Malta Budget 2025 Main Announcements
- Revised Income Tax Brackets: Changes may result in tax savings between €345 and €675.
- Pension Income Tax Exemption: Increasing to 80% of pension income.
- OECD's Pillar 2 initiative: Malta continues to defer the implementation.
- Highly Qualified Persons Rules (HQPR): The rules will apply to back-office services.
- Immovable Property: Various fiscal benefits will be continued.
- Startup and innovation: Malta's financial services industry will be strengthened by new legislation aimed at promoting fintech, AI, family offices, aircraft leasing and rules on Limited Partnerships.
- Adjustment for Cost of Living Allowance (COLA): Set at €5.24 weekly.
- Minimum wage increased by €5.24, from €213.54 to €221.78 per week.
- Stamp Duty Rate: The 1.5% reduced rate for certain business transfers to descendants will be extended.
- Occupational Pension Scheme: Employers will now be required to establish an occupational pension scheme.
- Private School Fees: Deductions for these fees will be increased.
- Local Film Productions: An additional €2 million will be allocated to bolster local film productions.
- Electric Vehicles: Grants will continue to be provided for the purchase of electric cars and motorcycles.
- Special Needs Children: Several allowances and increases will be provided for families with special needs children.
- National Insurance: Those born after 1976 will need to pay an additional year of NI.
- Children's Allowance: Increased by €250 per child annually.
- Gym Membership: Individuals born between 2005 and 2007 will receive a 6-month free gym membership.
Economic Performance
The Maltese economy, with a growth of 7.5% in 2023 due to net exports, is predicted to maintain its growth with a projected GDP increase of 4.9% in 2024 and 4.3% in 2025. The debt-to-GDP ratio remains well below the EU's threshold of 60.0%. However, it is projected to increase slightly, rising from 47.4% in 2023 to 49.5% in 2024, and reaching 50.1% by 2025. After this period, it is expected to decline. In absolute terms, government debt is anticipated to reach €11.1 billion by the end of 2024. The deficit is projected to be 4.0% of GDP in 2024, decreasing to 3.5% in 2025 and further to 2.6% by 2027. Inflation is expected to decrease to 2.5% in 2024 from 5.7% in 2023, while unemployment is predicted to remain stable at 3.5%. GDP is set to reach €22.3bn in 2024.
Tax Initiatives
The government is expanding tax-free brackets for individuals using single, married, and parent computations, leading to annual tax savings between €345 and €675. Individuals earning less than €60,000 will again receive tax refunds of €60 to €140. 80% of pension income will be exempt from taxable income in 2025. Malta has postponed the implementation of the OECD's Pillar 2 initiative, which introduces a global minimum tax rate of 15% for large multinational enterprises. The reduced stamp duty rate of 1.5% for certain business transfers to descendants has been extended.
Additionally, the Highly Qualified Persons rules will now apply to entities providing back-office services. The VAT rate for essential sanitary products and medical accessories for women will be lowered to 0%. The existing €54,000 VAT grant available to first-time property owners for the cost of construction/completion/rehabilitation works shall be extended.
Additional Initiatives
The 2025 Budget prioritizes the education, health, and financial sectors for funding and support through progressive legislative initiatives. Several initiatives related to sustainability and the environment are included in the Budget 2025. Support will continue for residences investing in renewable energy, as well as for large renewable energy installations in the private sector.
Malta will introduce the Vision for 2050 plan for the economic, social, and environmental development of the country, with a focus on digital innovation, infrastructure, education, healthcare, and sustainability.
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