Incentives for business
Value added tax
Tax incentives for working women and families
Other fiscal measures


On November 14 2011 the minister of finance, economy and investment, Tonio Fenech, delivered the 2012 budget speech and announced a number of fiscal measures aimed at incentivising investment and business, among other things.

These measures are being introduced against a backdrop of positive economic growth - with a projected increase in gross domestic product of 2.6% in real terms in 2011 - and Malta's positive performance in the context of the current global financial crisis. The minister of finance listed the main budget objectives as follows:

  • ensuring that the macro-economic stability and financial sustainability required to attract further investment and job creation are in place;
  • investing in initiatives aimed at fostering economic activity;
  • sustaining the current programme of investment in the country's infrastructure, the energy sector and the environment;
  • investing in education and training; and
  • supporting the needs of families, the elderly and the more vulnerable members of society.

This update looks at some of the more interesting fiscal measures announced in the 2012 budget speech as these will affect the business community.

Incentives for business

A significant number of fiscal incentives will be introduced with the aim of further encouraging investment in Malta, as well as attracting the necessary talent required to encourage growth in key areas. These incentives, some of which specifically underline the government's support for innovation, include:

  • a tax exemption applicable to royalty income derived from copyright (to include copyright on books, film scripts, music and art) on the lines of that currently in force for income from patents;
  • an expenditure-based income tax credit of up to €15,000 to be granted to companies that commission the development of educational or promotional digital games; and
  • the extension of the Highly Qualified Persons Scheme, which provides for a flat 15% personal tax rate for highly qualified expatriates working in the financial services and e-gaming sectors, international professionals such as game directors and game designers, and academics and researchers in the research and development sector.

Other incentives aimed at fostering growth within the business sector include:

  • the extension for a further year of the MicroINVEST scheme, offering a 40% (or 60% for Gozo businesses) tax credit to small businesses;
  • the launch of a MicroGuarantee scheme catering for government-provided bank guarantees on loans to existing or new enterprises requiring access to capital; and
  • the launch of the Malta Games Fund to support the growth of the digital games sector locally.

Value added tax

With a view to supporting those businesses that have encountered difficulties in recent years relative to the timely payment of value added tax (VAT) dues and which, as a result, have accrued significant penalties, the government will be introducing a scheme enabling businesses to benefit from a reduction in accumulated fines and penalties. This scheme is expected to be published shortly by way of legal notice in terms of the VAT Act.

Tax incentives for working women and families

Family-friendly tax incentives include the introduction of a 'parent tax computation'. New income tax bands will apply to income derived by parents that have children in their custody who are aged under 18 (or under 21 if in tertiary education) and are not gainfully employed.

Amendments will also be introduced to the Part-Time Work Rules, providing for a 15% income tax rate in respect of income from part-time work or activities, thus extending the benefits of these generally, as well as to extend the statutory deadline for payment of the tax.

Other fiscal measures

Other fiscal measures include:

  • family-related measures, such as a further increase in the private school fees personal tax deduction;
  • a revision of various vehicle registration taxes; and
  • various excise duties, including an increase in the excise duty levied on cement.

A number of other measures include tax incentives for the elderly and tax incentives relative to the restoration and renovation of scheduled properties and properties in Urban Conservation Areas.

For further information on this topic please contact Rosanne Bonnici at Fenech & Fenech Advocates by telephone (+356 2124 1232), fax (+356 2599 0640) or email ([email protected]).