This article was written by Dr Michael Psaila, Dr Annalies Muscat, and Dr Laura Spiteri
Amid the COVID-19 pandemic, the Maltese Government has issued three financial packages that businesses can avail themselves of. Each financial package builds upon the previous package.
First Financial Package:
The First Financial Package consists of two incentives. One measure is dedicated to the postponement of the payment of certain taxes, while the other provides aid in the form of a grant to help employers invest in teleworking technology.
- 1. Postponement of payment of certain taxes:
This incentive provides enterprises, including those who are self-employed, with a two-month moratorium on certain taxes. It should however be noted that companies and self-employed persons that failed to pay tax that fell due by December 2019 will not be eligible for this incentive.
The taxes that are eligible under this incentive are the following: provisional tax, employee tax, maternity fund payments and social security contributions, social security contributions of self-employed persons, and value added tax. This incentive applies to eligible taxes that fall due in March and April 2020, although the Government will be studying possible extensions of this incentive. It should be noted that all tax forms should still be submitted by the normal deadlines as required by law.
As the incentive currently stands, save for value added tax, all eligible taxes must then be settled in four equal monthly instalments in the four month period between May and August 2020. Tax due as value added tax must be settled in two equal instalments with the two quarterly returns that immediately follow the quarter the dues of which were deferred.
Any enterprise that benefits under this incentive will not face any penalties or interest with regard to the deferred eligible taxes. However, if a beneficiary breaches any of the terms and conditions of the application of this incentive, the benefit granted would be forfeited and the beneficiary would have to settle his dues as demanded by the Commissioner for Revenue, subject to the payment of interest or penalties.
Applications to benefit from this incentive should be made by 15 April 2020.
- 2. Facilitation of teleworking activities:
The second incentive issued by the Maltese Government aims to support employers and those who are self-employed with investing in technology that would enable teleworking by partially covering the costs of such teleworking solutions.
The support granted under this incentive will be in the form of a cash grant and will be limited to €500 per teleworking agreement and subject to a cap of €4,000 per undertaking that submits an application. The grant will be awarded against 45% of the eligible cost. Applicants are to note that the total support available under this incentive is capped at €2,000,000, and, to benefit under this incentive, the applicant must have incurred costs for such teleworking solutions after 15 February 2020. Businesses cannot benefit from this incentive for teleworking agreements which were in place before 15 February 2020.
The following costs are eligible for this cash rebate:
- i. the purchasing and/or leasing of computer hardware, including operating systems, that are considered portable. This includes installation and the setting up of connectivity software; and/or
- ii. communication solutions that allow different users to connect to their place of work.
Businesses applying for this incentive will be required to provide certain documentation. Once the application is approved, the business in question will also be required to undertake certain obligations. This call has been extended until 8 May 2020.
Second Financial Package:
1. An overview
In the Second Financial Package, the Government indicated that if will be setting aside the following funds:
- I. Aside from up to an estimated €700 million in tax deferrals announced in the First Financial Package, Government has earmarked around €900 million as bank guarantees.The bank guarantees are considered in more detail in Section 2 below;
- ii. An additional €35 million have been granted to the health authorities. The Government has not capped this amount and will provide more funds to the health authorities as the need arises;
- iii. €210 million has been earmarked to safeguard the economy and jobs. This arm of the Second Financial Package is considered in Sections 3, 4 and 5 below.
2. What about bank loans?
The Government announced that it would be assisting those who cannot keep up with bank loan repayments by allocating around €900 million to guarantee certain loans, which are estimated to amount to approximately €4.5 billion. These funds will be financed by the National Development and Social Fund (NDSF) and EU funds.
Pursuant to this commitment, the NDSF has already agreed to make available €150 million in guarantees to banks, which is intended to provide liquidity of up to €750 million for businesses in the form of soft loans granted by local banks. It is envisaged that these soft loans take the form of longer repayment periods and lower interest rates. The Government also indicated that banks have accepted to grant up to 3 months moratorium on business or personal loans, as guaranteed by the Government.
The Government has specifically indicated that it will not be regulating interest rates, as it expected the market to respond to these economic measures, although it appears that Government is in discussion with banks regarding interest rates.It will be noted that local banks have already put in place certain measures to assist their customers, and some have already, since the Government’s announcement, announced moratoria on loans.
3. Safeguarding the economy and jobs
Under this heading, the Government announced a number of measures aimed at assisting businesses impacted by various Government measures aimed at reducing the spread of COVID-19. Notably, the Government has announced that €350 will be given to employers for each full-time employee on quarantine leave. This grant is administered by Malta Enterprise, and applications opened on 25 March 2020.
When announcing the Second Financial Package, the Government had announced other measures aimed at helping businesses, specifically those involved in the restaurant, entertainment, tourism and hospitality sectors. These benefits were in the form of grants of one or two days’ salary per week, based on a monthly salary of €800.However, these grants have since been improved and superseded by the measures announced in the Third Financial Package, which are considered in more detail below.
4. Social measures
In addition to the above measures aimed at safeguarding businesses, the Government also announced a number of measures directly aimed at assisting individuals.In particular, it was announced that:
- I. families where both parents are in employment but cannot work remotely, or single parents who cannot work remotely, will be granted and will receive a direct payment of €166.15 per week if working full-time or €103.85 per week if working part-time, where one parent/the single parents has to stay home to care for the children following the mandatory closure of schools;
- ii. individuals whose employment was terminated with effect from 9 March 2020 will benefit from the Contributory Unemployment Benefit and will receive a direct payment of €166.15 (if previously working full-time) or €103.85 (if previously working part-time) per week;
- iii. persons with a disability working in the private sector that cannot work from home but who must remain at home for health reasons and complications associated with COVID-19 will be entitled to a benefit of €166.15 per week if working full-time or €103.85 per week if working part-time;
- iv. individuals whose employment was terminated, who are renting out a home, and who did not previously qualify for a rent subsidy will now qualify for that subsidy. The Government will be increasing rent subsidies for individuals whose employment was terminated.
Applications for these scheme are being administered by the Department of Social Security.
5. Third country nationals
With respect to third country nationals, the Government has announced that:
- I. Malta will stop accepting third country national applications, except for those applicants who are highly-qualified;
- ii. Help to find alternative employment will be given to third country nationals who had their employment terminated;
- iii. Jobsplus will introduce a new service that will assist both residents and third country nationals that have had their employment terminated. With regard to third country nationals, Jobsplus will also be helping them acquire work permits.It will also help employers in seeking new recruits.
- iv. Enterprises that have terminated the employment of their employees will not be allowed to apply for a permit for third country nationals.
Third Financial Package:
The Third Financial Package was announced on 24 March 2020. It builds upon certain measures announced in the Second Financial Package and refines or replaces some of them.
This Package applies to employees with businesses which are hit by the COVID-19 crisis. It distinguishes between two types of businesses – those hardest hit, listed in “Annex A”, and those otherwise adversely effected, listed in “Annex B”.The benefit varies according to the business in question.
1. Annex A
Full-time employees and self-employed individuals working in sectors listed in Annex A, where the business suffered due to the COVID-19 outbreak or the businesses had to mandatorily temporarily suspend operations, will be entitled to up to five days’ salary based on a monthly wage of €800. Part-time employees will be eligible for up to €500 per month.
2. Annex B
In the case of the sectors listed in Annex B, which relates mostly to manufacturing and wholesale businesses, full-time employees (and, it is understood, those who are self-employed and have no employees) will be entitled to one days’ salary per week, equivalent to €160 per month, whilst part-time employees are entitled to one day’s salary per week, equivalent to €100 per month.
In the case of Gozo-based enterprises the amount will increase to two days’ salary per week equivalent to €320 per month for full-time employees, and €200 per month for part-time employees. Self-employed individuals based in Gozo who have no employees will also be entitled to 2 days’ salary per week, equivalent to €320 per month.
Those who are self-employed and have employees will be entitled to two days’ salary per week, equivalent to €320 per month.If based in Gozo, self-employed individuals who employ staff will be entitled to 3 days’ salary, equivalent to €480.
During the press conference announcing the Third Financial Package, it was explained that these benefits will be paid to the employers, who will be paying their employees. The Government indicated that employers had agreed to pay the difference in their employees’ salary, up to a maximum salary of €1,200. As regards higher salaries, the Government appealed for good sense and cooperation to prevail. Government also announced that these benefits apply where businesses re-employ employees they had dismissed since 9 March 2020.
This scheme will be administered by Malta Enterprise. Application forms and exhaustive guidelines for these benefits are not yet available.
Apart from the schemes described above, there are other schemes that are still open and could be made use of by all enterprises, namely: the Business Development and Continuity Scheme; the Skill Development Scheme; Business Advisory Services 2018-2020; and the Family Business Support Scheme. The Commissioner for Revenue also provides assistance on mergers and divisions.
Moreover, other schemes dealing specifically with the COVID-19 outbreak may be announced, depending on the ever-evolving circumstances. We will endeavour to provide updates as and when any new measures are announced.
This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr. Michael Psaila, Dr Annalies Muscat, and Dr Laura Spiteri