Income tax reduction
Widening of the tax free brackets for individuals using the single, married and parent computations, as follows:
Single Computation |
|
Income earned (€) |
Tax rate |
0-12,000 |
0% |
12,001-16,000 |
15% |
16,001-60,000 |
25% |
60,001+ |
35% |
Married Computation |
|
Income earned (€) |
Tax rate |
0-15,000 |
0% |
15,001-23,000 |
15% |
23,001-60,000 |
25% |
60,001+ |
35% |
Parent Computation |
|
Income earned (€) |
Tax rate |
0-13,000 |
0% |
13,001-17,500 |
15% |
17,501-60,000 |
25% |
60,001+ |
35% |
This adjustment means taxpayers will enjoy an annual tax saving as set out below:
Single computation |
Married computation |
Parent computation |
|
Annual tax saving |
€435 to €675 |
€345 to €645 |
€375 to €650 |
The tax refund paid in the past years, ranging between €60 to €140, will be paid again to individuals earning less than €60,000.
To encourage pensioners to continue working beyond retirement age, pension income has been, over a 5-year period since 2022, gradually excluded from taxable income. For calendar year 2025, 80% of the amount of pension income will not be considered taxable income.
Tax exemptions for pensioners
The increased pension benefits announced in this Budget for pensioners aged 61 and over as well as for widowed individuals will be tax-exempt.
Increase in deduction relating to private school fees
Parents having children attending independent private schools will benefit from an increase in the deduction against their chargeable income, as follows:
- Kindergarten - €3,500
- Primary schools - €4,600
- Secondary schools - €6,500
International tax
As mentioned in last year’s budget speech, the OECD’s Pillar 2 initiative introduced a global minimum tax rate of 15% for large multinational enterprises. The EU introduced this initiative through a Directive that came into force from 31 December 2023.
Malta has elected to defer the implementation of this Directive. Discussions continue with the European Commission with respect to measures that Malta plans to introduce in the form of grants or tax credits (QRTCs). This should ensure that such measures are in line with EU rules.
Tax incentives on transfers of businesses
The reduced stamp duty rate of 1.5% applicable to certain transfers of businesses to descendants has once again been extended.
Back office services
The Highly Qualified Persons rules, providing a reduced tax rate to qualified professionals in specialised sectors such as financial services, gaming and aviation, will be extended to entities providing back office services.
Other tax measures
Excise duty on certain beer produced by small, independent Maltese breweries will be reduced and the basis to calculate this duty will change from Plato degree to ABV%. Similarly, excise duty on wine produced by small local producers will be significantly reduced.
Reduction of VAT rates on certain products
The VAT rate for sanitary products that are essential for women’s health will be reduced to 0%. This reduction will also apply to medical accessories for women related to cancer treatment.
Shift to greener private transportation
The scheme providing a full VAT refund for bicycles and electric scooters will be extended. Additionally, the scheme incentivising the purchase of electric-assisted bicycles and grants for those converting their vehicles to run on gas instead of petrol will also be extended.