Malta Budget Highlights 2016
The thrust of the 2016 Budget presented in Parliament by the Minister of Finance, continued on the concept focusing on the principle of Strengthening the Economy.
Fiscal and Economic Review
Economic growth is projected to reach 4.2 per cent in 2015. The Maltese economy is expected to continue growing in 2016, though with a lesser momentum and thus it is expected that economic growth will be in the region of 3.6 per cent in 2016.
Employment growth maintained a strong momentum and rose by an average of 2.0 per cent in 2015 but is expected to increase moderately by 1.3 per cent in 2016. Consequently the unemployment rate is expected to reach 5.8% in 2015 and 5.6% in 2016. Inflation should remain relatively low and is expected to be of 1.4 per cent in 2015.
The Government is reaching its targets to reduce its budgetary deficits and in fact it reached a deficit target of 2.1 per cent of GDP for 2014, and continued on this path of fiscal consolidation to further reduce the deficit to 1.7 per cent of GDP in 2015.
The labour market continued to perform well during the first half of 2015 as increases in the activity rate translated into higher employment whilst at the same time the unemployment rate decreased in comparison to 2014.
By the end of the second quarter of 2015, the labour force for persons aged 15 and over (i.e. the total number of people employed plus unemployed) increased to 195,465, reflecting an increase of 2,682 or 1.4 per cent over the second quarter of 2014. During the same period, total employment increased by 3,232 or 1.8 per cent to 184,871.
The unemployment rate during the second quarter of 2015 stood at 5.4 per cent, 0.4 percentage points lower than that recorded in the second quarter of 2014.
Total industrial turnover increased by 1.9 per cent in the first seven months of 2015 when compared to the same period in 2014. The increase in industrial turnover was mainly brought about by the improvement of 3.2 per cent in the export market, which outweighed the 2.4 per cent decrease in domestic sales.
In the first seven months of 2015, tourist activity has continued to prosper, with inbound tourism increasing by 5.2 per cent, over the previous corresponding period as total incoming tourists rose from 922,144 to 970,084. An increase was recorded in the majority of salient tourism indicators over last year, including, the nights spent by inbound tourists, which increased by 4.2 per cent as well as the expenditure from inbound tourism, which rose by 6.7 per cent.
With regards to the cruise passenger industry, arrivals that exclude the embarkations and the Maltese cruise passenger arrivals, increased from 203,272 to 277,023 between January and July of this year over the corresponding period of 2014.
During the same period, a significant number of new licences were issued by the Malta Financial Services Authority. Financial institutions were issued 6 new licenses, increasing the total to 37. In total, 18 investment services licences were issued, leading to 147 licences by the end of August 2015. The MFSA also issued 74 new Collective Investment Scheme (CIS) licences, increasing the total number of CIS licences to 1,178, as at the end of September 2015.
During the first nine months of 2014, the total number of gaming licenses increased by 8 per cent, to a total of 469 administered by 270 operators.
Exports contracted by 7.1 per cent when compared to the corresponding period in 2014, amounting to €2,107.4 million during the January to July period of 2015. This contraction mainly stemmed from the reduction registered in fuel exports.
Aggregate imports amounted to €3,807.6 million during the January to July period of 2015, increasing by 7 per cent, over the level recorded during the corresponding period in 2014. The visible trade gap widened by €410.5 million to stand at €1,700 million during January-July 2015, attributable to the decrease in exports of €160 million coupled with an increase in imports of €250 million.
The fiscal and financial measures in summary include:
- Cost of living increase of €1.75 for all employees, pensioners and students (on a pro-
- Reduction in the VAT rate of services concerning gym memberships, fitness centres,
football nurseries and other sports activities, from 18% to 7%.
- Effective 1st January 2016, income earned by Police Officers on extra duty for
organisations, entities, individuals or companies will be subject to a final and withholding
tax rate of 15%.
- Optional final and withholding tax of 15% on rental income from residential letting, will
be also extended to commercial properties. Inter-company rent agreements between
group of companies would not be eligible for the extension.
- When more than 51% of the heirs agree on a transfer value to sell immovable property
derived causa mortis, the property could be sold, after 3 years instead of 5 or 10 years
as currently in force. This measure is effective 1st January 2016 following the enactment
of the appropriate law.
- Consultation plans to address the problem of derelict commercial properties. Sanctions
and penalties may apply.
- Immovable property (within Urban Conservation Area) contracts of sale taking place
between 1st January and 31st December will benefit from a reduction in duty on
documents of 2.5%. (from 5% down to 2.5%).
- Reduction in property final and withholding tax from 8% to 5% for properties sold within
Urban Conservation Area.
- Refund of additional VAT paid on motor vehicles registered on the road during 2005.
- As from 1st April 2015, tourists over 18 years of age will pay €0.50 per night up to a
maximum of €5 per stay on the Maltese Islands. The funds generated would be utilised
to upgrade and maintain tourist zones.
- Despite the removal of eco-contribution on certain products, these are still harming the
environment. Therefore, products like chewing gum, plastic bags, alcoholic and non-
alcoholic beverage containers will be levied with a new excise tax.
- Complete removal of eco-contribution by 1st September 2016.
- Increase in excise tax on cigarettes and tobacco by an average of €0.30 per packet.
Effective introduction date: 13th October 2015.
- Launching of the “Access to Employment” (A2E) scheme to assist enterprises in
promoting job opportunities to individuals with special needs or unemployed.
- Launching of the Investing in Skills and Training Pays to encourage training for
employees, partly subsidised by ETC. It is being guaranteed that refunds are granted
within months and not years.
- Youth Guarantee scheme to be extended to the coming years.
- Renewal of incentives to encourage employers engage persons with special needs, by
refunding employers 25% of the gross pay in addition to a subsidy of €125 per week for
- Stipends to mature students attending MCAST or the University of Malta, as from 1st
- Increase in excise tax on cement to increase by €5 per tonne. Effective introduction
date: 13th October 2015.
- Provision of new child care services free of charge in Haz-Zebbug, St. Julians and
- Price for gas will remain fixed at €15 up to end of April 2016.
- Excise tax on lubricant oils will increase by €0.02, paraffin will increase by €0.03 per litre
and heavy fuel oil will increase by €3 per tonne. Increases effective 1st January 2016.
- Overall decrease in the price of unleaded petrol by €0.03 and the price of diesel by
€0.04. These reductions are effective 1st January 2016.
- Widening of the individual tax bands as follows:
|0%||0 - 9,100||0 - 12,700||0 - 10,500|
|15%||9,101 - 14,500||12,701 - 21,200||10,501 - 15,800|
|25%||14,501 - 60,000||21,201 - 60,000||15,801 - 60,000|
|35%||60,001 +||60,001 +||60,001 +|
By virtue of these adjustments, a single individual will save a maximum of €90 per
annum, a married individual will save a maximum of €120 and married couples utilising
parent rates, will save a maximum of €105 (per individual).
- Exemption on duty on acquisition of immovable property by first time buyers up to a
value of €150,000, will be extended up to 31st December 2016. First time buyers who
executed a promise of sale agreement or a contract of purchase after 1st July 2015,
would be fully refunded for the extra duty paid.
- Besides increase in COLA of €1.75 per week, the minimum national pension will
increase at an average of €8.92 per week for those pensioners over 75 years and €8
per week for those under 75 years of age..
- Extension from 40 years to 41 years representing the number of valid pension
contributions for individuals born after 1968.
- The work-in benefit, introduced last year for working married couples with children
younger than 23 years of age where the wife should not be earning more than €3,000
and the total income for the couple should read between €10,000 and €20,000, will be
retained also for 2016. The work-in benefit for these families will be entitled up to a
maximum of €1,000 per child. Single parents will be entitled up to a maximum of €1,200
per child and the total income for the same single parent will be between €6,600 and
€15,000. The benefit will be calculated after deducting the NI contributions from the
gross pay. All other benefits paid to the respective families will not be reduced
irrespective of the work-in benefit entitlement. From 2016, work-in benefit extended to
families with only one member in gainful employment and earning between €6,600 and
€12,700, and it would earn them up to €150 per child,
- Individuals who opt to continue working beyond pensionable age and would not apply
for the national pension, would have their pension increase by a % every year and the
increase will be retained in perpetuity.
- Pilot project fund launched for elderly people employing a full-time or part-time qualified
carer, whereby the Government would subsidise up to half of the minimum wage (and
pro-rata for part-timers). The fund amounts to €1 million. Individuals benefiting from
this subsidy will be removed from the waiting list to old people’s homes.
- Grant of €300 per annum to elderly persons of 75 years and over.
- Donations not less than €2,000, made to the Malta Community Chest Fund will be
allowable as a tax deductible expense in full.
- A flat income tax rate of 7.5% currently in force for water polo and football players will
now be extended to coaches and players active in any kind of sport.
- An incentive of 20% on the wage up to €5,000 granted for employees who are offered a
three-year contract or more.
- Gozitan students who study in Malta shall be given an allowance of €300 per annum.
- A new initiative under the programme relating to funds ERDF 2014-2020.
- Donations: A fiscal incentive in connection with arts, which relates to a tax reduction of
150% of the value of the amount of the donation to artistic initiatives.
- Discussions to attract private promoters that can assist in the Lost & Found and
Baroque Festival, and other related events to attract more tourists especially during the
- A new scheme with the aim to assist in the refurbishment of the apertures and balconies
facing St James Cavalier and Ordinance Street.
- A White Paper aimed for Sports entities in order to attract more investment of Sports in
- New incentives given to production and promotion of agricultural products. A certificate
and control system shall be launched with the aim to manage the farm waste.
- Proposal to introduce again the extension services in agriculture to assist farmers and
- Ta Qali vegetable market: introduction of a new system relating to payments for farmers.
- An electronic chip shall be marked on every vegetable crate.
- Children who work and live with their parents: the allowance of €16.30 will not be
- An introduction of vacation leave for IVF patients, which leave shall be specified after
consultation with parties concerned.
- Expropriation of immovable property: a maximum of €50,000 provided a proof of title is
- Malta Enterprise together with the Malta Council for Crafts are conducting a pilot
program designed to nurture and teach new craftsmen in the Maltese traditional artisan
industry with the intention to revive such craftsmanship.
- Malta Enterprise will issue a scheme in the coming days designed to fund new company
start-ups. The funds provided by Malta Enterprise range from €200,000 to €500,000
(depending on the type of industry). The funds should be paid back to Malta Enterprise
over a 10 year period.
- Malta Enterprise will be issuing fiscal incentives to companies promoting efficient use of
energy. Assistance will be given with respect to investment in projects designed
towards high efficiency cogeneration of power.
- Companies employing individuals who have a doctorate or are working for a doctorate in
science, ICT and engineering will benefit from a tax credit of up to €10,000 where the
employment is kept for a period of more than 12 months.
- SMEs which are renting immovable property from the private sector for manufacturing
purposes due to their expansion will be compensated by Malta Enterprise for their
relocation. This aid may be granted for a period of two years up to a maximum of
€10,000 per annum.
- Malta Enterprise will issue a scheme aimed at assisting enterprises to share knowledge
between them. The aim of this scheme will be for employees to share knowledge
between them for the growth of the employee himself and for his exposure to other
sectors of work. The assistance will be in the form of a tax credit or a grant depending
on the importance of the project to the company.
- Companies investing in immovable property for office use will be entitled to capital
allowances (Iinitial Allowance of 10% and Wear and Tear Allowance of 2%).
- The Government is working on a fiscal consolidation for Group of Companies.
Whereby, companies which are owned by the same shareholders may prepare an
aggregate tax computation and tax return.
- There will be a reform in the law relating to bankruptcy and insolvencies of
companies/business. Details about the reform have not yet been published.
- A guarantee system will be initialised which will serve as a guarantee to goods exported
to high risk countries. Details have not yet been given.
- The Government has once again committed towards the reduction of bureaucratic
measures especially with respect to SMEs.
- To further reduce the burden on SMEs and new companies, registration fees for SMEs
with a share capital not exceeding €1,500 and who register electronically will be reduced
from Euro 250 to Euro 100.
- The drafting of a logistics policy is under way. This policy will encourage more business
in the industry of logistics and transport in Malta, keeping in mind Malta’s geographical
- A white paper will be issued in the coming weeks analysing legal proposals, incentives
for better governance of family businesses as well as tax incentives designed at
sustainable transfers of the business between family members.
- A bill will also be issued with respect to social entrepreneurships.
- The reform will be designed at revising of regulations governing the Central Cooperative
Fund and the legislation governing co-operatives, including the minimum number of
member workers needed to set up a cooperative.
- The Government will be announcing the new rules with respect to opening hours for
retailers by the end of 2015.
- The performance guarantees requested when participating in a public tender will be
reduced from 10% to 4% when the contract value does not exceed €500,000
- In addition to the above, the single bond concept will be introduced. The single bond is
a system whereby an enterprise tendering for two or more projects with the same
department will be allowed to issue one performance guarantee for all projects instead
of various performance guarantees for the various projects.
- The Government is committed to continue to promote Malta as film making destination.
More funds will be allocated to marketing and PR.
- This type of assistance is designed to encourage more women to venture in self-
employment. The MicroInvest scheme will be revised in such a way that self-employed
women or companies with a high majority of women shareholders may be entitled to a
tax credit of up to €50,000.
- Incentives towards alternative energy were to date, only available to individuals who
own a roof on which to install photovoltaic panels. These incentives will now be
extended to individuals who do not own a roof. Such individuals will be able to invest in
solar energy generated through the use of photovoltaic panels in communal solar farms.
This initiative will be implemented in collaboration with private companies.
- A scheme will be implemented whereby a ‘white certificate’ will be awarded to individual
hotels based on the amount of energy saved (through their energy saving investments).
The certificate will be ‘traded’ for incentives or grants given to the same hotel.
- School Transport – New measures are being taught of, to encourage more families to
use school transport.
- Incentives are being thought of, to encourage more companies to offer transport to and
from work for their employees, car-pooling or encourage their employee to use public
- 15.25% of the value of bicycles and electronic bicycles (up to a maximum of €250) shall
be refunded upon their purchase.
- Companies which invest in bicycle racks (with the aim to encourage employees to go to
work by bike) will be refunded half of the expense.
- The care scrappage scheme will be reinstated as from 1 January 2016. This scheme
allows the Government to provide a grant to the individuals who scrap their 10 + year
old motor vehicle and purchase a new one.
- A grant of €7,000 when an old vehicle is scrapped and an electric car is purchased.
- A grant of €4,000 will be given upon the purchase of an electrical car.
- A grant of €2,000 will be given upon the purchase of an electric quadricycle.
- A grant of €2,000 will be given upon the purchase of hybrid passenger vehicles with
carbon dioxide emission between 50 to 65g/km
- A grant of €3,000 will be given upon the purchase of plug-in hybrid electric passenger
vehicles with carbon dioxide emission between 1 to 50g/km
- A grant of €900 will be given upon the purchase of a passenger vehicles with carbon
dioxide emission between 101g/km to 130g/km
- Persons who purchase a hybrid or an electric motor vehicle will be exempt from paying
- Companies which purchase a hybrid or an electric motor vehicle will be entitled to a
capital deduction of 50% of the value of the car in the year of purchase.
- Motor vehicles having travelled more than 160,000 km will be asked to do the VRT
- For 2016, motorcycle licences for motorcycles 125cc will be reduced to €10 per annum.
- Registration tax on electric motorcycles will be reduced to €0.
The above information is being provided as a general guide only and should not be considered as a substitute for professional advice.