The Budget Implementation Act, 2025 (the "Act") introduces amendments to the Income tax Act, the Income Tax Management Act, the Duty on Documents and transfers Act, and the VAT Act. Most changes take effect from the date of publication unless stated otherwise.
1. Amendments to the Income Tax Act (ITA)
1.1. Property Transfer Tax Relief
Article 5A(4)(c) of the ITA has been amended to refine the exemption from property transfer tax in relation to transfers of dwellings that are not part of a development project. The exemption applies if:
- The property has been owned and used as the transferor's principal residence for at least three consecutive years; and
- The transfer takes place within twelve months of the date the property is vacated.
A new proviso clarifies that in the context of a divorce or separation (whether de jure or de facto), the property is only deemed to be "vacated" for the purposes of this exemption once both spouses have ceased to reside in the property.
1.2. Deduction for Capital Expenditure on Permits and Leases
The act introduces a new deduction regime under Article 14 for capital expenditure incurred, on or after 1 January 2025, for the acquisition of the following business-related rights:
- A business permit issued by a public authority;
- A concession granted by a public authority to carry out an exclusive activity;
- A commercial lease or sublease for the purpose of conducting a trade or profession.
To qualify for the deduction, the following conditions must be met:
- The expenditure must be incurred by a person carrying on a trade, business, profession, or vocation.
- The permit, lease, or concession must be used or employed directly in the generation of income from that activity.
- The acquisition must be documented in writing.
- The asset acquired must not be of indefinite duration or exceed a term of 15 years, including any optional extensions.
- The deduction is spread evenly over 15 years or the term of the lease/permit, whichever is shorter.
Importantly, the deduction does not apply to:
- Goodwill or business acquisition costs;
- Rights under emphyteutical concessions;
- Intellectual property or similar intangibles covered by Article14(1)(m);
- Acquisition from related parties (as defined).
Where the asset is sublet, transferred, or ceases to be used in income generation, the right to deduction terminates. Additionally, on subsequent transfer, the deductible amount is subtracted from the acquisition cost for capital gains purposes, subject to a cap at the original cost.
Expenditure on renewals or extensions is also deductible under these rules, provided the amendments are contractually documented and satisfy the same criteria.
1.3. Private School Fees Deduction
Effective from the year of assessment 2026, the maximum deductions under Article 14B for fees paid to private educational institutions are increased as follows:
- Kindergarten: €3,500 (previously €1,600)
- Primary Education: €4,600 (previously €1,900)
- Secondary Education: €6,500 (previously €2,600)
1.4. Elective tax Regime (Article 22B)
A new enabling provision (Article 22B) empowers the Minister for Finance to issue regulations that allow Maltese entities to elect to pay a higher tax rate than that ordinarily applicable to their chargeable income. The aim is to facilitate alignment with the OECD/GloBE global minimum tax framework (i.e., Pillar 2). The regulations may provide for:
- The scope and eligibility of entities subject to the elective tax;
- The method for calculating the tax payable;
- Payment timelines and administrative obligations.
This framework is widely expected to underpin Malta's implementation of a 15% minimum effective tax regime applicable on a discretionary basis.
1.5. Revised Resident
The Act introduces revised personal tax rates applicable from the year of assessment 2026 (basis year 2025), with increased thresholds and adjusted reliefs for all categories of resident individuals:
Single Computation Basis
Chargeable Income (€)Rate Deduct (€)
0 - 12,000 0% 0
12,001 - 16,000 15% 1,800
16,001 - 60,000 25% 3,400
60,001 and over 35% 9,400
Married Computation Basis
Chargeable Income (€) Rate Deduct (€)
0-15,000 0% 0
15,001 - 23,000 15% 2,250
23,001 – 60,000 25% 4,550
60,001 and over 35% 10,550
Parent Computation Basis
Chargeable Income (€) Rate Deduct (€)
0-13,000 0% 0
13,001 - 17,500 15% 1,950
17,501 – 60,000 25% 3,700
60,001 and over 35% 9,700
These amendments are intended to increase take-home income particularly at lower and middle-income levels.
1.6. Clarification of 'Endangered Tax'
The definition of "endangered tax" in item 1 of the Schedule to the Income Tax Act has been amended to include a new proviso. This clarifies that where the Commissioner is satisfied that the tax actually chargeable, or any part of it, has been paid under the Final Settlement System (FSS) Rules, such amount shall not be treated as endangered tax - even if it was not declared. This amendment ensures that properly paid FSS tax is excluded from assessments relating to endagered tax.
2. Amendments to the Income Tax Management Act (ITMA)
Article 51 of the ITMA has been revised to extend the scope of administrative penalties. In addition to the existing penalties for:
- Omitting or understating income in a return; and
- Providing false or misleading information affecting tax liability,
a third contravention is now introduced:
- Failure to furnish a return as required under the ITA.
3. Amendments to the Duty on Documents and Transfers Act (DDTA)
Article 19(6) of the DDTA has been amended to address professional secrecy obligations in the context of judicial or quasi-judicial proceedings. Specifically, the provision now permits disclosure of otherwise protected information when ordered by a competent court or tribunal, thus reconciling confidentiality obligations with procedural fairness in legal proceedings.
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.
