Malta Budget 2003

Authored by: Legal-Malta Team

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Registration Tax & Road Licence For Motor Driven Vehicles

 
Racing cars
Stated Aim:
To regularize the position of motor racing enthusiasts.
Measure:
Reduction in Vehicle Registration Rate for specially equipped racing cars by 6.5% instead of the current rates of between 50.5% and 75%.
Naturally, given that these specially equipped cars are not driven on public roads, there will be no payment of road license in their regard.
 
Vintage Cars
Stated Aim:
To encourage the preservation and restoration of vintage cars for exhibition purposes.
Measure:
All classic, vintage or authentically veteran vehicles and motorcycles will be subject to new registration tax rates:
Vehicles manufactured pre- 1/01/1951: 11% – 16.5%
Vehicles manufactured 1/01/1951 – 31/12/1970: 50%
of the rate registration;
 
Road licenses for the above vehicles is reduced by half.

Excise Duties on Cigarettes

 
Stated Aim:
Control tobacco consumption and reduce the devastating damage of smoking.
 
Measure:
Increase in excise duty on cigarettes:
  • a packet of 20 king size: Lm1.25c (retail price)
  • a packet of 20 standard size: Lm1.10c. (retail)
  • Excise duty on hand-rolled tobacco: raised to Lm22.25/kg.
  • Excise duty on cigars: raised to Lm5 per 20 units.

Import Duties & Levies

 
Import Duties
Measure: Adjustment of import duty rates on goods imported from Europe.
Effect: Reductions / increase in import duties on different products.
 
Levies
Aim: Continuation of dismantling process of levies started in 1999.
Measures: Removal of levies on all industrial products listed in Legal Notice 123 of 1999.
Adjustment of levies in the agricultural and agro-industrial sectors with no impact on local products.
(Furniture: levies removed October 2002).

Import Duties & Levies

 
Import Duties
Measure: Adjustment of import duty rates on goods imported from Europe.
Effect: Reductions / increase in import duties on different products.
 
Levies
Aim: Continuation of dismantling process of levies started in 1999.
Measures: Removal of levies on all industrial products listed in Legal Notice 123 of 1999.
Adjustment of levies in the agricultural and agro-industrial sectors with no impact on local products.
(Furniture: levies removed October 2002).

Value Added Tax

 
Status of EU Negotiations
Negotiations with European Commission still in progress re. exemption of VAT on food, medicines, printed matter.
 
VAT Payment at Import Stage
Aim: VAT payments on importation of goods from EU MSs is incompatible with the internal market.
Measure: Removal of VAT on taxable products imported in Malta from MSs presently payable on importation (on membership)
(No change to procedure in case of goods imported from third countries)
 
VAT Collection
Aim: Importers from EU MSs – Reduction in form-filling burdens and removal of need for Customs to examine imported goods coming from EU MSs; improved cash flow; reduced compliance costs.
Measure: VAT collected from taxable products sold will be passed to the VAT Department in tax period of sale.
 
VAT in the Tourism Sector
No change (5% on accommodation)
 
VAT Payment on Electricity Consumption
Measure: Electricity consumption currently exempt without credit now subject to:
5% VAT absorbed by Enemalta.
 
VAT on Cylinder Gas
Aim: To solve current problems for gas distributing agents.
Measure: 15% VAT wholly absorbed by Enemalta.
(no VAT refunds will be made to retailers)
 
VAT on Cultural Teaching
Aim: To encourage the spread of culture among the general public.
Measure: Tax exemption on VAT on teaching of ballet & music (exempt without credit).

Income Tax & VAT Penalties

 
Refund of Penalties imposed by the VAT and the Income Tax Departments
Context: 93/92% VAT & IT compliance re. submissions of tax declarations for VAT & Income Tax, payment settlements.
Current Penalty System: automatic penalty system triggered off on a first VAT / Income Tax contravention.
Measure: Law-abiders who default in extraordinary circumstances will be admonished and will only be penalised on relapsing.
 
Penalty on Duty on Documents:
discrepancies between contractual value of property & value determined by CIR
Current Penalty System: A penalty of ten times more the duty saved by the amount under-declared.
Measure: Reduction to twice the same duty evaded; further gradual reduction of penalty according to timeliness of payment.
 
Outstanding Balances from VAT 1995 & from CET
Aim: To facilitate settlement by taxpayers of outstanding balances under the VAT 1995 & CET.
Measure: Reduction of c.15,000 assessments (Lm4.6 million in penalties) & reduction of penalties on a percentage scale linked to settlement time frame.
(interests due on outstanding tax are not affected).
 
Provisional Tax
Current System: Businesses declaring unexpected year-end profits which have not been declared for provisional tax purposes (due in April and in August), incur a penalty + interests for a whole year.
Measure: The penalty & interest on profits realized during the last four months of the year, which are not normal seasonal profits, will be calculated on 4 months not 1 year.
 
VAT Refunds
Aim: To help businesses’ cash flows.
Measure: VAT refunds due to an enterprise  providing exempt goods & services, will be made:
  • in 2003: within 4 not 5 months
  • in 2004: in 3 not 4months.

Procedures to reduce cases before the Small Claims Tribunal

 
Currently: For a credit to be declared a bad debt, the IRD used to require legal procedures and a Court Degree – caused a substantial increase of cases before Small Claims Tribunal (rather than debt collection, the aim was to obtain a Court Degree for bad debt.
 
Measure: A reduction of the procedures for companies to turn credit into bad debts without need to litigate in the Tribunal. 

Removal of Exchange Control Restrictions

 
Aim: To increase the amount Maltese citizens can send or invest abroad in foreign currency; to provide greater flexibility for local trade to operate in foreign exchange.
Measure: Liberalisation of exchange control – removal in stages of the major part of the remaining controls.
  • Repeal of Exchange Control Act;
  • Proposal of Exchange Transactions Act: provide necessary infrastructure for full liberalisation, give Minister of Finance authority to introduce measures & controls in times that would be critical for the balance of payments. 

Environment Friendly Tax Measures

 
Electrically-driven vehicles
Currently: Registration Tax on hybrid vehicles (consuming fuel & battery energy): 16.5%
Measure: Completely electrically-driven vehicles will be completely exempt from Registration Tax and exempt from the Valletta entry-permit tax for the next 5 years.
 
Products that benefit the Environment
Aim: To encourage use of environment-friendly products.
Measure: Reduction of mport duties as follows:
  • Recycled paper & bleach-free paper: 0%;
  • Degradable refuse bags: 6.5%;
  • Shopping bags manufactured from recycled paper & carton: 3.7%;
  • Consumption-reducing electricity bulbs: 2.7%.
 
Road License for Battery Operated Mopeds
Measure: Removal of road license for battery operated mopeds.
 
Incentives for improvement of property registered under Voluntary Registration Scheme: Valletta, Floriana and Cottonera
Context: National average vacant/dilapidated tenements: 6% of residential units
  • Senglea, Cospicua: 11%
  • Valletta, Vittoriosa: 26%
  • Floriana: 15%.
Aim: To incentivise applicants of Voluntary Registration Scheme to rehabilitate their tenements.
Measure: Refund of VAT payment on cost of works requiring Full Development Permit from MEPA.

Environment Friendly Tax Measures

 
Electrically-driven vehicles
Currently: Registration Tax on hybrid vehicles (consuming fuel & battery energy): 16.5%
Measure: Completely electrically-driven vehicles will be completely exempt from Registration Tax and exempt from the Valletta entry-permit tax for the next 5 years.
 
Products that benefit the Environment
Aim: To encourage use of environment-friendly products.
Measure: Reduction of mport duties as follows:
  • Recycled paper & bleach-free paper: 0%;
  • Degradable refuse bags: 6.5%;
  • Shopping bags manufactured from recycled paper & carton: 3.7%;
  • Consumption-reducing electricity bulbs: 2.7%.
 
Road License for Battery Operated Mopeds
Measure: Removal of road license for battery operated mopeds.
 
Incentives for improvement of property registered under Voluntary Registration Scheme: Valletta, Floriana and Cottonera
Context: National average vacant/dilapidated tenements: 6% of residential units
  • Senglea, Cospicua: 11%
  • Valletta, Vittoriosa: 26%
  • Floriana: 15%.
Aim: To incentivise applicants of Voluntary Registration Scheme to rehabilitate their tenements.
Measure: Refund of VAT payment on cost of works requiring Full Development Permit from MEPA.

Environment Friendly Tax Measures

 
Electrically-driven vehicles
Currently: Registration Tax on hybrid vehicles (consuming fuel & battery energy): 16.5%
Measure: Completely electrically-driven vehicles will be completely exempt from Registration Tax and exempt from the Valletta entry-permit tax for the next 5 years.
 
Products that benefit the Environment
Aim: To encourage use of environment-friendly products.
Measure: Reduction of mport duties as follows:
  • Recycled paper & bleach-free paper: 0%;
  • Degradable refuse bags: 6.5%;
  • Shopping bags manufactured from recycled paper & carton: 3.7%;
  • Consumption-reducing electricity bulbs: 2.7%.
 
Road License for Battery Operated Mopeds
Measure: Removal of road license for battery operated mopeds.
 
Incentives for improvement of property registered under Voluntary Registration Scheme: Valletta, Floriana and Cottonera
Context: National average vacant/dilapidated tenements: 6% of residential units
  • Senglea, Cospicua: 11%
  • Valletta, Vittoriosa: 26%
  • Floriana: 15%.
Aim: To incentivise applicants of Voluntary Registration Scheme to rehabilitate their tenements.
Measure: Refund of VAT payment on cost of works requiring Full Development Permit from MEPA.

Environment Friendly Tax Measures

 
Electrically-driven vehicles
Currently: Registration Tax on hybrid vehicles (consuming fuel & battery energy): 16.5%
Measure: Completely electrically-driven vehicles will be completely exempt from Registration Tax and exempt from the Valletta entry-permit tax for the next 5 years.
 
Products that benefit the Environment
Aim: To encourage use of environment-friendly products.
Measure: Reduction of mport duties as follows:
  • Recycled paper & bleach-free paper: 0%;
  • Degradable refuse bags: 6.5%;
  • Shopping bags manufactured from recycled paper & carton: 3.7%;
  • Consumption-reducing electricity bulbs: 2.7%.
 
Road License for Battery Operated Mopeds
Measure: Removal of road license for battery operated mopeds.
 
Incentives for improvement of property registered under Voluntary Registration Scheme: Valletta, Floriana and Cottonera
Context: National average vacant/dilapidated tenements: 6% of residential units
  • Senglea, Cospicua: 11%
  • Valletta, Vittoriosa: 26%
  • Floriana: 15%.
Aim: To incentivise applicants of Voluntary Registration Scheme to rehabilitate their tenements.
Measure: Refund of VAT payment on cost of works requiring Full Development Permit from MEPA.
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