Finance Minister announces raft of new measures to support business liquidity

Finance and Employment Minister Clyde Caruana has announced new measures and extension of others in a bid to safeguard Maltese businesses.

Speaking at a press conference on Wednesday morning, Mr Caruana announced an extension in the tax deferral scheme for businesses, with all income tax, social security contributions and VAT payments between August 2020 and December 2021 being eligible for deferral until May 2022, when they can be repaid in instalments.

“Through this deferral, our businesses can focus on their work, instead of worrying how to pay their dues,” he said.

The Minister stressed that taxes deferred would not be granted an amnesty down the line.

He noted that tax payments shot up in September and October of last year, before the country experienced a strong second wave that led to the closure of bars and clubs.

In fact, of the taxes deferred through the first initiative announced in March of last year, many had already been repaid.

“Some business may be fundamentally sound,” he said, “but they may not currently be in a position to pay their taxes.” He used hotels as one example of a business sector with strong potential for earning, but who are currently cash-strapped.

Additional measures announced today include the extension of the COVID Guarantee Scheme until September, an extension to 18 months in the moratorium imposed until the loan received under the scheme needs to be repaid, and an amendment to the definition of working capital to include loan repayments.

The COVID Guarantee Scheme acts as a guarantor for business loans, with the Government making €350 million available for the initiative, generating a possible €778 million in loans. Of these, over €300 million are still available. The scheme also ensures a lower interest rate, decreasing the price of liquidity for businesses.

Businesses can apply for the scheme until September 2021, extended from June, while repayments will now start after 18 months, up from six months originally and 12 months as amended later on.

The Scheme applies to loans taken out as working capital, those resources required in the day-to-day running of the business. This definition will now be extended to also cover loan repayments.

This means that a company can receive a loan with advantageous conditions through the scheme to repay a loan with commercial rates.

Mr Caruana also indicated that banks currently hold some 3.6 billion in commercial debt, with 600 million of these, or one sixth, are under moratorium.

Finally, businesses who have pending tax balances will be given a one-time concession to settle the bill, and will be exempt from capital gains tax when selling property to settle it.

The exemption would apply on the amount of revenue received from the sale of property which is equivalent to the amount of tax that is owed to the Government by the date of the promise of sale agreement, and applies on promise of sale agreements registered by March 2022.

To apply for this scheme, interested parties are to contact the Tax Department for guidance on filling out the necessary forms.