The Malta Budget 2025, as introduced by Finance Minister Clyde Caruana, reflects a forward-looking approach aimed at achieving sustainable growth while maintaining fiscal discipline. With significant tax reforms, increased social support, and infrastructural investment, the budget positions Malta as a resilient economy in the face of global challenges.
However, the nation faces ongoing challenges such as dependency on foreign labor, strain on infrastructure, and disparities in productivity across sectors. This article is aimed to provide an in-depth analysis of the budget's key measures, organised by fiscal, social, and sector-specific initiatives.
Economic Overview & Context
Malta's economy is forecasted to grow by 4.9% in 2024, following a strong performance in 2024 with 5.9% real GDP growth in the first half of the year. Real-term growth for 2025 is expected at 4.3%.
The employment rate is high at 81.3%, with an unemployment rate of 3.5%. This is projected to increase by an additional 4.6% in 2024 and 4.1% in 2025.
Inflation is expected to drop to 2.1% in 2025, down from 6.4% in 2023. Deficit reduction remains a priority, with the goal to reach 3.5% in 2025, 3.0% by 2026 and 2.6% by 2027.
Tax Reforms & Fiscal Measures
Personal Income Tax Changes
New tax brackets are effective from January 2025, aiming to alleviate the financial burden on low and middle-income earners. The tax-free threshold for singles, married individuals, and parents has been raised, resulting in annual savings of up to €675. These changes align with the government's objective to support middle-income households amidst rising living costs.
| Taxpayer Type | Range of Savings (Annual) |
|---|---|
| Single Taxpayer | €435 to €675 |
| Married Taxpayer | €345 to €645 |
| Parent Taxpayer | €375 to €650 |
An increase in tax deductions for parents whose children attend licensed independent schools shall be granted resulting in the following:
| Education Level | Current Deduction Per Child | Proposed Deduction Per Child | Increase in Deduction Per Child |
|---|---|---|---|
| Kindergarten | €1,600 | €3,500 | €1,900 |
| Primary School | €1,900 | €4,600 | €2,700 |
| Secondary School | €2,600 | €6,500 | €3,900 |
The Get Qualified and Higher Educational Qualifications Schemes have also been extended allowing for tax credits to continue to be provided to students studying for a Masters Degree or Doctorate.
The refund scheme enacted for VAT paid upon the acquisition of bicycles and electric bicycles shall also be extended for another year. Additionally, the scheme aimed to incentivise the purchase of electric-assisted bicycles and grants for those converting their vehicles to electric instead of petrol will also be extended, with a reduction in such grant from €11,000 to €8,000.
A five-year exemption from registration tax and road licenses for electric and plug-in hybrid vehicles will remain in place, providing further motivation for eco-friendly vehicle adoption.
Corporate Tax & Business Measures
Within the budget, the Minister also noted the effect that the ever-evolving international tax sphere may have on the island, specifically with regards to the deferred introduction of Pillar 2.
In last year's budget, the Minister confirmed that Malta will apply the derogation up to 2029 provided for in the EU Minimum Tax Directive and therefore will delay the introduction of the 15% minimum tax rate for companies forming part of a group with an annual turnover of at least €750 million.
This year, the Minister noted the provisions for Qualified Refundable Tax Credits (QRTCs) and advised that Malta is currently still in discussion with the EU Commission with regards to the introduction of such measures and incentives, which may be provided in the form of grants or tax credits, which will be expected to be utilised to retain Malta's attractiveness in the global tax landscape whilst remaining in line with the EU rules.
Additionally, an extension of the reduced duty rate of 1.5% for family business transfers has been granted for another year.
The Minister announced initiatives to encourage the establishment of back office activities in Malta including the applicability of the Highly Qualified Persons rules, with such initiatives being introduced to focus on promoting gaming, IT, and back-office services, enhancing Malta's appeal as a competitive business hub.
Social Welfare & Family Support
Cost of Living Adjustments (COLA)
The COLA increase of €5.24 per week addresses inflationary pressures, with the minimum wage set to increase by €8.24 per week.
Additional support includes pension increases of €8 per week and enhanced family benefits such as a €250 increase in children's allowances, aiming to offset living expenses for families and the elderly.
An increase in the tax credit has been granted to the parents having a child suffering from a disability, which shall now be €750 instead of €500.
Individuals who were born in 1976 or after have to contribute an additional year of social security contributions in order to receive a full pension.
Healthcare & Education Initiatives
Healthcare reforms enacted include a €14 million investment in reducing waiting times and providing free medication for seniors over 75.
Other education support measures, such as expanded private school fee deductions, support accessibility and quality improvements in education have been enacted.
Benefits to parents, newlyweds and prospective parents and their spouses undergoing IVF treatment were proposed by the Minister in the Budget Speech.
The VAT rate for sanitary products related to women's health will be reduced to 0%. This reduction is also applicable to medical accessories related to cancer treatment required for women.
Property & Housing
A new scheme will be launched to help with the redemption of temporary emphyteusis of residential properties, expanding eligibility on current and past schemes.
Extension of fiscal incentives for properties built over 20 years ago and vacant for over 7 years, properties in UCA zones, or new properties developed according to approved criteria.
Existing fiscal incentives applicable to buyers and sellers of properties which have been built for more than 20 years and have been vacant for more than 7 years, properties located in Urban Conservation Areas and other properties developed in terms of established criteria will be extended.
These incentives cover exemptions from tax and from stamp duty on the 1st €750,000, VAT savings of a maximum of €54,000 on the 1st €300,000 in refurbishing expenses and a grant of €15,000 or €40,000 to first time buyers of such properties located in Malta and Gozo respectively.
Additionally, the succession tax on leased agricultural land has been removed as part of the reform in the agricultural sector.
The Building and Construction Authority is also expected to introduce initiatives targeted to low income earners who renovate their homes in an energy efficient manner.
Lastly, the Grant on First Residence (GFR) as well as reduction in stamp duty for first time and second time buyers will be extended for another year.
For more information on these real-estate measures, we invite you to contact the team from our associated brand, Malta Sotheby's International Realty.
Environmental & Sustainability Initiatives
Renewable Energy & Green Infrastructure
'Project Green' introduces 8,000 square meters of urban green spaces, and grants for renewable energy systems and electric vehicles are expanded. Malta's environmental commitment includes investments in sustainable transport infrastructure and incentives for electric vehicles.
Strategic Economic Focus
The recent announcements by the Minister encompass a wide range of initiatives designed to drive technological advancement, support local business growth, expand gaming and creative sectors, and encourage sustainable practices.
The government is establishing a dedicated unit focused on AI technology development to drive innovation through targeted funding and research in advanced systems. This unit will serve as a foundational pillar in Malta's tech ecosystem.
Additionally, a Digital Identity Wallet app will be introduced, allowing citizens and businesses to share their digital identities securely and efficiently. This app aims to streamline identity verification processes and strengthen digital interactions across sectors.
To stimulate local entrepreneurship, the Seed Investment Scheme has been extended to attract more investment in start-ups. Complementing this, the newly established Malta Government Venture Capital fund, with €10 million in allocated funding, will provide capital to new businesses through equity investment.
The government is exploring new legislation for Limited Partnerships, aimed at creating a more flexible legal structure that appeals to investors and promotes collaborative business models.
In the gaming sector, the government is launching the Video Gaming Gateway initiative, offering financial assistance for innovative gaming projects. Basecamp, a dedicated incubator, will also assist start-ups focused on video game development and esports. To further bolster Malta's position as a hub for gaming, specialized visas will be introduced for esports athletes, easing their ability to work and compete in Malta.
Local alcohol production will benefit from excise duty reductions on low-alcohol beer produced by small, independent breweries, along with significant duty cuts for small wine producers.
Infrastructure investment will also see increased focus, with plans to improve electricity and water supply to meet future demands and enhance reliability.
In a step towards sustainable agriculture, organic waste will be pasteurized to produce soil additives, which will then be distributed free of charge to local farmers.
The creative sector, meanwhile, will benefit from €15 million in EU funding aimed at fostering cultural and artistic projects that drive economic activity.
An additional €2 million will be allocated to Creative Malta to support local film producers, enhancing Malta's appeal as a destination for film production and contributing to job creation within the creative sector.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
