Malta Budget 2023: taxes and other measures

This evening Finance Minister Clyde Caruana presented his budget for the forthcoming year, amidst a challenging backdrop of lingering pandemic recovery, the Russian invasion of Ukraine, the energy crisis and disrupted supply chains.

As a Tax and Corporate specialist firm, we focus our view on those measures that are commercial or business-related in nature.

A Stable Economy

Despite the difficult external conditions, the local tourism industry performed better than expected this year, while gaming, manufacturing and some other sectors also did well.  Although international pressures will invariably weigh down the local economy, this is still forecast to grow by around 3.5% in real terms over 2023, while investment is expected to increase by 5.9%.

The unemployment rate is projected to be at around 3.1%, with inflation retracting to some 3.7%. 

Malta’s Tax System in the Malta Budget 2023

There have been no changes to Malta’s corporate or personal tax system. The only fiscal measures are the property tax incentives and slightly increased thresholds in the personal income tax bands limited to pensioners.

Property Purchase Incentives Extended

Incentives for first- and second-time buyers have been prolonged. These include a reduction in stamp duty for those acquiring properties within Urban Conservation Areas (UCA), properties built over twenty years ago and vacant for the last seven years, as well as on new properties built with typical and traditional Maltese architecture.

Other grants apply to those renovating and restoring such properties, including a tax rebate.

Research & Development

Minister Caruana announced that there will be a €5 million investment in a Technology Extension Support scheme that shall include the participation of private investors.

Malta intends to extend its involvement in the Horizon Europe scheme (the EU’s main R&D funding programme) and bolster the National STEM Community Fund.

Business Digitisation in the Malta Budget 2023

A new scheme to be known as Business Enhance will offer cash grants to SMEs up to the tune of €40 million. The EU-funded Digital Innovation Hub project is aimed at helping SMEs and start-ups to introduce into their processes and operations innovative technologies such as cloud computing.

Local businesses investing in digital projects may enjoy reimbursement grants of up to 50% of their investment, limited to a maximum of €100,000. Businesses established in Gozo will also benefit from a further 10% in the form of a tax credit, which can increase up to 20% where the investment reduces the business carbon footprint.

We expect further details on these to be announced in the coming weeks.

A Growing Aviation Industry

Lufthansa subsidiary Eurowings Europe has very recently transferred its registration to Malta and been granted an air operator certificate by Transport Malta. Following this news, Caruana announced that more airlines are similarly about to follow suit.

Building on the successes already achieved in this industry over the last several years, the government will develop a masterplan for civil aviation and to enhance the airport hub. This will be focussed on developing economic niche areas such as leasing and cargo, also drones and electric vertical take-off and landing (eVTOL) aircraft.

Malta Budget 2023 and National Digitisation

The state will continue its investment program to digitise more administrative functions. €10 million will be used towards digitising the court system and another €6 million towards digitising the maritime registry.

All initiatives to improve efficiency in these critical areas are welcomed.

Clean Energy Initiatives

A number of measures have been announced to help Malta move towards its net carbon neutral goals and for a cleaner environment. A consultation process to analyse the feasibility of an offshore wind farm will commence. A €50 million project for an organic processing plant was also mentioned.

Incentives to buy new electric vehicles will increase to €11,000 with a further €1,000 for those who also scrap a car. At a national level, infrastructure projects include a “shore-to-ship” power supply project at Malta’s Freeport. A similar project is currently underway at the Grand Harbour, that will permit large vessels in port to switch off their engines while docked. 

Existing schemes aimed at promoting the installation of solar panels, heat pump water heaters, solar water heaters and well restorations will be carried on over next year. Caruana also announced plans to increase to 1,200 the number of electric vehicle charging points across the country by 2024. There are currently 340 such points in total.

The government will start it’s promised investment in green urban lungs with initial work at a number of locations around the island, while ongoing works at the Ta’ Qali national park will also continue.

Social Measures with this year’s Malta budget

Several social measures were announced for low- and fixed-income earners, aimed at alleviating the impact of rising global prices.

How we can help

Please contact us for guidance or clarification on any of the Malta Budget 2023 measures announced.