Last week, the Maltese Government launched the Third Pillar Pension Scheme, paving the way for low income earners to start saving for their retirement.
The introduction of the Third Pillar Pension schemes was the next step following the amendments to the Income Tax Act and the Social Security Act, paving the way for new fiscal incentives. The incentives are aimed at encouraging Maltese residents to start saving for their pension by investing in private products offered by local banks, life insurance companies and other financial institutions.
A new Article 57 has been introduced to the Income Tax Act which provides for a tax credit with respect to contributions paid to personal retirement schemes or premium payments in relation to a policy of insurance.
The amount of the tax credit is equivalent to the lower of:
15% of the total contributions made during a year to a personal retirement scheme or premiums paid in respect of a policy of insurance held with a company which is authorized to carry on long term business of insurance under the Insurance Business Act; and
In the case of a married couple resident in Malta, each of the spouses may claim the credit (irrespective of whether they have used the parent rates, single rates or married rates of taxation). The credit will only be available in respect of income tax chargeable for the year in which the contribution was made or the premium paid and cannot be carried forward if not utilized. The income against which the tax credit is granted is considered to be the first part of the income.
It is expected that detailed regulations will be published soon in particular to identify the conditions to qualify for such tax credits.