On 20 March 2020 numerous measures announced in the Budget Speech were enacted by means of Budget Measures Implementation Act. Here is a short summary of the legislative updates:
From 1st January 2020, taxpayers may opt to have his/her qualifying overtime income subject to tax of 15%. The tax will be final unless a taxpayer elects otherwise.
With effect from year of assessment 2021, each spouse may make an election to file a separate income tax return, which can be availed of, if:
The definition of a company under Article 2 of the ITA has been amended so as to embrace the new definition every cell of a cell company and that part of a cell company in which non-cellular assets are held shall be deemed to be a separate company. This amendment is line with recent amendment to Article 84E of the Companies Act, which empowers the Minister for Finance to make regulations to provide for the formation, constitution and regulation of cell companies carrying on, or engaged in, shipping or aviation business.
Due to this amendments each cell and the non-cellular part of a cell company will be deemed as a taxable legal person. Therefore each cell and non-cellular part of a company would need and become subject to: separate registration for income tax purposes, TIN and income tax return, tax payments and consequently receive tax refunds accordingly.
The ITA provides that transferor will be subject to a 5% final withholding tax, payable on the transfer value, where a property is transferred within 5 years from its acquisition date, provided that the transfer takes place after 1st January 2015 and the property being sold does not form part of a project.
The Budget Act sets further restrictions by excluding disposal of any immovable property made within five years from the date of acquisition, which is not the transferor’s sole ordinary residence and on which any construction works for which a development permission is required, have been carried on orders given by the transferor. Such transfer will not be eligible for the reduced rate of 5%.
The budget Measures Implementation Act has amended the ITA, so that gains from the transfer of promise of sale agreements have been excluded the Property Transfers Tax regime as per Article 5A of the ITA.
With effect from 1 January 2020, the first €100,000 of profit derived on the transfer of any right acquired through a promise of sale agreement shall be subject to a final tax at a reduced rate of 15%, while the remainder value will be subject to a 7% provisional tax.
Starting from 20 March 2020, in the case of a transfer of securities in a property company or of an interest in a property partnership, the provisional tax payment shall be equivalent to an amount to be prescribed, capped at 35% of the higher of the market value and the consideration for the transfer.
By means of the transposition of the EU Anti-Tax Avoidance Directive implementation regulations (ATAD I) in the ITA Article 14(1)(a) of the ITA has been amended so that the deduction for borrowing costs will be allowed in accordance with the interest limitation rule compounded in Regulation 6.
As of 15th October 2019 a reduced rate of 3.5% is applicable to the first €175,000 (previously €150,000) of the value or consideration paid by qualifying individuals acquiring immovable property to establish their sole, ordinary residence.
With effect from 28th June 2019, the following is applicable to interests in partnerships:
As of 1st January 2020, no duty shall be due on transfers inter vivos of foreign marketable securities (whether executed in Malta or outside Malta) held in a property company, provided that duty on such transfer would have been paid in the country where the transfer is executed or in the jurisdiction where the company is registered.
With effect from 15 October 2019, additional duty equivalent to 20% of the amount of duty assessed by the Commissioner for Revenue, plus interest, shall be due where the Commissioner for Revenue determines that the value expressed or declared in a document is lower than the real value at the time of execution of the document.
The 7 day extension applicable to online VAT return filings is no longer conditional to the corresponding VAT payment also being made. Online filing of VAT returns within 7 days from the standard VAT return deadline, without making the corresponding VAT payment, does not trigger an administrative penalty for late filing of the VAT return.