NEWS

BULLETIN

Malta Budget 2012

Salient Points of the Budget for the 2012 fiscal year - Bulletin by HBM Group

This brief bulletin by HBM Group highlights the key fiscal measures announced during the Budget Speech, in particular how international clients might be affected.

The Economy
The economy of the Maltese Islands is expected to grow by 2.3% during the 2012 fiscal year. This cannot go unnoticed, in particular in view of the fact that many neighboring countries are facing political and economic difficulties, including the Eurozone area. Unemployment stands at 6.6%, well below the EU average. 72% of the gainfully occupied are employed by the private sector (June 2010 statistic).

From a 2011 perspective, government deficit is likely to be at circa 2.8% of the country‘s GDP (in line with the announcement in the 2011 Budget Speech), whilst for 2012 this is forecasted to be at 2.3% of Malta‘s Gross Domestic Product.

Whilst inflation was on the up, the GDP increased by 4.9% over 2010. In the first 3 quarters of 2011, the balance of payments was negative with imports exceeding exports.

The cost of living adjustment, commonly referred to as the COLA, for the year will be EUR4.66 per week, based on the increase in the Retail Price Index.

Financial Services and e-Gaming
With respect to incentives to the financial services sector in particular, the tax incentives offered to Highly Qualified Persons, enabling such personnel to pay a low income tax rate of 15% after satisfying a number of criteria, will be extended both to the e-gaming industry as well as to Maltese returning back to Malta to work on the island. Specifically on the e-Gaming front, this scheme was also extended in particular to game designers and game developers, and this is in line with the government‘s strategy to attract value-added manufacturing and services sectors to the island.

Intellectual Property
With respect to Intellectual Property, the government announced an exemption regarding royalty income. In essence, this means that income derived from IP will be exempt from income tax in Malta. The government‘s aim in this case is to increase Malta‘s competitiveness when structuring cross-border.

Personal Benefits
A new ‘parental computation’ (in addition to the Single and Joint/Married Computation) was announced aimed to incentivize parents of children under 18 (or 21 years if children are attending a tertiary education institution) if both parents work and earn a minimum of EUR21,201 per annum.

Maternity leave was increased by 4 weeks, with the first 2 weeks coming into effect in 2012 and the other 2 weeks in 2013.

Environment and Property
A greener Malta is also high on the agenda, and during the 2012 Budget Speech, the Minister announced higher taxes for older / polluting vehicles, whilst a car scrappage scheme was announced, awarding a rebate when purchasing a new vehicle.

A rebate scheme and various levels of withholding taxes were also announced with respect to restoration of scheduled properties.

Less Bureaucracy and Greater Fiscal Consolidation
The 2012 Budget is aimed towards incentivizing the Maltese economy as well as safeguarding employment. Furthermore, reducing bureaucracy is high on the government‘s agenda; so much so that the government announced the implementation of a decision announced in the budget of the previous year to consolidate all fiscal authorities (namely the Inland Revenue Department and the VAT Department) under one roof.

© HBM Malta Ltd. November 2011. Disclaimer: This document has been written for information purposes only; and should in no way be considered as advisory. Clients are encouraged to seek professional tax advise in case of any queries. Furthermore, the information being presented outlines only the salient points; and for more information one should consult the full budget speech and financial estimates on www.gov.mt