BUDGET BILL 2015 AND
OTHER FISCAL MEASURES
INCLUDING LEGAL NOTICES
ISSUED
Fiscal Measures
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INCOME TAX ACTS:
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Taxation on immovable property transfers
Partnerships: Election to be treated as a company
Equal rights for partners in a civil union
Tax treatment of rental income
Professional property valuations
Reduction in personal income tax rates
Tax exemption on minimum wage earners and pensioners - cost
of living adjustment
Reduced 7.5% tax rate extended to waterpolo players
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Parents of children who attend church and private schools who
opt to make use of school transport may now claim a tax
deduction of €150.
Tax exemption on students’ stipends
Individual Savings Account Rules
Personal Retirement Scheme Rules
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A. Taxation on immovable property transfers
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With effect from 1st January 2015 the capital gains tax
system will, with minor exceptions, be fully replaced by the tax
on property transfer system.
Capital gains will continue to apply in respect of the transfer
of shares and other prescribed items as well as immovable
property situated abroad.
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The new Final Withholding Tax will be 8% on the value of the property
transferred. There are however be two exceptions to this as follows:
a. In the case of individuals who do not carry on the business of property
trading, the applicable final withholding tax rate shall be 5% if the
property is transferred less than five years after the date of its acquisition.
b. In the case of properties acquired by any person (individuals &
companies) before the 1st January 2004 the applicable final withholding
tax rate shall be 10% the value of the property transferred.
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Transfers of inherited immovable property will remain subject to a 12%
final tax on the difference between the transfer value and the cost of
acquisition (denunzja); and to a 7% final tax on the consideration if
inherited before 25/11/1992. Nothing has changed in this regard.
The current exemptions are not affected by the new system and will
therefore continue to apply. For example: transfers of one’s own residence,
donations as prescribed, assignments during separation and divorce, intragroup transfers, etc, will remain exempt from tax.
There are transitory provisions with respect to properties in respect of which
a notice of a promise of sale or transfer relating to that property has been
given to the Commissioner before the 17th November, 2014.
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TRANSFERS MADE ON OR AFTER 1st JANUARY 2015
Notice of a promise of sale or transfer relating to the property has not
been registered before the 17th November, 2014
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5% FWT if transferor is an individual who does not trade in property and
property is transferred before five years from the date of its acquisition.
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10% FWT if property was acquired before the 1st January 2004.
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8% FWT in all other cases.
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Notice of a promise of sale or transfer relating to the property has been
registered before the 17th November, 2014
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5% FWT if transferor is an individual who does not trade in property and
property is transferred before five years from the date of its acquisition.
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12% FWT if property was acquired before the 1st January 2004.
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8% FWT in all other cases.
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If transfer is made before 12 years from DOA of the property an election
may be made to exclude the transfer from the final tax system and 7%
provisional tax paid on contract, if transfer is made by 31/12/2015.
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Properties forming part of a project or situated within a special
designated area (i.e. transferred by owner of SDA project) existing
before the 1st January 2015
Owner of the project elected to exclude the transfers of all properties
from the final withholding tax system before the 1st January 2015:
Notice of a promise of sale or transfer relating to the property has been
registered before the 17th November, 2014:
The transfer is subject to 35% tax on the profit and 7% provisional tax is to
be paid on contract.
In the case where the property is not situated within a SDA and the transfer
is made after 12 years 12% FWT applies.
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Owner of the project did not elect to exclude the transfers of all
properties from the final withholding tax system before the 1st January
2015:
Notice of a promise of sale or transfer relating to the property has been
registered before the 17th November, 2014.
12% FWT applies
Notice of a promise of sale or transfer relating to the property has not
been registered before the 17th November, 2014.
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10% FWT if property was acquired before the 1st January 2004.
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8% FWT in all other cases.
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Transfer of property made by a person who is not resident in Malta
Election can be made if:
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produces to the notary who publishes the deed of transfer a statement
signed by the tax authorities of the country of that person’s residence that
confirms that person’s residence in that country and that certifies that that
person is subject to tax in that country on gains or profits derived from the
transfer of immovable property situated in Malta.
As from the 1st January, 2015 such non resident persons may still be entitled
to opt out of the final withholding tax system and be taxed under article 5
(Capital gains) however the 7% provisional tax paid relating to a transfer
of property made on or after the 1st January, 2015, shall not be available
for refund under article 48 of the Income Tax Management Act. No claim
can be made to reduce the 7% provisional tax payable.
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Exemptions prescribed under article 5A(4) of the Income Tax Act:
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Donations
Property that has been owned and occupied by the transferor as his own
residence for a period of at least three consecutive years
The assignment of property between spouses consequent to a judicial or
consensual separation or a divorce.
The assignment of property that formed part of the community of acquests
between the spouses
A transfer of property from one company to another forming part of the
same group.
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The transfer of property upon the incorporation of a business or a
partnership en nom collectif as a going concern into a limited liability
company.
The settlement of property on trust, or the distribution or reversion of
property settled on trust.
A transfer of property by a company to its shareholder or to an individual
related to its shareholder in the course of winding up or in the course of a
distribution of assets pursuant to a scheme of distribution.
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Tax losses (capital / trading) no longer available.
Companies to allocate profit after tax to the Final
taxed account.
Article 14(4) – Limitation of tax loss (existing
provision)
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B. Partnerships: Election to be treated as a company
for tax purposes
Any partnership or EEIG shall be entitled to make an election
in writing to be treated as a company for all purposes of the
Income Tax Acts
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Article 27 ITMA:
“Where income from any source accrues to or is received by a partnership
that is carried on by any two or more persons jointly and the partnership is
not a "company" in terms of article 2 of the Income Tax Act (including, for
the avoidance of doubt, partnerships in respect of which no election in
terms of sub-article (6) of this article is in force), the income of any partner
from the partnership, shall be deemed to be the share to which he was
entitled during the year preceding the year of assessment in the income of
the partnership, such income being ascertained in accordance with the
provisions of the Income Tax Acts and shall be included in the return of
income to be made by such partner under the provisions of the Income Tax
Acts.”
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Partnerships: Tax treatment no longer determined on whether a trade,
business, profession or vocation is carried on.
Article 27(6) ITMA: Any partnership or EEIG referred to in subparagraph
(iii) of paragraph (a) or sub-paragraph (ii) of paragraph (b) of the
definition "company" in sub-article (1) of article 2 of the Income Tax Act
shall be entitled to make an election in writing to be treated as a company
for all purposes of the Income Tax Acts, and in such case, the provisions of
article 27 ITMA shall not be applicable thereto.
Such an election shall be made on such form and under such conditions as
may be prescribed and shall be effected not later than sixty days after the
date of setting up of the partnership or EEIG as the case may be
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Definition of a “Company”:
A. Limited Liability companies:
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a limited liability company constituted under the Companies Act or under
the Commercial Partnerships Ordinance
any other company constituted as such under any other law in force in
Malta
any body of persons constituted, incorporated or registered outside Malta,
and of a nature similar to a company referred to above.
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B. PARTNERSHIPS:
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any partnership en nom collectif and any partnership en commandite constituted
under the Companies Act or under the Commercial Partnerships Ordinance;
any partnership regulated by the applicable provisions of the Civil Code and
registered in such manner as may from time to time be provided in terms of the
Second Schedule to the Civil Code;
any European Economic Interest Grouping (EEIG) formed pursuant to the provisions
of the Companies Act (European Economic Interest Grouping) Regulations;
any body of persons constituted, incorporated or registered outside Malta and of a
nature similar to any partnership referred to above;
Treated as companies if elected to be treated as a company in terms of sub-article
(6) of article 27 of the Income Tax Management Act and for as long as such
election remains in force:
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Partnerships en commandite the capital of which is divided into shares
constituted under the Companies Act existing on the coming into force of the
changes shall be deemed to have elected to be treated as a company.
Whether or not the partnership or EEIG elects to be treated as a company
or otherwise, the status of the said partnership or EEIG shall remain
effective until such time as the Commissioner, at his sole discretion and for a
reasonable cause, authorises a change following a request in writing made
by the partnership or EEIG, as the case may be, on such form and under
such conditions as may be prescribed.
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C. Equal rights for partners in a civil union
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Married couple refers to two spouses who contracted marriage or two
partners who have registered their partnership as a civil union, in
accordance with the legal provisions of the country where the marriage or
civil union was executed.
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Married refers to any of the spouses or partners in a married couple.
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Spouse shall include a partner registered as being in a civil union.
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D. Tax treatment of rental income
Applies to any person renting immovable property, being a tenement
leased as a residence or garage, to an individual or individuals.
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Tenement:
a dwelling house or part thereof which is to be occupied or is occupied as a
home or residence by the occupier or a garage
not a commercial tenement
excluding a tenement which, for the purpose of the said letting, is required
to be licensed by virtue of the Malta Travel and Tourism Services Act.
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Optional: Tax charged at the rate of 15% of the gross rental income received. Such
tax shall be final and notwithstanding any other provision of the Income Tax Acts, no
set-off or refund shall be granted to any person in respect of the tax so charged.
Where a person, in a relevant year, derives rental income from the letting of more
than one tenement and the option has been exercised for such year, the total rental
income received in the said year from all the tenements let out by such person shall
be taxed at 15%.
Where an enquiry has been conducted any rental income which has not been
declared shall be charged to tax at the rate of 35% of the gross rental income
received and such tax shall be in addition to any interest and additional tax
payable under the Income Tax Acts. Such tax shall be final and notwithstanding any
other provision of the Income Tax Acts, no set-off or refund shall be granted to any
person in respect of the tax so charged.
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Past undeclared rental income:
Where an individual has failed to declare rental income derived from a
tenement leased as a residence or garage during the period of eight years
preceding basis year 2013 (basis years 2005 to 2012) in any return and
such individual opts to declare such rental income in the prescribed form to
be submitted by not later than the 30th June 2015, and pays tax at the
rate of 15% on the gross rental income received it shall be deemed for the
purpose of the Income Tax Acts that such rental income was received during
basis year 2014.
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Where an individual exercises the option and declares rental income for
more than one year, the total amount subject to the tax shall not exceed an
amount determined as follows:
Y = (a / b) x 2
Where –
(a) "Y" represents the amount to be determined;
(b) "a" is the total rental income declared in the said relevant form;
(c) "b" is the number of years comprised in the relevant period in respect of
which rental income is declared:
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E. INDIVIDUAL SAVINGS ACCOUNT RULES
An individual savings account shall qualify as an ISA if:
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the account holder is an individual who is at least eighteen years old, and is
ordinarily resident in Malta
the account holder does not hold any other ISAs with any person at the time of
application, and that he shall not thereafter open any other ISAs for as long as the
ISA with such payor remains open in his name
elects by notice in writing to the payor of investment income pursuant to article 35
of the Act to be paid any such investment income arising from his holding of the ISA
without deduction of tax
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the income from such an individual savings account consists exclusively of
interest payable to an individual in his own name – bank deposits,
Government stocks, listed bonds.
deposits by the individual into the individual savings account and the value
of interest-bearing securities credited for the benefit of the individual into
such account do not exceed €1,000 in any year. (€2,000 will apply for
year 2015).
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F. PERSONAL RETIREMENT SCHEME RULES
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"qualifying scheme" means a personal retirement scheme or a long term
contract of insurance that fulfils the requirements of these rules and which is
approved by the Commissioner;
"personal retirement scheme" means a retirement scheme which is not an
occupational retirement scheme and to which contributions are made for the
benefit of an individual;
"qualifying contribution" means a contribution made to a qualifying scheme
in respect of which a credit against the income tax chargeable in Malta
may be claimed in terms of the Act;
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A 57. (1) An amount which is equal to the lower of:
(a) fifteen per centum (15%) of the aggregate of any contributions made or
premiums paid by a person during the year immediately preceding a year of
assessment in respect of membership in any personal retirement schemes as defined
in the Special Funds (Regulation) Act or any Act substituting the said Act, or a policy
of insurance held with a company authorised to carry on long term business under
the Insurance Business Act; and
(b) one hundred and fifty euro (€150) or such other amount as may be prescribed
by the Minister from time to time, (€300 in respect of year 2015)
is to be allowed as a credit against the income tax chargeable in Malta to any
person who is a member of, and makes contributions to, any one or more personal
retirement schemes or pays a premium in relation to a policy of insurance in the
year immediately preceding the year of assessment, and the amount of the income
tax so chargeable shall be reduced by the amount of the credit:
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DUTY ON DOCUMENTS AND TRANSFERS ACT
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The stamp duty exemption on partitions will be apply to deeds of partition of
immovable property where the value of the share of the property acquired is equal
to the value of the share of property held prior to the partition
The one-time exemption from the payment of duty on the first €150,000 of the
value of immovable property granted to first time buyers acquiring immovable
property in 2014 will be extended for contracts executed up to 30 June 2015
Duty on policies of insurance (other than life insurance policies) shall be increased
by one cent for every Euro or part thereof subject to an increased minimum duty of
€13
No stamp duty will apply on the transmission causa mortis of assets held in a trust
where the beneficiary is a disabled person
Transfers between co-owners – property purchased as sole ordinary residence
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Professional property valuations (DDTR)
The transferee in a transfer inter vivos of any immovable or any real right
over an immovable, where the transfer is effected by public deed or in the
case of a declaration made in terms of article 33 of the Act may produce
to the notary publishing the relative deed, a professional valuation drawn
up by an architect in possession of a warrant issued under article 5 of the
Periti Act. The architect’s report shall be annexed to the deed relating to
the transfer by the notary publishing such deed.
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VALUE ADDED TAX ACT
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To facilitate dissemination of material in electronic format, the VAT rate on
audio books and on books published on CDs, DVDs, SD-Cards and USB
drives and similar media is being reduced from 18% to 5% with effect
from 1st January 2015. This measure seeks to align the VAT treatment of
such digital books with that currently attributed to printed matter/books.
Introduction of a VAT refund mechanism to enable non-EU tourists to obtain
a refund of VAT paid in Malta on supplies purchased during their stay in
Malta
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The exemption from registration for persons established in Malta for VAT
purposes whose turnover does not exceed €7,000 in a calendar year is
being removed. Accordingly, such persons will now be obliged to register
for VAT and to issue fiscal receipts in respect of supplies made however
they will not be required to submit the article 11 annual vat declaration
form.
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PART-TIME WORK RULES
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4. Where income from part-time work falls to be charged under article 4(1)(a) of
the Act, the provisions of article 90A of the Act shall apply only where the
individual –
(b) does not engage more than two employees (and such employees shall be on a
part-time basis) in the parttime activity he carries out;
(d) performs such work for a company, organisation, enterprise or entity other than
that with which he is employed on full-time basis; and
(e) is registered for value added tax purposes, unless the economic activity
engaged in is one in respect of which such registration is not required or the
individual is exempt from registration under the Value Added Tax Act.
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6. (1) For the purpose of rules 4(d) and 5(1)(b): (a) companies controlled
and beneficially owned, directly or indirectly, to the extent of more than
50% by the same shareholders shall be considered as the same employer;
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Maximum amount subject to 15% tax:
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€10,000 in the case of income chargeable under article 4(1)(b) of the Act
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€12,000 in the case of income chargeable under article 4(1)(a) of the Act
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6. (1) For the purpose of rules 4(d) and 5(1)(b): (a) companies controlled
and beneficially owned, directly or indirectly, to the extent of more than
50% by the same shareholders shall be considered as the same employer;
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Maximum amount subject to 15% tax:
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€10,000 in the case of income chargeable under article 4(1)(b) of the Act
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€12,000 in the case of income chargeable under article 4(1)(a) of the Act
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