The Budget Implementation Act 2025 (Act IX of 2025) was enacted on 17 April 2025, introducing a number of tax-related measures. A summary of the key provisions is outlined below.
Income Tax Act
Transfers of Immovable Property (effective 17th April 2025)
Article 5A(4)(c) of the Income Tax Act excludes from the property transfer tax, transfers of property, not forming part of a project, consisting of a dwelling house owned and occupied for at least 3 (three) years as residence, provided that the property is disposed of within 12 months of vacating the premises. A proviso has been added to this article which provides that in instances whereby one of the spouses ceases to occupy the property as consequence of a divorce or (de jure or de facto) separation, the property shall only be regarded as vacant, for the purposes of this article, when the other spouse also ceases to occupy the property.
Deduction in relation to Business Permits / Leases of Immovable Property (effective 17th April 2025)
Article 14 of the Income Tax Act has been amended to provide for a deduction with respect to expenditure of a capital nature (incurred as from 1st January 2025) for the acquisition of a business permit or a concession, or a commercial lease, or by way of a premium on lease of immovable property, by a person carrying on a trade, business, profession or vocation. For the purpose of the new deduction, the applicable assets are defined as follows:
- "business permit" means a permit to carry on or operate a business that is issued by a public authority in accordance with any applicable law and it shall be deemed to have been acquired by a person if and when such person is registered as the holder thereof with the relevant public authority;
- "concession" means the privilege to carry on a business activity granted by a public authority that has exclusive rights over such activity;
- "commercial lease" means the lease of a commercial going concern (twellija) or the lease of immovable property for the purpose of carrying therein a trade, business, profession or vocation and includes a sub-lease of a commercial lease;
- "public authority" means the government, a government ministry, department or government agency, or any other entity in which the government has, directly or indirectly, a controlling interest;
This deduction applies subject to the following conditions:
- The capital expenditure is incurred by a person carrying on a trade, business, profession or vocation;
- The business permit, commerical lease or leased property is used or employed in the production of income, being derived by way of trade, business, profession or vocation;
- The deduction does not include any sums paid or attributable to the acquisition of a business, or a business goodwill, or rights in accordance with an emphyteutical concession, or any intellectual property or rights to which paragraph Article 14(1)(m) ITA applies, or any other tangible or intangible asset other than the business permit, the concession or the commercial lease in question;
- No deduction shall be allowed in respect of the acquisition of a permit, concession or lease for an indefinite duration or for a duration of more than fifteen(15) years.
- The deduction is allowable only if the acquisition in question (including the payment of the consideration) results by means of a document in writing
- Deduction is to be spread equally over 15 years, or over period for which the permit or the lease was acquired, if shorter;
- If there is the option to extend or renew the permit or lease, the permissible extension/renewal shall be deeded to be part of its duration for all intents or purposes.
- Right of deduction ceases if;
- Permit is subsequently transferred, or lease or ceased;
- Property is sublet;
- Permit or property is no longer used or employed in the production of income relation to trade, business, profession or vocation.
- If permit is transferred, or lease is assigned or sublet, the cost of acquisition used in the capital gains computation shall be reduced by the deductions claimed under this Article in determining the gains or profits on such transfer, assignment or sublease. However, the deduction shall not exceed the cost of acquisition deduction.
- This article does not apply if the business permit is acquired or the property is leased from a related party (as defined).
- Capital expenditure incurred as consideration for the extension, renewal or modification of the terms and conditions of the acquisition of a business permit, concession or commercial lease is allowable under the same conditions and to the same extent as if the extension, renewal or modification was a fresh acquisition.
Private School Fees deduction (effective year of assessment 2026)
The private school fees tax deduction capping is increased as follows:
- Secondary schools - €6,500
- Primary Schools - €4,600
- Kindergarten - €3,500
Elective Tax (effective year of assessment 2025)
The Budget Implementation Act introduces a new Article 22B to the Income Tax Act. The new Article 22b provides that the Minister responsible for finance may make regulations for the charging and levying on an elective basis of a tax higher than that established in relation to the profits of Malta entities as defined in such regulations, and may, in particular, by such regulations, provide for:
- (a) the scope, applicability and amount of such tax;
- (b) manner in which the tax due shall be calculated, paid and collected and the obligations in respect of the payment of such tax; and
- (c) such other conditions and consequences in relation to the application of such tax.
It is understood that this new Article is in place to permit the payment of an elective tax to bring the effective Malta tax to at least 15%.
Updated personal tax rates (effective year of assessment 2026)
The personal tax rates have been updated as follows: - Single Rates
| Chargeable Income (€) | |||
| from | to | rate | subtract |
| 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 rates
| Chargeable Income (€) | |||
| from | to | rate | subtract |
| 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 Rates
| Chargeable Income (€) | |||
| from | to | rate | subtract |
| 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 |
The tax rates can also be verified from the MTCA webpage here: https://cfr.gov.mt/en/rates/Pages/TaxRates/Tax-Rates-2025.aspx
Definition of ‘Endangered Tax’ (effective from 1 January 2025)
The Schedule to the Income Tax Act defines ‘endangered tax’ as (subject to the provisions of item 12), the difference between the tax declared to be chargeable by the taxpayer after taking into account any exemption, relief, allowance or tax credits to which he may be entitled and the tax actually chargeable after considering the same, but shall not include any additional tax. A proviso is to be added to this definition which provides that where the Commission is satisfied that the tax actually chargeable or part thereof has been based under the FSS, the amount so paid shall not be regarded as ‘endangered tax’.
Income Tax Management Act
Article 51 of the Income Tax Management Act deems taxpayers guilty of an offence and due to penalties ranging from €58 to €465 (+ double the tax undercharged), in the following instances:
- Taxpayer makes incorrect return by omitting or understating declarable income;
- Taxpayer gives any incorrect information in relation to any matter affecting his own tax liability or that of any other person or partnership.