Malta – New Legislation Implements Budget Measures

Key Measures 

As announced in the budget speech, the tax deduction currently available to parents paying fees for sporting, cultural and creative courses for their children has been increased from €100 to €300 per child, with effect from year of assessment 2024.

Tax Deduction of Fees Paid for Sports, Artistic, and Cultural Activities 

As announced in the budget speech, the tax deduction currently available to parents paying fees for sporting, cultural and creative courses for their children has been increased from €100 to €300 per child, with effect from year of assessment 2024.

Taxation of Royalties on Qualifying Literary Works 

Authors and co-authors deriving royalties from qualifying literary works may opt to be charged a final tax on the gross amount of royalties received.  Such final tax rate has been reduced from 15 percent to 7.5 percent, effective for royalties derived on or after 1 January 2023.

Provisional Tax on Transfer of Interest in a Partnership

This amendment clarifies that the provisional tax of 7 percent payable upon a transfer of securities or a transfer of value in securities shall also apply on a transfer of a full or partial interest in a partnership and on a deemed transfer of an interest in a partnership. 

As a consequential amendment, the possibility to reduce the 7-percent provisional tax rate to a lower rate if certain conditions are satisfied, has also been accorded to transfers of an interest in a partnership.

Interest Chargeable for Late Payment of Tax 

The interest chargeable to taxpayers for late payment of income tax increased from 0.33 percent (applicable as from 1 January 2020) to 0.6 percent per month or part thereof during which the tax remains unpaid, capped at the amount of tax due.  Such increased rate applies on tax that became / becomes payable after 30 August 2022.  For tax that was payable by 30 August 2022, it is the previously applicable rates of interest which remain enforceable.

The Act further amends the clauses that grant empowerment to the Commissioner to change the rate of interest.

Interest Chargeable on Payment of Disputed Tax 

Consequent to the aforementioned increase in the interest rate for the late payment of tax, an amendment was passed to align the applicable rate of interest chargeable on the payment of disputed tax that is determined on objection/appeal.  Such rate is similarly dependent on whether the date when the tax fell due was before or after 31 August 2022.

Interest Chargeable for Late Payment of Tax Refunds 

The Act has increased the interest rate payable by the Commissioner on the late repayment of tax due to the taxpayer, for any period or part thereof commencing on or after 1 September 2022, to 0.6 percent per month or part thereof.  The interest is capped at the tax refundable amount.  The new rate applies irrespective of the statutory repayment date of the refund.

Budget 2023: Other Measures Affecting Individuals 

• Personal income tax tables: There were no changes to the personal income tax rates in the 2023 budget.  For the applicable personal income tax tables refer to Appendix A (see below).
• A tax refund ranging from €60 to €140 for individuals earning an annual salary of less than €60,000 is being paid by the government.
• Increase in the children’s allowance of €90 per child (this took effect on 1 January 2023).
• Tax credit of €200 per annum to cover costs of approved therapy provided to children with a disability.  This is available as from 1 January 2023. 
• The Cost of Living Adjustment for 2023 is €9.90 per week for pensioners, employees, and people benefiting from social security benefits.  Pensioners also benefit from an additional weekly increase of €2.60.
• Pensioners who claim a tax rebate, under the terms of the Tax Rebate (Pensioners) Rules, against tax on their pension income had their limit of effectively-untaxed income raised from €14,320 to €14,968, in the case of the single rate calculation and to €18,568 in the case of married couples (effective 1 January 2023). 
• In addition to a possibility to claim the capped tax rebate, the tax exemption on pension income introduced in March 2022 shall continue to apply, subject to the updated limits noted in Appendix B (see below).
• Existing property-related measures and schemes, such as the duty exemption for first-time buyers (exemption from duty on the first €200,000 of the consideration) and second-time buyers (refund of duty paid on the first €86,000 of the value of the replacement property and purchases of property in Gozo (rate of duty of €2 for every €100 or part thereof with respect to transfers inter vivos of residential property situated in Gozo)) have been extended to the end of 2023.
• Continuation of certain existing property schemes providing for an exemption from income tax and duty on the first €750,000 of the higher of the value and consideration of the property.  The schemes, applicable to transfers made by the end of 2024, cover properties located in an Urban Conservation Area or old and vacant properties.
• First-time home-buyers acquiring their residence after 1 January 2022, are eligible for a grant of €10,000 over a period of 10 years.
• Assistance in terms of the Deposit Payment Scheme applicable to persons under the age of 40 to assist with financing the initial deposit required to acquire property increased from €17,500 to €22,500, representing 10 percent of the consideration of the property of a value up to €225,000. 

  Source: Office of the Commissioner for Revenue 

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