Budget 2020 Malta

14 October 2019

Budget 2020 Malta

On the 14th of October 2019, the Finance Minister Hon. Edward Scicluna presented the Malta Budget measures for 2020.


1. Economic Highlights

1.1 Economic Outlook

Although not growing at the same rates as in the last few years, Malta’s GDP growth is still strong compared to the EU average. The government was originally looking at closing 2020 with a financial surplus of 1.5 % of GDP, however this has been reduced to a new forecast of 1.4 %, based on a slower economic growth. Moreover, Malta’s debt-to-GDP dropped to 43% in 2019 and is expected to be even lower at 40.4% in 2020.

During 2019, the number of tourists visiting Malta has increased by 4.5% when compared to 2018, which was already a record-breaking year.


1.2 Other Economic Snippets

The Government aims to keep unemployment low at 3.5% during 2020 resulting in a 4.1% improvement in the employment.

The inflation for 2020 is expected to be at the rate of 1.6%.


2. Employment Market, Pensions and Social Measures

2.1 Cost of Living Allowance (COLA) and Labour Market Incentives

The 2020 cost of living allowances applicable to all workers, pensioners and social benefits beneficiaries will increase to €3.49 per week. Students will be granted a pro-rata increase in their stipend. The progressive tax bands will be adjusted to ensure that the minimum salary will remain tax exempt.

Moreover, the Government will incur the cost of a one-off bonus, which will amount to €15 for single person household and €35 for all households with two or more members.  This is meant to compensate for the 2019 bread and milk price hikes.

The tax rate on overtime will be reduced to 15% for the first 100 hours of overtime carried out by workers, who earn less than €20,000 basic salary per year and are not in a managerial position.

All employees will be granted an additional day of annual leave in 2020. This brings the total annual leave entitlement to 27 days per annum.


2.2 Pension Increases

Pensioners will be getting an additional €3.51 over and above the cost of living adjustment of €3.49 per week, thereby resulting in a total increase of €7.00 per week, or €364 per year.

The tax brackets for pensioners will be further amended such that pensions will be tax-free for the first €13,798 in income, whereas couples with a single pension will be exempt from tax for the first €15,798 in income.

Pensioners will no longer pay provisional tax, which will automatically be deducted from their pension.   Tax rebates will be paid within six months instead of twelve.

A bonus of between €200 and €300 will be given to 16,500 individuals who do not receive a pension because they did not pay enough national insurance contributions. In addition, low income pensioners will receive a supplementary income of €150 per year.

Individuals in receipt of a services pension will be granted a €200 increase to their effective pension entitlement. Moreover, individuals who after their 25 years of service in the police force, army, civil protection or as correctional officers, commenced working elsewhere will now benefit from a higher pension rate due to changes in the way how pension is calculated. They will be able to include their pre-pension salary, when computing their pension eligibility.

The tax credit for third pillar pension contributions to private pension schemes, by both individuals and companies will be retained.


2.3 Other Social and Family Measures

The tax refund that has been granted for the last two years will be repeated again in 2020. This measure will benefit 200,000 workers earning up to €60,000 per annum, who will receive between €40 and €68 each.

Widows and widowers who maintain a child aged less than 18, who were previously receiving €4.54 allowance if the parent is in employment and €9.32 if there is no employment, will now receive €10 per week irrespective of their employment status.

A €300 bonus will be given to each born or adopted child as from 1 January 2020.

People over 75 years who live at home will again be receiving a grant amounting to €300. Elderly people aged over 80 will be getting €350. This grant will be extended to elderly people who pay to live in residential homes.


2.4 Disability Allowances

The disability pension will increase by a further €11.40 to €161.40 per week. In addition, the VAT exemption on the purchase of special apparatus meant to be used by people with disabilities will go up by €400 to €1,000.

Parents who have to quit work to take care of a disabled child will have their national insurance contributions covered, thereby safeguarding their eventual right to a statutory pension for up to eight years.

Deaf or mute people will qualify for disability assistance once they reach 60 years of age.

The government will cover the first three days of sick leave for cancer patients receiving treatment Mater Dei Oncology Centre.


3. Incentives applicable to the Housing Market

3.1 Rental Benefits

The Finance Minister announced that the Government will be working on a rent reform exercise. Rental aid benefits will be extended to people who spend more than 25% of their income on rent, with the salary cap for single people entitled to receive this benefit rising from €14,500 to €19,000. For couples with two children, the eligible cap will increase from €28,600 to €32,000.


3.2 Stamp Duty Exemption

The stamp duty exemption for first-time buyers introduced in the past years will be extended to 2020 and the tax-exempt amount will be increase from €150,000 to €175,000 resulting in a maximum saving of €6,500. Moreover, the reduced duty on documents rates for second time buyers, property in Gozo and property in an Urban Conservation Area will also be extended.


3.3 Interest Free Loans

A new scheme will come into force in 2020 and is addressed to those young would-be property owners (under 40s) who do not have enough saved money to pay the 10% deposit on a home loan. The government will be granting out loans for up to €17,500 for this purpose, with interest rates paid for by the government and repayment terms split over 15 years.


3.4 Other Measures Related to Property

Transfers of rights on immovable property on the transfer of a promise of sale to third parties will no longer be subject to tax at 35% but will instead be subject to a reduced tax rate of 15% on the first €100,000, which will be collected by notaries.

Person who choose to live in a property that is inherited will benefit from a reduced stamp duty rate of 3.5% on the first €175,000.


4. Environmental Measures, which aim Malta to become Carbon Neutral by 2050

4.1 Electric Cars

In a measure to incentivise the purchase of electric cars, the Government introduced a reduced electricity charge of €0.13 per unit, with effect from January 2020 and applicable for the home charging of such electric cars.

Further charging points will be introduced across all Malta and all fuel stations will be required to install charging points for all electric vehicles and start supplying LPG.

The exemption from the payment of the registration tax on the acquisition of electric cars and environmentally-friendly appliances such as PV panels will be retained. The vehicle scrappage scheme will be retained. A cut-off date for the elimination of combustion engines will be announced early next year.

A grant of up to €1,500 for scrapping of old vehicles and €200 for conversion to alternative fuels will be available during 2020.


4.2 PV Panels

Early adopters of photovoltaic panels whose contract to sell electricity into the grid is now coming to an end will be offered a 25% grant of the total cost, capped at €1,000, to help cover the cost of buying a battery storage system, thereby allowing the storage of energy generated by PV panels to be used when it is needed.


4.3 Single-use Plastics Ban

The production and importation of single-use plastics will be banned from Malta with effect from January 2021. The sale and distribution of plastic bags, cutlery, straws, and plastic plates will be banned from January 2022.


4.4 Bring your own Container Incentives and Bottle Return Machines

Shop owners will be given a grant covering 50% of expenses, capped at €3,000 when establishing green corners, where products will be sold by weight and volume. Consumers can bring their own containers as part of a circular economy strategy.

The first bottle-return machines will be installed in shops by the end of the year, with the scheme fully operational by end of next year. 


4.5 Cleaner Heavy Machinery

Contractors will be offered grants of up to €200,000 when they replace their heavy machinery with less polluting and less noisy models. Malta Enterprise will administer this scheme.


5. Education Measures

2020 will see the introduction of a Maltese online spell checker, fully funded by the Government.

The VAT on educational and vocational training, including distance learning, will be removed as of next year. Moreover, a one-off grant of €850 for Maltese students who opted to study a foreign language abroad will be introduced.

A pilot project for a roll out of a free tablet per child in middle schools was also announced encouraging the investment in technology in the schools.

Drinking water fountains will be introduced in every state school.


6. Other Measures  

Duty on documents on transfer of businesses to related persons will remain at the reduced rate of 1.5%.

The Government is fully committed to continue promoting innovative technologies and industries such as blockchain, esports, artificial intelligence and space sector commercialization.

With effect from 1st January 2020, it will no longer be possible to settle the acquisition of immovable property, motor vehicles, marine vessels, yachts, diamonds, precious stones and art objects in cash if the payment exceeds €10,000.

Public transport will be free of charge to people over 75 years of age.


DOWNLOAD BDO Budget 2020 Malta Highlights.


Get in touch with BDO’s Tax Advisory Team.

I'm not a robot *: