovable property, directly or indirectly, prior to 1 January 2014, will be exempt from paying duty payable on the first €150,000 of the value of the immovable property purchased by such persons.
Architects appointed by Government
Tax authorities will start accepting valuations prepared by private architects to determine the duty that is to be paid on transfers of immovable property. To avoid abuses, the necessary safeguards and controls will be introduced.
Property transmissions to persons with disability
Duty exemption will be extended on bona fide transmissions causa mortis of immovable property where the transferee is a person with disability. Presently, a duty exemption applies in cases of immovable property consisting of the deceased and the heir’s ordinary residence.
Sale by auction
The 2.6% duty currently payable on sales by auction of movables exceeding the value of €230 will be removed.
Interest on causa mortis transmissions
Capping was implemented on the interest payable by heirs on late payment of duty arising upon causa mortis transmissions so that the interest will not exceed the amount of duty.
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Disclaimer: The above updates reflect high level accouncements made in the Budget Speech on 4 November 2013, which are typically implemented through detailed legislative amendments and tax guidelines that have yet to be published. Persons using this information 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 these updates. This update contains general information only, and CAMILLERI GALEA LTD.is not rendering professional advice or service by means of this update. Before making any decision that may affect your business or finances, you should consult a qualified professional adviser. CAMILLERI GALEA LTD. shall not be responsible for any loss whatsoever sustained by any person who relies on this information.