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RESOURCES
Malta Budget 2013
Date: 30th November 2012

The last budget of this legislature was presented to parliament by Malta’s Finance Minister, Tonio Fenech.  Income tax cuts, as originally promised during the Nationalist Party’s electoral manifesto, were announced as were further renewable energy incentives.  Plans were also laid out to nurture new industries in Malta and further strengthen the core contributors to the Maltese economy.  The Government is projecting a deficit of €95 million, down to 1.7 per cent of GDP in 2013, which should be in line with EU targets to reduce the deficit gradually until a balanced Budget is achieved.  The economy expected to grow 1.2 per cent by the end of December, above the Eurozone average, which is reportedly going to recede by 0.4 per cent.  Unemployment in Malta was stated to be 6.5 per cent, less than half the Eurozone average.

 

Income Tax

 

The reduction in income tax was probably the most anticipated part of the budget presentation and most likely comes as a surprise to many outside Malta, given the austerity measures being implemented.  It was announced that middle income earners, that currently pay 35 per cent tax on part of their salaries, will eventually see the tax rate reduced to 25 per cent.  The Government proposed that over a three year period  income tax for middle income earners will be reduced, as of next year, to 32 per cent, to 29 per cent in 2014 and finally to 25 per cent in 2015.  These rates would apply to income between €19,500 and€60,000.  Currently, any income over €19,500 is taxed at 35 per cent.  Earnings over €60,000 per annum will continue to be taxed at 35 per cent.

Mr Fenech told a press briefing last Thursday that “We expect the reduction to cost the Government €10 million in the first year and €40 million in total”, however, much of that revenue shortfall is expected to be compensated for by excise duty increase on cement, cigarettes and fuel, which were also announced in the budget presentation.

 

For Married Couples

 

Chargeable Income in Euros

Rate

0 – 11,900

0

11,901 – 21,200

15%

21,201 – 28,700

25%

28,701 – 60,000

32% (2013)

29% (2014)

25% (2015)

60,000 and over

35%

 

 

For Parents

 

Chargeable Income in Euros

Rate

0 – 9,300

0

9,301 – 15,800

15%

15,800 – 21,200

25%

21,201 – 60,000

32% (2013)

29% (2014)

25% (2015)

60,000 and over

35%

 

 

For Singles

 

Chargeable Income in Euros

Rate

0 – 8,500

0

8,501 – 14,500

15%

14,501 – 19,500

25%

19,501 – 60,000

32% (2013)

29% (2014)

25% (2015)

60,000 and over

35%

 

 

Business Growth

 

A total of €14 million have been allocated for investing in the manufacturing industry and the High Energy Users Scheme (developed last year to support high energy users in the manufacturing industry) will be extended to the Gozitan industry and the tourism sectors.  €38 million will also be allocated to the Bio Malta Campus, another €17 million to the improvement of industrial parks in Bulebel, Hal Far, Kordin and Mosta and further investment in opening three new childcare facilities in these areas to attract more people, particularly women, to the work place.

The film industry will be able to take advantage of increase incentives in the form of rebates on film production.  Film producers will be able to take advantage of a rebate of between 20 and 23 per cent on their costs.  The rebate will increase to 25 per cent on productions that specifically feature the Maltese islands.

The MicroInvest Scheme, which grants tax credits of up to 40 per cent of the investment of small businesses (SMEs), will be extended for another two years.

 

The Environment

 

The Finance Minister also announced new feed-in tariffs for those who sell electricity produced from photovoltaic units.  It is expected that in 2013, energy will be generated from approximately 67,000 square meters of solar panels following a call for expression of interest in 2009.  Another call is planned in order to cover a further 40,000 square meters of roofs of public buildings.  Families who cannot install solar panels on their roof should soon be in a position to take part in a common system.  Furthermore, the solar water heaters incentive schemes have been further extended.

Tonio Fenech also announced that car registration tax will continue to be tied to the Euro standard, a calculation based on the emissions expelled by vehicles.  Plans to significantly reduce the registration tax on the least polluting cars (Euro V) up to 30 per cent were announced in a drive to continue to modernise cars on Malta’s roads.  Initiatives introduced last year to discourage those buying the more polluting Euro I and Euro III cars will now be extended to Euro IV cars,

 

Nurturing the Seas and the Sky

 

An area of 172,000 square metres, formerly the Marsa shipbuilding site, is intended to be converted into a dedicated maritime park, subject to the approval of an application for the project by the Malta Environment and Planning Authority (MEPA).  The application is scheduled to be submitted in 2013.  Given that Malta’s maritime register remains one of the largest in the world with more than 5,800 ships and super yachts currently registered, a dedicated maritime park is fitting. It is estimated that the industry contributed approximately €12 million to the Maltese economy this year.  The introduction of the park is intended to further cement Malta as a shipping hub and attract more stakeholders in the industry to take a more active role.

A zone dedicated purely to the aviation sector is also planned for the former Air Malta head office in Luqa.  The Maltese aircraft register currently includes 104 planes, an increase of 21 per cent over 2010.  With the launch of the Aircraft Lease Structure and considerable foreign interest being expressed, the industry needs to be vigorously promoted.  The development is therefore expected to take place by means of a joint public-private partnership and will incorporate logistical facilities, education, training and other related activities.  The Maltese Government has already invested €17 million in the infrastructure to set up the Safi aviation park with several companies already operating from it.

 

Strengthening Malta’s Core Services

 

The Finance Minister also emphasised the importance of the digital gaming industry, the financial services industry and the tourism sector and how we must continuously strive to remain ahead of the pack.  Recommendations proposed by the private industry are being taken on board by the Government and will be implemented. A new physical and strategic hub will be created to provide facilities enhancing the development of digital games.  Under the auspices of Malta Enterprise the B.START scheme will be introduced aimed at encouraging businesses to invest in the capital of new companies and benefit from a maximum tax credit of €30,000 (as approved by Malta Enterprise), whilst certain licensed hotels will also continue to benefit from investment aid in the form of a tax credit at a rate of 15% of capital expenditure.

 

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