Fiscal Measures – Malta Budget 2021

In his budget speech for Malta’s fiscal budget 2021 Minister Scicluna announced various fiscal measures designed to incentivise voluntary organisations and other small businesses and increase the disposable income of households. The main fiscal measures are highlighted below.

Pension Plans

The Income tax exemption of 25% of the annual contributions made to private pension plans falling under the Third Pillar Pension Scheme, has been increased as this will now be applicable on contributions up to €3,000 per annum (€6,000 in case of married couples where only one of the spouses works).  Thus, the tax credit will increase from the current €500 p.a. to €750 p.a. and €1,500 for a category of married couples’ respectively.

In line with above measure the same capping of €3,000 has been made applicable also on Voluntary Occupational Pension Schemes.

Royalties

A novel measure intended to promote literary works by Maltese authors is the imposition of a special final tax at a rate of 15% on royalties derived from literary works.

VAT

The Minister announced that small businesses can now opt to be exempt from charging VAT on their sales up to €30,000 annual turnover – a substantial increase of €10,000 from current capping. This measure will significantly reduce the costs of compliance for a substantial number of small businesses and part time economic operators. This measure is applicable to those small business opting out of the VAT refund scheme.

Partial Exemption on Surpluses of Voluntary Organisations

In a bold move, designed to promote the voluntary organisations sector, Government has decided that duly registered and compliant, Voluntary Organisations , would benefit from a tax exemption from income tax on their annual surpluses,  if their annual income does not exceed €50,000. This measure will certainly incentivise this sector to expand.

Tax Refund

The now customary tax refund for those earning less than €60,000 annually has been increased to between €45 and €95. This is as always payable back to taxpayer on the basis of the previous year’s total declared income for income tax purposes.

Pensioners

Pensioners who are married and are both in receipt of a pension, would benefit from an exemption from tax on €3,600 per annum worth of non-pension income.

Family Business Transfer Tax

The reduced rate of duty of 1.5% applicable to transfers of family businesses has been retained and extended for another year. This measure will assist in and facilitate inter-generational business transfers and restructuring.