Malta Budget 2026: Key Highlights And Salient Features

Malta Budget 2026

Malta's Budget for 2026, is crafted to sustain robust economic growth while supporting businesses and families. It delivers a mix of corporate incentives, tax relief measures, and social initiatives in a tone that is business-friendly yet mindful of broader societal needs.

Malta's economy continues to grow at an impressive pace. Real GDP growth for 2025 is expected to reach 4.1%, with a similar rate projected for 2026. Growth is driven mainly by strong domestic demand, capital investments, and robust exports Inflation is forecast to stabilize at around 2.2%, a moderation compared to recent years. In line with this contained inflation, the Cost-of-Living Allowance (COLA) for 2026 is set at an increase of €4.66 per week.

Malta's finances are moving toward EU-compliant levels – the budget deficit for 2025 is now projected at 3.3% of GDP, improving on earlier forecasts, and is expected to decline to 2.8% in 2026, dropping below the EU's 3% ceiling. Public debt is anticipated to stabilize around 46-47% of GDP, well under the EU's 60% threshold, reflecting prudent fiscal management amid continuing economic expansion.

To foster a competitive business environment and stimulate investment, the Budget introduces several incentives targeted at companies – from startups and small enterprises to larger investors. These measures focus on tax credits, deductions, and support schemes that encourage innovation and growth:

• Expanded MicroInvest Scheme – The popular MicroInvest tax credit scheme for SMEs is being enhanced. The cap on tax credits under MicroInvest will rise to €65,000 for Maltese businesses (covering up to 65% of eligible investment costs), with a higher ceiling of €85,000 for Gozo-based enterprises. Notably, the scheme will now also recognize digital investment as eligible for credits. In addition, a new wage-support mechanism is introduced: the government will finance 65% of wage increases (capped at €780 per employee per year, or €960 in Gozo) for workers who have been with the same employer for over four years, for a two-year period. This helps long-serving employees receive raises while easing the burden on employers.
• Investment Tax Credit (Capex Support) – Enterprises investing in new machinery, equipment, software, or other productivity-enhancing assets over the next two years will benefit from a generous 60% tax credit on qualifying capital expenditures, claimable over four years. This measure is aimed at encouraging businesses to modernise and expand their operations, effectively subsidising a significant portion of their investment cost.
• Innovation and Digitalization Incentives – To promote research and development (R&D) and technological adoption, companies can now claim a 175% tax deduction on eligible R&D and innovation expenditures. In practice, this means a business gets to deduct €1.75 for every €1 spent on qualifying innovation activities, substantially reducing taxable income and encouraging consistent investment in new technologies. Furthermore, investments related to Artificial Intelligence (AI), digitalization, automation, modernization, and cybersecurity will enjoy accelerated tax depreciation over two years, allowing firms to write off technology investments faster and spur digital transformation.
• Business Development and SME Support – Existing programs to aid business growth are being extended. The Business Development Scheme, which supports expanding enterprises in upskilling workers and scaling up (including via startup accelerators), will be extended to continue assisting companies in transformation and job creation.

While corporate incentives take centre stage, the Budget also introduces noteworthy personal tax cuts and social measures, ensuring that economic growth translates into broad-based benefits. The below should be noted:

• Over the next three years, families with children will enjoy significant income tax reductions through specialized "parent" and "married" tax bands, with lower tax rates and higher thresholds for those with one child and even more for those with two or more children.
• This means many working parents will retain more of their income – an average tax saving estimated around €2,400 per family over the three-year period. Eligibility for these tax cuts lasts until the youngest child reaches 18 years of age (or 23 if in full-time education).

Starting 2026, all pension income will become fully exempt from income tax (up to double the statutory maximum pension amount). This brings with it the following:

• A gradual reform, in line with the position in recent years to remove tax on pensions, meaning retirees will no longer pay income tax on their state pension receipts. In addition, government pensions will increase by €10 per week for all beneficiaries, with additional boosts for widows and pensioner parents raising children.
• The minimum contributory period for pension eligibility will be standardized at 10 years for everyone, making it easier for more people to qualify for a retirement pension. These measures improve senior citizens' disposable income and financial security in retirement.
• Several measures target the property market, benefiting first-time buyers and those inheriting homes. The First-Time Buyer scheme, which waives stamp duty on a portion of a first home's value, will be made permanent (it was previously renewed annually).

• Moreover, the scheme's conditions are being relaxed – having owned a non-residential property in the past will no longer disqualify an applicant from being treated as a first-time homebuyer. This change should broaden the pool of people eligible for relief when purchasing their first residential property. Meanwhile, relief on inheritance tax (stamp duty) for residential homes is being enhanced. When a property used as the heir's own residence is passed down, a reduced duty rate of 3.5% will now apply on the first €400,000 of the property's value – double the previous €200,000 threshold.

In summary, Malta's Budget 2026 balances economic prudence with targeted generosity. It projects confidence in Malta's economic trajectory – with solid growth and improving public finances – and channels resources into areas expected to yield long-term benefits: business investment, innovation, and human capital. Businesses will find an array of tax credits and deductions encouraging them to invest in technology, research, and expansion, while families and vulnerable groups gain tax relief and social support. The budget also addresses housing affordability, environmental sustainability, and key industries like tourism and gaming. Budget 2026 positions Malta for continued prosperity, appealing to both the business community and the wider public it ultimately serves.

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