The post below is not meant to be a comprehensive summary of the budget measures but rather a highlight of what we think are the main measures likely influence small businesses.
We have kept it short in line with our objectives of making it more readable for small business owner-managers who might not have had the time to go through the more detailed measures but would like to have a quick overview of the main measures that might effect them. You are encouraged to contact us for further details.
Tax on Sale of Property
As from 2015 the capital gains tax on property transfers has been changed and taxpayers will no longer have the option to opt for a a final witholding tax or a capital gains tax. Instead there will only be a final witholding tax of 8% of the market value save for 2 exceptions:
- If the property was purchased before 1 Jan 2004 the final witholding tax to be applied shall be 10%;
- If the property is sold within 5 years from the date of acquisition (by a person who does not trade in property), a final witholding tax of 5% shall apply;
The current tax regime shall still apply for property transfers which are subject to a promise of sale agreement which has been notified to the Commissioner of Inland Revenue up to the 17 November, 2014.
Reduction in Income tax
Persons earning up to the minimum statutory wage will not be subject to any tax. For persons earning less than €60,000, the maximum tax rate has been reduced from 29% to 25% irrespective of the tax computation used. Income from dividends will continue to be taxed at the current rates and will not apply to these reduced rates.
Removal of exemption from registering for VAT
All persons carrying out an economic activity will be obliged to register for VAT including those with an annual turnover of less than €7,000 along with an obligation to issue fiscal receipts;
Tax credit on start ups
A tax credit equal to the amount of capital invested in shares in newly set up companies, up to a maximum of €250,000 in a year will be provided to private investors
Other fiscal measures
- Facilitating the transfer of businesses between family members by the introduction of a Family Business Act;
- Tax Credits for employing people with special needs;
- Tax deductions of 50% of the amount donated to the Malta Community Chest Fund;
- Tax deduction for parents whose children opt to use the school transport (limited to €150)
- Excise tax on fish farm food and additional duty on tobacco, cigarettes, cement, insurance policies and mobile phone services;
- Removal of Eco Tax on electronic goods provided that importers join an approved waste collection system. This will come into effect in Sept 2015 and further exemptions are envisioned in 2016;
- Upward revision in vehicle licences, a daily charge of €10-€15 on tower cranes, and an increase in licences for swimming pools;
- Reduced VAT Rate of 5% for digital books, audio books and other books published on electronic media (CDs, DVDs, SD Cards, USB Cards etc);
- Reduction in water bills by 5% and electricity bills by 25% for businesses;
- Strengthening the Inland Revenue’s capability to combat tax evasion;
Social Measures
- Cola adjustment of €0.58 per week (also applicable for students);
- A one off bonus of €35 per employee or person relying on social benefits;
- Parents earning a low income will receive an allowance per child (ranging between €1,000 to €1,200 per child depending on annual income);
- Tapering down of social benefits (instead of immediate cessation) when unemployed single parents join the labor force;
- Employers shall contribute towards a fund (based on number of employees) to cover the cost of the maternity leave benefit so that this is shared equally by all employers thereby removing the financial disadvantage of employing women and eliminating gender inequality;
- Aid assistance to employers who offer training to their employees (under the Training Aid Framework);
- Extension of free child care facilities;
The above is a brief outline of the budget speech delivered by the Minister of Finance on 17 November 2014; In order to be as brief as possible we have outlined the main measures that we believe will be most relevant to small businesses. You are encouraged to contact us for more information;