Budget 2022

We welcome you to the main highlights of the Budget Speech 2022 delivered by the Minister of Finance, the Hon. Clyde Caruana.

ECONOMIC OVERVIEW

Hon. Clyde Caruana, opened his budget speech by providing an outlook of the Maltese Economy, a summary of which is in the following:

1. DEFICIT – The deficit for 2021 is expected to amount to around 11.1% of GDP whilst for 2022, this is targeted to decrease to 5.6% of GDP.

2. EMPLOYMENT – Registered unemployment rate has decreased from 3.6% in 2019 to 3.2% in August 2021.

3. ECONOMIC GROWTH – The economy is expected to grow by 6.5% in 2022 representing a full recovery from the economic down turn due to Covid-19. The economy is further expected to grow by 4.7% in 2023, and 4.5% in 2024. 

4. INFLATION – The inflation rate is projected to trend around 1.9% in 2022.  

5. GOVERNMENT DEBT – Government debt is expected to increase to 61.3% of GDP, further increasing to 61.8% in 2022.

COST OF LIVING ADJUSTMENT, Employment & pensions

• The Cost of Living Adjustment (COLA) will be of Eur 1.75 per week the same as 2021.
• Part-time workers will now be allowed to pay social security contributions on more than one part-time job, up to 40 hours a week of employment.

• Part time workers will now be subject to a 10% tax rate (down from 15%).

• Pensions will be increased, by Eur 5 per week as from 2021,which consists of a Eur1.75 COLA increase coupled with a Eur3.25 weekly increase.

• €150 in-work benefit for the minimum wage employees not exceeding €20,000 and that work atypical hours, nights, weekends and on a shift basis in the hospitality, administration, support services, manufacturing and transportation.

• There will be a decrease in the tax rate on overtime pay for employees not exceeding Eur 20,000 and not having managerial roles. Tax on overtime on the first Eur10,000 will be at 15%.

• There are higher in-work benefits for working parents with the eligibility band extended significantly. Couples who both work and earn up to a combined Eur50,000 a year will be eligible (up from Eur35,000). Single parents or families with one working parent will be eligible if they earn up to Eur 35, 000 a year.

• If you are having a baby or adopting a child next year, you will be getting an additional Eur 100. A grant given to new parents that currently stands at Eur 300 will be increased to Eur 400.

• Allowances for children with a disability will rise to Eur 1,560 per year. Whilst grants for careers of people with severe disabilities will be increased by Eur 300 to reach Eur 500. The grant for a career at home will rise to Eur 7,000 (from Eur 6,000). Subsidies for the home helper of your choice scheme will rise to Eur 7/hr (from Eur5.50).
• Aid to Disadvantaged Children – Eur 10,000 for school heads to allocate to children who come from disadvantaged backgrounds, to spend on food or other basic things they need.

• Assistance for affordable Housing – Pre-1995 rent housing valued at Eur 250,000 that needs structural repairs will now be eligible for subsidies of up to Eur 25,000.

• Tax refund cheques – Cheques will range from Eur 60 to Eur 140.

• Free childcare services – Free Childcare services will be extended to people working nights and shifts.

• Student Stipends – Stipends are to raise by 10% and students will now be allowed to work 25 hours a week without forfeiting their stipends.

FISCAL Measures

• Tax incentive for companies  – Entities with unused capital allowances due to losses suffered as a consequence to the pandemic may surrender such losses to other group companies. This measure will be applicable for the year 2021 (year of assessment 2022).

• Regular amnesties on tax interest and penalties will end and as of  June 1^st 2022 and the interest on unpaid tax will be 7.2% annually (0.6% per month).

• There will be no capital gains tax or stamp duty, on the first Eur 750,000, on the sale of properties that are more than 20 years old and abandoned for the past seven or more years, in UCAs or built in the ‘traditional style’.

• First time buyers of traditional properties will receive a grant of Eur 15,000.  If the property is in Gozo, the grant will be Eur 30,000.

• VAT refunds when restoring old properties – Work to restore old or abandoned homes, or any property within a UCA, will as of 12^th October 2021 be able to pay no VAT on the first Eur 300,000 in work, saving up to Eur 54,000 in VAT.

• Existing schemes for first time buyers will remain in place.

• Existing reduction of duty from 5% to 1.5% will remain, on the transfer of businesses inter vivos to descendants.

• Start-up Visas – The government will be attracting start-ups to Malta by offering a ‘start-up visa’. Malta enterprise will work with Community Malta to develop the program, to attract non-EU entrepreneurs.

• A new 7.5% tax rate will be introduced for the fiscal year of 2022 for Artists.

RENEWABLE ENERGY, Transport & Infrastructure

• Infrastructure – The government will be spending Eur 470 million on industrial estates, road building and works done.

• From the 12^th of October 2021, the incentives for the purchase of electric or plug-in hybrid cars will increase by Eur 3,000 to a total of Eur 11,000 which can increase by another Eur 1,000 if the vehicle scrappage scheme is used in tandem with it.

• Night-time charging rates for households with electric vehicles will remain, whilst a scheme for the installation of solar panels on vehicles such as minibuses, coaches and trucks worth up to Eur 900 per applicant will be introduced.

• Some 1,200 charging points will be built across the country in the space of three years as well to cater for the increase in electric cars.

• VAT refunds for bicycles and electric bikes will continue, as will existing schemes for scooters and other such transport.

• Scrapping of motor vehicles – grants for that will rise to Eur 2000.

• Public Transport will be free of charge as of October 2022.

• There will be the afforestation of land consisting of 500,000 m^2.

• Contractors have to be licensed in order to operate. The license will be a certificate of quality and contractors will be eligible for incentives only if they follow such quality levels.

• Schemes to encourage the purchase of solar panels, solar water heaters, heat pumps and other such devices will be extended.

• The government intends to revamp the way in which the utility billing company charge people for their water and electricity usage.

• A new scheme as part of the Farm to Fork Strategy will see the introduction of a carbon farming initiative, wherein farmers can use a grant of up to Eur 8,000 to change fields which are not being used or are out of production, to be used for agro-foresting based on fruit trees.

Disclaimer

The information contained herein is based on our interpretation of the Budget 2022 and should not be used as a substitute for professional advice. No liability for errors of fact or opinion is accepted.