MALTA BUDGET 2026

On 27th October 2025, the Minister of Finance presented the country’s budget for 2026.  Please refer to our selection of key highlights.

Malta’s economy continued to grow steadily in 2025. During the first half of the year, real GDP increased by 3.1%, outperforming the European average of 1.4%. Growth is being driven mainly by strong domestic consumption, public investment, a buoyant tourism sector and continued strength in services exports. For the full year, nominal GDP is expected to grow by 4.1%, with a similar rate projected for 2026.

Inflation is forecast to remain stable at around 2.2%, with the Cost-of-Living Allowance (COLA) set at €4.66 per week.

On the fiscal front, Government expenditure is projected to increase by more than revenue, resulting in a slight widening of the deficit in absolute terms from €814 million in 2024 to €820 million in 2025. However, when expressed as a percentage of nominal GDP, which is expected to rise from €23.1 billion to €24.7 billion, the deficit is anticipated to decline from 3.5% to 3.3%. By 2026, it is projected to fall further to 2.8%, below the EU’s 3% threshold.

Government debt is expected to amount to €11.6 billion in 2025, up from €10.7 billion last year, and to reach €14 billion by 2028. This corresponds to around 47.1% of GDP and is forecast to remain broadly at that level over the coming years, comfortably below the EU’s 60% reference value.

• Government is introducing significant income tax reductions over the next three years to support families and address Malta’s declining birth rate.

• Eligibility applies until the youngest child is 18 years old, or 23 if still in full-time education.

• Two new sets of tax bands will be introduced, distinguishing between:
  • Parents with one child and those with two or more children

• The current married tax rates will continue to apply for households that do not qualify for the new bands, such as where only one spouse is employed.

• Non-taxable income thresholds will rise significantly by 2028, as highlighted below:
  • Parent computation (2+ children): from €13,000 to €30,000
  • Married computation (2+ children): from €15,000 to €37,000
  • Married computation (1 child): from €15,000 to €22,500
  • Parent computation (1 child): from €13,000 to €18,000

• The applicable rates for basis year 2026 will be published in tax tables, with more favourable rates planned for 2027 and 2028.

• The Children’s Allowance will increase by €250 per child for families earning less than €30,000 annually, with an additional €167 for those earning less than €23,000.

• The In-Work Benefit will increase by €75 per child.

• Families will receive an additional €500 per child enrolled in post-secondary education.

• The fostering allowance will increase by €10 per week.

• The birth and adoption bonus will increase by €500, to €1,000 for the first child, €1,500 for the second child and €2,000 for the third child and onwards.

• The maximum reimbursement for foreign adoptions will increase from €10,000 to €12,000. The reimbursement for local adoptions will increase from €1,000 to €2,000, €500 of which will be issued as a grant.

• Unmarried parents living with their parents will receive full social assistance without the 25% reduction.

• The government will begin discussions with stakeholders on increases to maternity leave, paternity leave and improvements to parental leave.

• A Neonatal Care Leave will be introduced for parents whose newborn children require intensive or additional care immediately after birth. The cost of this leave will be covered by the government.

• Self-employed individuals will become entitled to bereavement leave, miscarriage leave and the 8-week parental leave granted upon birth, adoption, fostering or legal custody of children.

• The entitlement for parents who temporarily step out of employment to care for their children has been extended from 6 to 10 years for up to three children, with an additional year granted for each subsequent child. For families with at least one child with a disability or rare disease, the age limit has been removed entirely.

• Retirement pensions will increase by €10 per week.

• Widowers’ pensions will increase by €3.50 per week, with an additional €10 per week for widowers raising children until the child turns 23.

• Social security contributions paid before the age of 18 will now count towards pension entitlement.

• The staggered pension tax exemption will continue, with 100% of pension income exempt for basis year 2026, subject to a cap.

• Pensioners born before 1962 will receive adjustments to remove discrepancies in pension entitlement when compared to those born after 1962.

• The scheme allowing individuals to pay a maximum of five years of missing social security contributions will no longer require the applicant to be in employment where at least ten years of contributions are needed to qualify.

• The annual supplement paid to persons aged 65 and over will increase by €100, from €150 to €250.

• The Supplementary Allowance has been increased by:
  • €27.30 per week for married couples
  • €14.40 per week for single persons

• Additionally, the income limits to qualify have been raised to:
  • €14,000 for single persons
  • €20,000 for couples

• Pensions for married individuals receiving a reduced rate because their spouse also gets a pension will increase by €2 to €14 per week.
• €200 increase in commuted pensions for individuals receiving service pensions.

• €50 increase in the bonus for individuals not entitled to a pension.

• €75 increase in the allowance for elderly persons living at home, with relatives, or in a care home at their own expense.

• €10 increase per week in the allowance for individuals attending a drug rehabilitation programme.

• Individuals who successfully complete a drug rehabilitation programme will receive four years of social security credit, and their employer will get a two-year exemption from social security contributions.

• €179.24 annual increase in the Carers’ Grant, bringing the total to €5,368.89 per year.

• The income limit for couples eligible for the Energy Benefit will increase by €2,500.

• The First-Time Buyers Grant of €1,000 per year for ten years will be extended. Ownership of non-residential property will no longer disqualify eligibility, and an additional financial assistance of €10,000 over ten years will be renewed.

• The Housing Authority programme that finances the interest on the 10% deposit for qualifying buyers will now cover properties costing up to €250,000, up from €225,000. The equity sharing scheme will lower the minimum eligible age from 30 to 25 and increase the maximum purchase price to €350,000 for purchases by separated persons.

• The exemption from duty on documents and transfers for first-time buyers on the first €200,000 of the property consideration will be permanently included in law. Eligibility will now also extend to those who have previously acquired non-residential property.

• The reduced duty rate of 3.5% on inherited residential property in which they already reside, will apply on the first €400,000, up from €200,000. 

The government will implement a series of measures to support businesses, particularly SMEs, start-ups, and value-adding industries such as gaming, health, pharmaceuticals, light industry, and biotechnology.

• Cooperatives will be exempt from submitting audited accounts for tax purposes.

• The European Digital Innovation Hub will provide SMEs and start-ups with free access to AI, high-performance computing, and cloud services.

• Existing schemes supporting family business transfers will be extended, including the 1.5% reduced duty rate on intra-family transfers, advisory grants for governance and succession planning, training vouchers, and digitalisation assistance.

• A new scheme for self-employed individuals and small enterprises will cover up to 50% of the cost (capped at €300,000) for the purchase of industrial garages.

• Development of a modern SME complex for companies in health, pharmaceuticals, light industry, and biotechnology is planned.

• Micro Invest Scheme tax credits will increase to €65,000 (covering 65% of eligible costs), with the 20% additional support for Gozo-based enterprises maintained, reaching a maximum of €85,000 for certain enterprises.

• A new wage-support mechanism under the Micro Invest Scheme will cover 65% of wage increases for employees with more than four years of service, up to €780 annually; Gozo-based employees receive 80%, up to €960.

• A New Investment Tax Credit will provide 60% of qualifying investment value, claimable over four years, for capital expenditure on machinery, IT, tools, and cybersecurity.

• A 175% tax deduction will be available for eligible research and innovation expenditure.

• Accelerated depreciation over two years will apply to investments in AI, digitalisation, automation, modernisation, and cybersecurity.

• A total of €100 million has been allocated to incentivise adoption of technologies such as AI, Internet of Things, cybersecurity, AR/VR, blockchain, and robotics.

• The government will establish a centre of excellence within MITA to train civil servants in AI.

• Partnerships with Microsoft and other entities will invest in AI initiatives within the public sector.

• The “AI for All” programme will provide free AI courses, national certification, and practical training for parents, students, workers, and seniors, including complimentary subscriptions to AI services.

• Ongoing digitalisation initiatives include Family Court Reform processes and the establishment of a Digital Identity Wallet.

An increase in the eco-contribution tax from €0.50 to €1.50 per person per night has been announced. This tax applies to tourists for each night of their stay in Malta.

• Student stipends will rise by 15%, boosting financial support for students across Malta.

• Gozitan students pursuing post-secondary or tertiary studies in Malta will receive a €280 monthly allowance, a 70% increase.

• Families with students in Years 10 and 11 will receive a €500 grant to support digital learning.

• Through the LIFEHACK programme, students and youth will access accredited courses in personal finance and digital skills.

• Approximately 20,000 digital devices will be distributed to students in Years 4, 7, 8, and 9.

• Free gym memberships for the first six months will be extended to youth aged 16–21.

• Marsa Sports Complex to open, offering weightlifting, squash, and netball facilities.

• €1 million investment in Special Olympics Malta to enhance athlete development and services.

• Young people under 30 who give up their driving license may receive a €5,000 annual grant for five years.

• Grants for electric cars and scrappage schemes will continue, with new €1,500 grants for motorcycles or car-to-motorcycle switches.

• Major investments include €85 million for an organic waste processing plant and €17 million for a skip management facility, alongside studies for a hazardous waste facility.

• Feed-in tariffs for small photovoltaic systems will remain, alongside energy efficiency schemes for households and businesses.

• A call for interest has been issued for offshore wind renewable energy projects in Malta’s exclusive economic zone.

The Malta Budget 2026 takes a strategic approach to supporting both families and businesses while maintaining sound fiscal management. Families will benefit from significant tax relief, higher children’s allowances, post-secondary education grants, and expanded parental and neonatal care leave. Additional support for carers and families of children with disabilities further underscores the government’s commitment to social equity and addressing Malta’s declining birth rate.

For businesses, the budget emphasises innovation, digitalisation, and SME growth. Expanded Micro Invest Scheme tax credits, investment incentives, and wage-support measures aim to boost entrepreneurship and workforce development. Funding for AI, research and development, and emerging technologies, alongside infrastructure support such as industrial garages and SME complexes, positions Malta as a competitive hub for high-value industries.

Contact us for a comprehensive, customised assessment on how your business can strategically capitalise on the 2026 tax budget to optimise operations, strengthen workforce planning, and maximise available benefits.