Malta Budget 2025

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In the Budget Speech presented by Finance Minister Clyde Caruana, he highlighted Malta’s recent economic successes, including improvements in GDP and control over government spending, but also noted two critical issues: Malta’s dependence on imported labour and the lack of productivity gains across all economic sectors. The Minister emphasised that these challenges have led to infrastructure strain, traffic congestion, and increased pressure on the health sector. Caruana stressed the need for sustainable economic growth, suggesting a strategic shift toward prioritising quality over quantity and focusing on innovation and IT.

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Minister Caruana attributed his tax reduction proposal to three factors: improved fiscal compliance resulting in better tax collection, controlled government spending that lowered the deficit, and a decreased national debt-to-GDP ratio. Despite global challenges, Malta’s economy has shown resilience, with forecasts predicting a 5.9% GDP increase in early 2024 and an annual growth of 4.9%, leading EU economic growth. Employment rose by 4.6%, achieving an 81.3% national employment rate compared to the EU’s 75.3%, while inflation remained stable at 2.5%.

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We invite you to review the key points from this budget speech and remain available to address any questions regarding the 2025 Budget.

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• Beginning on January 1, 2025, individual tax rates will be revised to expand the tax-free brackets, resulting in annual tax savings ranging from €345 to €675 per taxpayer. The adjustments are as follows:
  • Single from €9,100 to €12,000
  • Married from €12,700 to €15,000
  • Parent from €10,500 to €13,000

• A tax refund of €60 to €140, previously provided in past years, will once again be issued to individuals with annual earnings under €60,000.

• Parents with children enrolled in independent private schools will benefit from increased deductions against their taxable income as follows:
  • Kindergarten: €3,500
  • Primary Schools: €4,600
  • Secondary Schools: €6,500

• The Highly Qualified Persons rules, which offer a reduced tax rate to skilled professionals in specialised sectors like financial services, gaming, and aviation, will now also extend to entities providing back-office services.

• The VAT rate on essential sanitary products for women’s health will be reduced to 0%. This reduction will also extend to medical accessories related to women’s cancer treatment.

• The reduced duty rate, from 5% to 1.5%, on inter-vivos transfers of business property or shares between family members will be extended for another year.

• A tax credit of €750 will be granted to parents with a child who has a disability, an increase from the current amount of €500.

• The Get Qualified and Higher Educational Qualifications Schemes shall be extended

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In last year’s budget speech, it was noted that the OECD’s Pillar 2 initiative established a global minimum tax rate of 15% for large multinational enterprises, with the EU incorporating this measure through a Directive effective 31 December 2023.

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Malta has opted to delay the implementation of this Directive and is currently in discussions with the European Commission regarding proposed measures in the form of grants or tax credits (QRTCs) to ensure alignment with EU regulations.

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• The Cost-of-Living Adjustment (COLA) is set at €5.24 per week, resulting in an annual increase of €272.48.

• The minimum wage will increase by €8.24 per week, €221.78 per year.

• The government will continue to subsidise fuel, cereals, flour, and animal feed.

• Additional amendments to the Wage Regulation Ordinance will be made to ensure equal social benefits (such as overtime pay and sick leave) across various economic sectors.

• In the coming year, approximately €25 million will be allocated to over 50 public social partnerships that the government has established with various voluntary organisations.

• A one-stop shop will open in southern Malta, serving as the first center for training, resources, and research for the voluntary sector.

• The children’s allowance will increase by €250 for each child.

• Additional 100 hours for IVF treatment leave, split 60 – 40 between the mother and partner.

• 10 days paid parental leave to self employed fathers.

• Post secondary education allowance of €500 for parents.

• Marriage grant increased to €1,000 per couple.

• Parents will receive a one-time grant of €1,500 upon the birth or adoption of a third-child and onwards.

• Fostering allowance increased by €10 per week, an annual allowance of €6,240 per child.

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• Pensioners will receive another increase of €8 per week, which includes the cost-of-living increase.

• Individuals who do not qualify for a pension will receive an annual bonus ranging from €550 to €1,000.

• Every new employee will have the option to invest in an occupational pension plan, with no obligation for the employer to contribute. These occupational pensions will benefit from the same tax incentives currently in place.

• Public sector workers who choose to enrol in a private pension plan will have their contributions matched by the government, up to €100 per month.

• Widowed pensioners will receive an additional pension increase of approximately €3 per week, on top of the general increase of €8 per week.

• The adjustment of bonus rates will continue over the next two years, concluding in 2027, with every pensioner entitled to the maximum rate of €21.53 per week.

• As in previous years, the part of any service pension that will not be deducted from the social security pension will be increased by an additional €200, totalling €3,666.

• To receive the full pension, the required contribution years will increase from 41 to 42 for those born on or after 1976. However, the retirement age and social security contribution rate will remain unchanged.

• Pensioners who remain in the work force, their pension income will be gradually excluded from taxable income with 80% not considered taxable for 2025.

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• The Grant on First Residence (GFR) and the reduction in stamp duty for first-time and second-time buyers will be extended for an additional year.

• The current fiscal incentives for buyers and sellers of properties that are over 20 years old and have been vacant for more than 7 years, as well as those in Urban Conservation Areas and other designated properties, will be extended:
  • Tax and stamp duty exemptions on the first €750,000;
  • VAT savings of up to €54,000 on the first €300,000 of refurbishment costs; and
  • Grants of €15,000 or €40,000 for first-time buyers of such properties in Malta and Gozo, respectively.

• The succession tax on leased agricultural land has been eliminated as part of the agricultural sector reform.

• The Building and Construction Authority is set to launch initiatives aimed at assisting low-income earners who renovate their homes to improve energy efficiency.

• A new scheme will be introduced to allow for certain redemptions of temporary emphyteusis and expand eligibility for these redemptions, with the goal of increasing the number of freehold residential properties.

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• The Minister announced the creation of a new unit focused on AI technology to support innovative systems through funding and research. Additionally, a Digital Identity Wallet app will be launched, enabling citizens and businesses to securely share their digital identities.

• The Seed Investment Scheme has been extended to encourage investment in local start-ups. The Malta Government Venture Capital fund has been established with €10 million allocated for investing in shares of newly formed companies.

• The government will be reimbursing the first 6 months of gym membership for individuals born between 2005 and 2007.

• The government plans to introduce legislation for Limited Partnerships to promote this sector.

• New opportunities in the gaming sector will be introduced, including the Video Gaming Gateway initiative, which provides financial support for innovative products. Basecamp will help start-ups develop video games and esports, and Malta will introduce visas to attract esports athletes.

• The Minister announced reductions in excise duty on low-alcohol beer produced by small, independent breweries and significant reductions for small local wine producers.

• Incentives for investing in renewable energy will be extended for another year. The incentive for purchasing electric cars, motorcycles, and bicycles will also continue, capped at €8,000, and will apply to electric cars ordered but registered in 2025.

• The exemption from registration tax and road licenses for electric and plug-in hybrid vehicles will remain in place for five years from the registration date.

• There will be further investment in electricity and water infrastructure. Additionally, organic waste will be pasteurized to create soil additives, which will be given for free to farmers.

• The creative sector will receive €15 million in EU funding, along with €2 million allocated to Creative Malta to support local film producers.

In summary, the 2025 Malta Budget aims to build a resilient, sustainable economy by focusing on fiscal responsibility, social welfare, and innovation, setting a foundation for long-term growth and improved quality of life

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