Malta reduce taxes for both local citizens and foreign investors

Malta’s Minister of Finance, Economy and Investment Tonio Fenech has announced numerous tax measures in the territory’s budget for 2012, many of which reduce the tax burden on islanders and enhance the island’s appeal to international investors.

Among the latest changes, royalties income derived from copyright-protected books, film scripts, music and art will now be tax exempt in Malta. The announcement follows the decision in the 2010 Budget that royalties on patents would receive an exemption.

To further promote Malta as a hub for innovation and product development, the 15% personal income tax scheme – aimed at attracting skilled persons engaged in certain fields to Malta – is to be extended to include international professionals specializing in the development of digital games.

In addition, Maltese companies which commission educational digital games will be given a tax credit up to a maximum of EUR 15,000 (USD 20,000).

The government has also announced significant tax cuts for parents with the introduction of a new ‘parent computation’ in addition to the current single and joint computation. This will apply to taxpayers who are a parent of at least one child under the age of 18 (or 21 if the child is in tertiary education) and entitle claimants to a 0% income tax rate on the first EUR 9,300 of income. A taxpayer newly transferring to parental computation and with an income of EUR 21,200 would for instance see a reduction in income tax payable of EUR 420 per annum compared to the single computation system, according to Fenech.

In addition, tax allowances for parents sending their children to private, fee-paying schools will be significantly increased.

Other measures include the introduction of a new car scrapple scheme, worth 15.25% of the value of the new car when trading in an older model, with the benefit capped at EUR 2,000. Registration taxes for older vehicles will be hiked from January 1, 2012.

Tax concessions are also to be introduced for property owners for the restoration of certain buildings.

Excise duty on cigarettes and tobacco will increase by 5.8% and 8.5%, respectively, and tax on bunker fuel and cement is also due to rise.

The government also intends in the new year to merge the Inland Revenue Department and value-added tax department, and to hold a VAT amnesty to allow taxpayers to regularize their tax affairs.

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