HIGHLIGHTS OF THE 2020 BUDGET SPEECH
We welcome you to the main highlights of the Budget Speech 2020 delivered by the Minister of Finance, the Honourable Prof. Edward Scicluna.
ECONOMIC OVERVIEW 2019
Hon. Prof. Edward Scicluna, opened his budget speech by providing an overview of the country’s economic outlook. The following is a short glimpse:
1. GDP – In 2020 real GDP growth is expected to be 4.3%.
2. EMPLOYMENT – Registered unemployment rate during 2018 was of 3.9%. The unemployment rate in August of 2019 stood at 3.3%.
3. INFLATION – Inflation rate during 2020 is expected to be 1.9%.
4. TOURISM – During 2019, inbound tourists have increased by 4.5% over the figure reported in 2018.
5. GOVERNMENT DEBT – At the end of 2019, this expected to be 43.06% of GDP.
COST OF LIVING ADJUSTMENT, PENSIONS & SOCIAL MEASURES
1. The Cost of Living Adjustment (COLA) will be of Eur 3.49 per week.
2. In view of the increase in prices of certain products, an additional bonus will be given of Eur 15 for single person households and of Eur 35 for of more than two persons.
3. For the 5th consecutive year, pensions will be increased by Eur 3.51 per week over an above increase in COLA.
4. The income tax bracket until which pensionable income will not be taxed, will be increased to Eur 13,798. This will be increased to Eur 15,798 for married pensioners who receive a single pension.
5. The portion of service pension which is not to be deducted from the retirement pension will be increased by Eur 200, totaling up to Eur 2,666.
6. The bonus (which ranges between Eur 200 and Eur 300) which is being paid to persons who do not have sufficient national insurance contributions accumulated to qualify for a pension, will also be paid as of next year, to persons who are over 75 years of age.
7. Supplementary assistance paid to low income pensioners over 65 years will increase by Eur 50 per year.
8. The incentives related to the ‘Third Pillar Pensions Scheme’ and the ‘Voluntary Occupational Pension Scheme’ will continue to be available to both companies and individuals.
9. Elderly people over 75 years who are still living in the community will be compensated by a grant of Eur 300, whilst elderly people who are over the age of 80 years and are still living in the community, will receive an additional grant of Eur 50, as of next year. This grant will be extended to elderly people who live in private residential homes.
10. A bonus will be introduced as from January 2020 of Eur 300, which will be paid to families for every birth or adoption and this in order to alleviate costs.
11. Disability allowance will increase to Eur 161.40 per week.
12. VAT exemption on the purchase of special apparatus which would be required by disabled persons will increased by Eur 400 with a maximum of Eur 1,000.
13. Sickness benefits are being enhanced for people who are suffering from conditions such as Fibromyalgia, ME or who are receiving treatment at the Sir Anthony Mamo Oncology Centre.
14. Parents of children who suffer from rare diseases, and who do not have any other option but to quit their employment, will have a credit of contributions up to a period of 8 years.
1. Employees will be given an additional leave day to add to their annual leave balance brining this up to 27. Furthermore the compensation of public holidays which fall on weekends, will continue to be implemented.
2. Tax refunds which have been paid in the last two years will be repaid next year as well, and this is aimed to reduce tax on employment income.
3. As of 2020, the first 100 overtime hours worked by employees who have a salary of less than Eur 20,000 per annum and who do not hold a managerial position, will be taxed at a reduced rate of 15%.
1. A grant of Eur 850 will be given to Maltese students who start studying a foreign language abroad.
2. An exemption from VAT has been introduced in relation to the provision of educational or vocational training and distance learning.
3. As of next year, the Government will introduce the introduction of an online Maltese spell checker.
4. Free transport scheme presently available for children in primary and secondary schools, will be extended for another year.
1. The first-time and the second-time buyers measures have been extended for another year. Furthermore, as of today 15th October 2019, all contracts entered into by first-time buyers will benefit from an exemption from duty on documents on the first Eur 175,000.
2. The measure introduced where duty on documents is decreased from 5% to 2.5% in relation to properties in UCA, will be extended for another year.
3. The measure which was introduced where persons purchasing a residence in Gozo, benefit from a decreased duty on documents of 2% was extended for another year aswell.
4. Another scheme has been launched aimed at persons under 40 years of age, who do not have sufficient liquidity to effect the 10% deposit on a home loan. The government, in collaboration with a bank, shall be granting loans of up to Eur 17,500 which will be repayable over 15 years. The interest attached to such loans will be paid by the government.
5. The benefits on rent being presently paid to persons whose rent exceeds 25% of their gross income, will extend also to persons who have an income of up to Eur 19,000 and up to Eur 32,000 in the case of families with two children.
6. As of January 2020, the first Eur 100,000 of profit derived on the transfer of any right acquired through a promise of sale agreement will be subject to a reduced rate of 15%.
7. The present scheme of 3.5% stamp duty payable by persons who inherit their residential property, up to a maximum property value of Eur 150,000, has been increased up to a property value of Eur 175,000.
1. A special electricity rate of Eur 0.1298 per unit is being introduced when charging electric cars at one’s home.
2. Single use plastic products will be prohibited in Malta. The importation or manufacturing of single use plastic bags, cutlery, straws and plates will be prohibited as from January 2021, whereas the sale and distribution of such items will be prohibited as of January 2022.
3. A grant of 25% up to a maximum of Eur 1,000 will be given on the purchase of renewable energy battery storage. This scheme will be available to persons who had already installed solar panels and who are no longer benefitting from the feed-in tariff.
4. Assistance of up to Eur 3,000 will be given to shops owners who create ‘Green Corners’ within their shop floor in order to enable customers to bring their own fillable containers.
5. Malta Enterprise will be introducing an incentive aimed at construction companies of up to Eur 200,000 when these scrap old machinery and replace these by new energy efficient ones.
6. The present grant of Eur 400 given on the purchase motorcycles, scooters and electric bicycles is being extended for another year. Furthermore, the full VAT refund on the purchase of bicycles and electric bicycles is also being extended.
BUSINESS & ECONOMIC COMPETITIVENESS
1. Schemes including Micro Invest, Business Start and Start-Up Finance schemes, will be extended.
2. Transactions related to transfers of businesses to family members will continue to attract a reduced duty on documents rate of 1.5%. This scheme has been extended for another year.
3. The Malta Development Bank (MDB) is under going negotiations to implement guarantee schemes with more banks and to also provide co-financing opportunities.
4. The Malta Stock Exchange will implement new initiatives to promote the issuance of Green Bonds in order to promote investment in clean energy and sustainable resources.
1. Incentives will be given to companies which relocate their operations in Gozo.
2. Further incentives will be given to companies which create employment opportunities in the fields of teleworking and back office work, in Gozo.
3. The assistance presently being given to Gozitan employees and students who work and study in Malta, will be extended for another year. The rental assistance being presently provided to Gozitan students who study and live in Malta, will continue to be enhanced by Villa Lauri hostel project.
4. Further work will continue to be carried out in order to address the regional pay-gaps.
COMBATTING MONEY LAUNDERING AND TAX EVASION
1. As of next year cash transactions exceeding Eur 10,000 will not be allowed on the purchase of property, vehicles, yachts, precious stones and arts.
2. A new entity will be set up which will be referred to as the ‘Financial Organised Crimes Agency’ which will complement the Economic Crimes Unit.
For further information on the measures announced, please do not hesitate to contact our team of experts on [email protected] or reach out by phone on 21654567.
The information contained herein is based on our interpretation of the Budget 2020 and should not be used as a substitute for professional advice. No liability for errors of fact or opinion is accepted.
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