The Budget for 2027 was presented in Parliament on the 26th of October 2026, introducing several fiscal measures and proposed regulatory changes affecting individuals, families, businesses, employers and Third-Country Nationals (TCNs).
The Budget places particular emphasis on tax relief for families, support for low-income earners, changes to corporate taxation, and revisions to work and residence permit fees. Below is an overview of the principal measures announced and their potential implications.
1. Personal Income Tax and Tax Relief for Families
The Government has confirmed that there will be no increases in personal income tax rates, VAT rates or social security contributions for 2027. Individuals earning the National Minimum Wage will also continue to remain outside the income tax net.
The Budget further advances the three-year programme of income tax reductions for parents, with additional increases to the tax-free income thresholds applicable in 2027 and 2028.
For married couples applying the married tax computation, the tax-free threshold for families with one child will increase from €17,500 to €20,000 in 2027 and €22,500 in 2028. For families with two or more children, the threshold will increase from €22,500 to €30,000 in 2027 and €37,000 in 2028.
Under the parent tax computation, the tax-free threshold for parents with one child will increase from €14,500 to €16,000 in 2027 and €18,000 in 2028. For parents with two or more children, the threshold will rise from €18,500 to €24,000 in 2027 and €30,000 in 2028.
Under all four computations, income exceeding €60,000 will remain subject to the 35% tax rate.
2. Increase in the National Minimum Wage
The National Minimum Wage will increase by €10.41 per week, inclusive of the Cost of Living Adjustment (COLA).
Individuals earning the National Minimum Wage will continue to be exempt from income tax.
Furthermore, the Government has announced its intention to reappoint the Low Pay Commission to reach an agreement on the National Minimum Wage applicable from 2028 onwards.
3. Super Bonus for Employees and Other Eligible Individuals
A tax-free Super Bonus will be paid during the first quarter of 2027, calculated on the basis of income earned during 2025.
Individuals whose employment income in 2025 amounted to €12,000 or more will be entitled to a tax-free payment of €1,000. Those earning between €2,000 and €11,999 will receive a proportionate payment ranging from €500 to €925.
The measure will also extend to eligible self-employed individuals, working pensioners and part-time employees.
4. Tax Measures Affecting Pensioners
The Budget introduces further tax relief for pensioners through an increase of €520 in the tax-free threshold applicable to pension income. Consequently, the annual tax-free limit for pension income will rise to €37,624, providing additional relief to eligible pensioners.
5. Introduction of Separate Income Tax Returns for Spouses
The Government has announced a project aimed at introducing separate income tax returns for married couples.
Under the proposed approach, each spouse would, as a general rule, submit an individual income tax return rather than a joint return. However, couples would retain the option of filing jointly where permitted by law.
Further details regarding the implementation and administrative requirements of this measure are expected to be announced.
6. Corporate Tax: Reduced Rate for Small Companies
One of the principal corporate tax measures announced concerns companies with an annual turnover not exceeding €1 million.
Under the proposed framework, eligible companies may benefit from a reduced corporate income tax rate of 25%, instead of the standard 35%, on profits retained within the company or reinvested in its operations.
Profits distributed to shareholders by way of dividends will remain subject to the 35% rate under the announced measure.
The eligibility criteria, applicable conditions and practical operation of this incentive will be established through specific rules.
7. Changes to the Tax Treatment of Airspace Transactions
The Budget introduces proposed measures aimed at increasing transparency and strengthening tax compliance in transactions involving the sale of airspace rights. These measures will require disclosure of the full consideration agreed between the parties, together with enhanced valuation and verification procedures.
The proposed framework will also seek to ensure that transactions are taxed in accordance with their economic substance, including arrangements involving intermediaries or developers who do not formally appear on the relevant deed.
The measures are intended to apply prospectively to future transactions, following a consultation process.
8. VAT Reverse Charge Mechanism in the Construction Sector
The Government has announced the introduction of a VAT reverse charge mechanism for certain transactions within the construction industry. Under this mechanism, responsibility for accounting for VAT will shift from the supplier to the business receiving the relevant goods or services.
Where the recipient is entitled to deduct input VAT, the corresponding deduction may be claimed in accordance with the applicable VAT rules. Further guidance will be required to determine the precise scope of transactions covered and the compliance obligations arising from this measure.
9. Revised Penalties for VAT Invoices and Fiscal Receipts
The Budget provides for a revised administrative penalty framework relating to breaches of VAT invoicing and fiscal receipt obligations.
The announced penalties will be €100 for a first infringement, €200 for a second infringement, €400 for a third infringement, and €500 for a fourth and each subsequent infringement occurring within a 24-month period.
Payment of the applicable penalty within 30 days will extinguish criminal liability in respect of the relevant breach.
Such infringements will also be taken into account in the tax authorities’ risk assessments when determining potential audit cases.
10. Clarification of VAT Exemptions on Food Products
The Government has announced that guidelines will be issued to clarify the application of VAT exemptions to ready-to-eat food products sold by supermarkets, minimarkets and convenience stores.
11. Increased Work and Residence Permit Fees for Third-Country Nationals
The Budget introduces additional costs for Third-Country Nationals (TCNs) applying for or renewing work and residence permits in Malta. The fee applicable to new work permit applications will increase from €600 to €800.
Furthermore, an annual infrastructure contribution of €400 will be introduced, applying both to new applicants and to individuals renewing their existing permits. Minors under the age of 18 will be exempt from this additional contribution.
The Government has also announced that fees relating to various residence permits issued by Identità will be revised upwards.
These measures are expected to have financial implications for TCNs and businesses employing foreign nationals, particularly where employers bear or reimburse the relevant application and renewal costs.
12. Revised Annual Registration Fees for Recreational Boats
The Malta Budget 2027 introduces revisions to the annual registration fees applicable to recreational boats, with the revised tariff structure taking into account the length and applicable category of the vessel.
Under the announced measures, recreational vessels measuring between 10 and 24 metres will be subject to revised annual registration fees ranging from €300 to €2,600, depending on their length and classification.
Vessels measuring less than 10 metres, as well as professional fishing vessels, will fall outside the revised tariff scheme and will therefore not be subject to increased annual registration fees under this measure.
