On Wednesday 12th November 2014, Hon. Prof. Edward Scicluna launched the Third Pillar Pension scheme, encouraging 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 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.
Any Malta tax payer will be able to obtain a tax credit against income tax chargeable in Malta. This will be applicable on any contributions made by a person to any personal retirement scheme or premiums paid in respect of a qualifying policy of insurance. The tax credit will be equal to the lower of:
• 15% of the aggregate of the contributions or premiums paid; and
This means that if a taxpayer falls within the 15 per cent income tax bracket, s/he can utilise €1,000 of his/her annual income to contribute to a personal retirement scheme or a qualifying insurance policy without paying tax on that €1,000 income. If, on the other hand, a taxpayer falls within the higher tax bracket or would want to contribute more than €1,000 every year in such scheme or policy, the maximum tax saving of the taxpayer would be €150.
It should also be noted that this tax credit will only be available in respect of qualifying schemes or policies of insurance as may be prescribed by the Commissioner for Inland Revenue.
It is expected that more detailed regulations will be published in the future to identify the conditions for qualification.