The Maltese Budget for the year 2023 has just been announced with the theme of “Certainty and Stability”. As the finance minister announced, the Budget 2023 is a social budget, even more so than last year’s budget. Where most European countries suffered greatly during the recent year due to the covid-19 pandemic, Malta’s economy grew by 10.3% in 2021, 4.9% more than the EU average.
The IMF (International Monetary Fund) predicts a rise in inflation from 4.7% to 8.8% in 2022 and 6.5% in 2023. It is estimated that next year, €600 million will be allocated in order to subsidize energy and cereals, approximately 10% of the government’s expenditure for the year. Taking all this into account, here are the main points announced during this year’s budget for you to keep an eye on.
Expectations
- In real terms the economy will grow by an estimated 3.5% next year,and 7.3% in nominal terms, and private consumption will increase to around 4%. The government is also anticipating that investment will increase by 5.9%.
- Employment is expected to rise by 3.4%, with unemployment being at a low of 3.1%, with inflation moderating to 3.7%.
- Significant resources and funds will be allocated towards upskilling Malta’s domestic work force, with emphasis on improving the local employment market.
- Announcements will be made in the upcoming days declaring that more airlines will be registered in Malta. The government will also be creating a masterplan for civil aviation and the area in proximity to the airport.
- Land reclamation is still a possibility with government officials and experts exploring a number of projects. New studies will be undertaken to assess the feasibility and environmental impact of such projects.
- Electrical Vehicle charging points to be increased by 1,200 across the country by 2020, while initiatives concerning solar panels, heat pump water heaters and well restorations remain untouched.
- An industry wide review of wage regulation orders with the MCESD (Malta Council for Economic and Social Development)
Income & Other Taxes
- The non-taxable pension income threshold will increase to €14,968, and those on the married rate will keep on taking advantage from the tax relief on any other income up to €3,600 per annum.
- Parents with disabled children will be allotted with €200 in tax credits per year. Furthermore, parents who quit their jobs to take care of their disabled children are to receive €4,500 a year broken up into four payments.
- Rent capping has also been increased from €400 to €500 for a one-bedroom, from €500 to €600 for a two-bedroom and from €600 to €700 for a three-bedroom apartment.
- Tax refunds to remain in place and will range from €60 to €140.
- An increase of 20% to 40% in non-taxable pension income to encourage pensioners to remain economically active after itching pension age.
- Assistance has been increased to a maximum cap of €100,000 to Maltese entities entering into digital and sustainable capital projects.
- The part-time and over-time tax rules will remain unchanged.
- Authors deriving royalty income will benefit from a further reduced tax rate from 15% to 7.5%.
- A reduction in stamp duty from 5% to 1.5% on the transfer inter-vivos of company shares and commercial tenements of family businesses in intra-family donations.
- Various residency schemes, such as the Global Residence Programme and the Malta Residence Programme shall be evaluated, revised and updated to determine if such programmes truly reflect the current international conditions.
- Unabsorbed capital allowances due to the losses incurred by companies by the COVID pandemic, during 2020 and 2021, awarded with a further extension. Companies can also make use of this deduction against all taxable income from other companies, which make part of the same group for the base year 2022, in addition to the base year 2021.
- Social enterprises will be eligible for a €70,000 tax credit over three years under the Micro Invest scheme.
- The tax rebate given to parents with children who participate in arts, cultural activities and sports will be increased from €100 to €300.
- The scheme allowing people restoring old homes to claim back up to €54,000 in VAT will continue to apply.
Social measures
- Cost of living allowance increases to €9.90 every week for all employees, pensioners as well as those on social benefits. The increase of student stipends will be based on a pro-rata basis.
- Pensions are also set to rise by €12.50 per week, equal to €650 per annum.
- Pensioners will also be granted with €1.50 additional variable increase and service pensions will enjoy an increase of €200 to their social security exemption capping, which will now stand at €3,266 per annum.
- Widows will be given an additional €3.54 per week on average.
- A new threshold for the government scheme to aid those who cannot afford the initial deposit for their mortgage to be raised to €225,000, to better reflect the current property’s market value.
- €150 to be given to workers who earn less than €20,000 per annum and work atypical hours in certain industries.
- First time buyers to benefit from €10,000 grant spread over ten years when purchasing a property valued up to not more than €500,000. This will apply to those properties bought from 1st January 2022 onwards.
- The schemes for first-time and second-time buyers, as well as the schemes for Gozo properties and the UCA scheme will remain in effect.
- Those not working between the ages of 18 and 30 who are receiving mental health care to be granted with up to two years in social security but will need to prove to have received psychiatric care.
- Those in low-income positions will receive their increased COLA payment by December, with each grant being worth an average of €300.
- Paternity leave has been increased from 1-2 days to 10 days, whilst a 2-month paid parental leave has been introduced.
- Children allowance will be increasing by €90 per child.
- The Fostering Grant will also be seeing considerable investment. Under the current policy the Foster Care Allowance ceases immediately after the child is adopted but with new regulation this will be phased out across four years. Parents will receive 80% of the grant in the first year with a drop of 20% every subsequent year.
- An extra €50 a year will be given to those who are retired but do not qualify for a contributory pension. Those with less than five years’ worth of contribution will get €450 a year while those with five to ten years will get €550
Other measures
- All year 7 students will be provided with a laptop, starting the next scholastic year.
- The Business Enhance schemes for Small and Medium Enterprises (SMEs) to be extended, with SMEs being able to benefit €40 million in cash grants.
- An EU funded Digital Innovation Hub project will be set up, which will help SMEs and start-ups to include cloud-based computing and AI into their business.
- Malta Enterprise is to provide guidance and technical support to companies to reach the required ESG criteria.
- Rent subsidy regulations given to local businesses will be increased from €25,000 to €50,000 and such assistance will be extended from an initial three-year period, to an extended period of six years.
- €5 million to be allocated to private collaboration in Research and Innovation within the private sector.
- ‘Start in Malta’ will be launched during the year 2023 to provide a non-stop-shop for start-ups, including assistance with applications to benefit from existing schemes.
- Cash-grants are to be doubled by 50% to those companies investing in digital and sustainable projects to cover 50% of the investment capped at €100,000.
- Businesses and start-ups based in Gozo will keep profiting from further financial assistance of 10% in tax credit, which can increase to %20 depending on whether the company invests in reducing its carbon footprint.
- Enterprises investing in digital projects that reduce consumption of energy, water or reduce the use of material and waste will be granted a maximum tax credit of €40,000.
- Malta Enterprise will establish a new Business Incubation Centre through EU funding for innovative start-ups to continue diversifying Malta’s economy.
- Police, army and civil forces members who provide an additional 4 years of service will benefit from an increase in pension income.
- New interest-free loans will be given to companies who wish to switch their vehicle fleets to once powered by electricity.
The above highlight the main points discussed in Malta’s proposed budget for the year 2023 which seem to lay out a comprehensive plan of what the government has in store for next year. If you require any further clarification or a better insight, please get in touch.
