2020: Year of a new start for Malta
A new confidence in government and good governance, a positive economic outlook and more efficient corporate tax processing create a positive mood
The year 2020 will be a year of new beginnings for Malta; the island state is faced with the task of regaining the trust that was called into question under the old government, rebuilding its good international reputation, making its governmental and administrative structures more transparent and efficient and positioning Malta even more clearly as an international investment location.
New Prime Minister Robert Abela has made a good start.
The 42-year-old lawyer Robert Abela, who won the primary election for the presidency of the ruling Labour Party ('Partit Laburista'), was elected as the new head of government of the smallest EU state on 13 January 2020. The new prime minister, whose father George was president of Malta from 2009 to 2014, has only been in parliament since 2017 and has not yet held a government post. Abela wants to be guided by the values of 'integrity and honesty' and at the beginning of his term of office he committed himself to discipline and collegiality. The new prime minister was already able to set the first positive accents with the significant reshuffle of his cabinet, which no longer contains any old, burdened ministerial names.
Stable and healthy economic development; Fitch rating again A+ with positive outlook
The positive outlook reflects the rating agency’s expectation of sustained high economic growth from diverse sources in the medium-term. As a result, Fitch expects Malta’s per capita income to continue converging to the EU average in the coming years. Thus, Fitch recognises the island’s sound and prudent management of public finance by ensuring that expenditure growth does not exceed the economy’s potential growth rate.
Fitch forecasts inflation to remain below the 2% threshold this year and the next. The agency also acknowledges recent efforts to strengthen supervisory and regulatory institutions.
Tourism boom here to stay; Malta International Airport handled record 7.3 million passengers in 2019
Malta International Airport (MIA) enjoyed a record of over 7.3 million passenger movements last year, translating into an increase of 7.4 per cent over 2018. The top drivers of traffic in 2019 were Spain (+17.3%), France (+10.8%) and Germany (+9%).
International Tourism is one of the island’s most important sectors of economy. The emphasis the new governments is willing to give to a more sustainable development of Malta’s environment can foster this positive momentum.
Tax efficiency – new Income Tax Consolidation Rules from year of assessment 2020 onwards
Under the new rules (see Legal Notice 110 of 2019) a Malta company which elects to be treated as part of a fiscal unit (formed of one holding company and at least one or more trading companies) will not be obliged to pay the full 35% income tax, of which subsequently 6/7 could be regularly claimed back by its shareholders (Tax Refund).
Instead, the tax refund due to the shareholders is taken into account when calculating the final tax liability of the consolidated tax entity and is payable by the main taxpayer. As a result, the so-called 'Principal Taxpayer', i.e. the holding company in a group (Fiscal Unit), usually pays only 5% tax directly, which leads to a considerable simplification and acceleration of the procedure and a significant improvement of the cash flow position of the shareholders of Maltese companies.
Further details of the new and attractive tax rules will be given at a later stage.