Malta Budget 2027: Guide for Company Directors

Malta Budget 2027: A Director’s Guide to the Measures Announced on 26 October 2026

By the EGM Assurance Editorial Team · Last reviewed October 2026 · 15 min read

The Minister for Finance presented the Budget for 2027 to the House of Representatives on 26 October 2026, the first Budget of the legislature elected in May 2026. Its headline for business is a proposed 25% income tax rate, in place of 35%, for companies with turnover of up to €1 million on profits they retain or reinvest. Around it sit a set of measures that will move the cost base of most Maltese employers in 2027: a €6.41 weekly cost-of-living adjustment, a €10.41 weekly increase in the national minimum wage, higher work permit fees for third-country nationals, higher eco-contributions for tourist accommodation, and a reworking of how VAT is accounted for in construction and how invoice failures are penalised.

This guide is written for company directors, owner-managers and CFOs. It sets out what was announced, measure by measure, and, just as importantly, what was not announced. A Budget Speech is a statement of intent. The operative detail arrives later, in the Budget Measures Implementation Act and the legal notices and guidelines that follow it. For the 25% rate in particular, the conditions that will decide whether a given company qualifies have not yet been published.

Every figure below is stated as announced in the Budget Speech. Nothing in this guide should be read as a statement of enacted law. We will update it when the implementing legislation is published.

1. The economic backdrop in five numbers

The fiscal framing matters for directors because it explains why the Budget is structured as it is: continued energy subsidies funded within a sub-3% deficit, with new revenue raised from tourism and third-country labour rather than from income tax, VAT or social security rates, none of which were increased.

The Government will spend around €400 million in 2027 to hold electricity, gas and fuel prices at current levels, roughly half the projected deficit. A further €75 million or so is planned for the electricity distribution network. For a business, the practical reading is that utility and fuel input costs are not expected to move in 2027 as a result of government pricing, which is one fewer variable in the 2027 budget.

2. The proposed 25% tax rate for small companies

This is the measure directors will ask about first, and it is the one on which the least operative detail currently exists. The paragraphs below separate what was said from what was not.

What was announced

• Scope: companies with annual turnover not exceeding €1 million.

• Rate: 25% instead of the standard 35% rate under the Income Tax Act.

• Base: profits retained in the company or reinvested in the business.

• Distributions: where profits are distributed as dividends, the 35% rate continues to apply.

• Conditions: the Minister stated that the framework will operate under specific conditions and limitations to be set out in rules, so as to remain coherent with the existing corporate tax system.

One possible mechanism is a 25% charge on retained or reinvested profits, with a top-up to 35% when those profits are distributed. That is a plausible reading of the Minister’s words, but the speech itself did not set out the mechanics, and no draft rules have been published.

What was not announced

The following questions determine whether, and how much, a given company benefits. None of them has an answer yet:

• The turnover test. Whether €1 million is measured on the company’s own turnover or aggregated across a group; whether it is tested on the current year, the prior year or an average; and whether “turnover” follows the accounting definition or a tax-specific one.

• The meaning of “reinvested”. Whether any retention qualifies, or whether profits must be applied to specified categories of expenditure (capital investment, headcount, research) within a defined period.

• The treatment of later distributions. Whether a dividend paid in a later year out of profits that were taxed at 25% triggers a top-up charge, and if so on whom and at what point. This also determines how the measure interacts with Malta’s tax accounting (the allocation of profits to the Maltese Taxed Account and the other tax accounts) and with the shareholder-level imputation credit.

• Timing. Whether the rate applies to profits of the year of assessment 2028 (basis year 2027) or earlier, and whether an election is required.

• Interaction with other regimes. How the measure sits with fiscal units under the Consolidated Group (Income Tax) Rules, with companies claiming Micro Invest credits, and with companies that have opted into the 15% final tax without imputation under LN 188 of 2025.

• Excluded sectors or structures. Whether holding companies, companies deriving mainly passive income, or companies in regulated sectors are excluded.

How a director should read it today

For an owner-managed trading company that habitually retains most of its profit, the measure is potentially significant: on €100,000 of retained profit, the headline difference between 35% and 25% is €10,000 a year. For a company that distributes most of its profit to individual shareholders, the headline saving may be small or nil, depending on the top-up mechanism, and under the current system, the shareholder-level refund of company tax only produces a saving for individuals in the lower income bands in any event.

The sensible position until the rules are published is to model both outcomes (a permanent 25% on retained profit, and a 25% charge that is topped up on distribution) and to avoid any step (deferring a planned dividend, converting salary into retained profit, or splitting activities across companies to stay under €1 million) that only makes sense under one reading. Any rules are likely to contain anti-fragmentation provisions, and the Minister’s reference to “coherence with the existing corporate tax system” suggests the measure will be built on the tax-account architecture rather than outside it.

3. VAT measures affecting businesses

Mandatory reverse charge for construction services

A domestic reverse charge mechanism will be introduced for construction-related supplies between businesses. Under it, the obligation to account for VAT shifts from the supplier to the business customer, which self-charges the VAT on its return and recovers it in the same return where it is entitled to input VAT. The stated purpose is to combat VAT abuse in the sector.

For contractors and subcontractors this changes cash flow (no VAT is collected from business customers) and invoicing (invoices to business customers will need to carry the reverse-charge wording). For developers and other business customers it removes the VAT financing cost on construction inputs but adds a self-accounting step. The scope of “construction-related supplies”, the treatment of mixed supplies and the start date are not yet published.

Invoice and fiscal receipt failures: administrative penalties replace immediate prosecution

Failure to issue a correct tax invoice or fiscal receipt currently exposes the person to criminal proceedings. As announced, this will be replaced by a graduated scale of administrative penalties for repeated failures within a 24-month window, with payment within 30 days extinguishing the criminal liability.

VAT on ready-to-eat food

The Malta Tax and Customs Administration is to publish guidelines on the application of the VAT exemption for food, specifically ready-to-eat food sold by supermarkets and convenience shops. Retailers in this space should expect clearer line-drawing between exempt food and standard-rated catering.

4. Employment costs in 2027

COLA is a statutory increase that applies to all employees; it flows automatically through payroll from January. The minimum wage increase of €10.41 includes the €6.41 COLA, so the increase over and above COLA for minimum-wage employees is €4.00 per week.

For employers of third-country nationals, the combined first-year cost of a new permit becomes €1,200 (€800 fee plus €400 contribution), and renewals carry the €400 contribution each year. The €83 monthly driving-licence charge applies to the individual licence holder, with EU/EEA citizens, long-term residents and their spouses, UK, Australian and UAE citizens, and holders of residence permits for specific driving occupations exempt. Non-EU licence holders may continue to use their home licence for up to 12 months after entry. Whether employers absorb these costs will be a commercial decision, but they should be built into 2027 headcount budgets now.

Separately, access to free public transport and the atypical work cheque will be limited from January 2027 to Maltese citizens, resident EU citizens and long-term residents; free childcare will be limited to those groups for new beneficiaries only.

5. Tourism and hospitality: eco-contribution and transport

From 1 January 2027 the eco-contribution payable by tourists aged 18 and over is to be revised as follows:

The contribution will no longer apply to accommodation for English-language school students, and the cruise charge will not apply to passengers starting their cruise from Malta. Operators collect and remit the contribution, so booking systems and VAT-exclusive price displays will need updating before January. Fast-ferry fares for tourists are to rise by €3 per journey and Gozo Channel fares for non-residents will also increase.

6. Incentives and property

All existing schemes renewed

Every government scheme running in 2026 is to continue in 2027. On the business side this includes Malta Enterprise’s schemes for digitalisation, automation and high-value investment, with further incentives promised for new niche sectors. The Micro Invest tax credit framework, which was reset for 2026 to 2030 in last year’s Budget, therefore continues on its existing terms. Schemes for renewable energy, electric vehicles, first-time and second-time buyers, property renovation, NGOs and sports organisations are also renewed.

Sale of airspace

New rules are to be introduced so that property transactions structured as sales of airspace or development rights are taxed on the full value of the completed property, with fuller disclosure of the agreed consideration, stronger valuation and verification requirements, and measures aimed at arrangements involving intermediaries or developers not named on the deed. The rules will apply prospectively, after consultation. Developers and investors using airspace structures should expect the economic-substance approach to govern future deals.

7. Personal tax: the 2027 and 2028 married and parent rates

The three-year widening of the married and parent tax bands for families with children, announced in Budget 2026, continues as scheduled. The 2027 rates apply to income earned from 1 January 2027 and the 2028 rates from 1 January 2028. Single rates and the married and parent rates for taxpayers without qualifying children were not changed. These tables are relevant to directors both personally and in setting 2027 remuneration for employees who are parents.

Married rates: couples with one child

Married rates: couples with two or more children

Parent rates: one child

Parent rates: two or more children

Worked example: a married couple with two children and a single income of €40,000 pays €1,500 under the 2027 table (€40,000 × 15% − €4,500, since €40,000 falls in the 15% band) and €450 under the 2028 table (€40,000 × 15% − €5,550). The tax-free band for that family rises from €22,500 in 2026 to €30,000 in 2027 and €37,000 in 2028.

Super Bonus

A tax-free Super Bonus is to be paid in the first quarter of 2027 to individuals who worked in 2025, including the self-employed, part-timers and working pensioners. Individuals with 2025 employment income of €12,000 or more receive €1,000; those with income between €2,000 and €11,999 receive a pro-rata amount between €500 and €925. It is paid by Government, not through the employer’s payroll.

Pensions

Pensions rise by €10 per week from January 2027, inclusive of COLA; the annual tax-free pension income threshold increases by €520 to €37,624; and from 2027 social security contributions may in certain cases be transferred between spouses so that a spouse without a pension entitlement acquires one. The auto-enrolment occupational pension framework remains under discussion and was not legislated in this Budget.

8. How a Budget measure becomes law

Directors are sometimes caught out by the gap between announcement and enactment. The sequence in Malta is consistent from year to year:

• Budget Speech (26 October 2026): a policy statement. It has no legal effect of itself.

• Financial Estimates: the revenue and expenditure appropriations, debated and approved by Parliament in the weeks following the speech.

• Budget Measures Implementation Act: the omnibus Act amending the Income Tax Act, Income Tax Management Act, VAT Act, Duty on Documents and Transfers Act, Social Security Act and others. The 2026 Act was introduced in March 2026 with most measures backdated to 1 January 2026.

• Legal notices and rules: subsidiary legislation giving operative detail, such as the rules the Minister referred to for the 25% rate, and MTCA guidelines (for example on VAT and food).

Payroll-related measures (COLA, minimum wage) take effect from 1 January regardless of when the Act is passed. Tax-rate measures typically apply from the basis year beginning 1 January 2027, meaning they first affect the tax return filed in 2028. We will update this guide at each stage.

9. Three director scenarios

Scenario A: trading company retaining profit

A Maltese retail company has turnover of €850,000 and expects a taxable profit of €120,000 for 2027, of which the shareholders intend to retain €100,000 to fund a second outlet. If the 25% rate applies as announced, tax on the retained €100,000 would be €25,000 rather than €35,000. The €20,000 distributed would remain at 35% (€7,000). Whether the €10,000 difference is permanent or merely deferred depends on the treatment of future distributions out of the retained amount, which is unknown. The directors should document the reinvestment plan now, since “reinvested” may well be defined by reference to actual expenditure.

Scenario B: employer with third-country nationals

A catering business employs eight non-EU workers, four of whom renew their permits in 2027 and two of whom are new hires. As announced, the additional 2027 cost is: two new permits at €800 each (€200 more than the current €600 fee) plus €400 annual contribution each, and four renewals at €400 contribution each: €2,800 of new cost in total (2 × €200 + 2 × €400 + 4 × €400), before COLA and minimum-wage increases on the whole workforce. The company should decide its policy on recharging permit costs to employees with reference to the Employment and Industrial Relations Act and the terms of its employment contracts.

Scenario C: short-let operator

A company operating twelve short-let apartments with average occupancy of two adults for four nights collects €80 per booking in eco-contribution from January 2027 (€10 × 4 nights × 2 guests) in place of the current amount. The contribution is collected from guests and remitted; it is not the operator’s cost, but the operator’s channel-manager and invoicing templates must be updated, and the amount must be shown separately from the VAT-inclusive accommodation price.

10. Frequently asked questions

Is the 25% corporate tax rate in force?

No. It was announced on 26 October 2026 and will require amendment of the Income Tax Act through the Budget Measures Implementation Act, together with rules setting out the conditions. Until those are published, the standard 35% rate applies.

Does my company qualify if turnover is exactly €1 million?

The measure was announced for companies with turnover “not exceeding” €1 million, which on its face includes exactly €1 million. How turnover is measured, and whether group turnover is aggregated, has not been published.

If my company retains profit at 25% and pays a dividend three years later, what happens?

This has not been announced. A top-up to 35% on distribution is one possible mechanism, but the speech said only that distributed profits remain subject to 35%. Directors should assume that a later distribution may carry additional tax until the rules say otherwise.

Should I defer my 2026 dividend into 2027 to benefit?

Not on the basis of the speech. The rate is expected to apply to profits of a basis year beginning on or after 1 January 2027, and the treatment of distributions is unknown. A deferral that turns out to carry a top-up charge would deliver no benefit while delaying cash to shareholders.

Can I split my business into two companies to stay under €1 million each?

Rules of this kind normally include anti-fragmentation or aggregation provisions, and the general anti-avoidance provision in Article 51 of the Income Tax Act applies in any event. Splitting a single business to access a rate concession is not a step to take before the rules are published, and may not be effective afterwards.

Does the 25% rate apply to a company in a fiscal unit?

Unknown. The interaction with the Consolidated Group (Income Tax) Rules has not been announced. Fiscal-unit members should raise this with their advisers once the rules appear.

When does the construction VAT reverse charge start?

No start date was announced. The mechanism requires amendment of the VAT Act and will likely be accompanied by MTCA guidance on scope. Contractors should prepare invoice templates and accounting entries but not apply the reverse charge until it is in force.

Are the new VAT invoice penalties already in effect?

No. The graduated administrative penalties were announced as a replacement for immediate criminal proceedings and require legislation. Current law continues to apply until then.

Do employers pay the Super Bonus?

No. The Super Bonus is paid by Government directly to eligible individuals in the first quarter of 2027 based on 2025 income. It does not pass through payroll and is not a cost to the employer.

Does the €400 infrastructure contribution apply to existing permit holders?

As announced, it applies to both new and renewal applications, so existing permit holders will pay it at their next renewal. Persons under 18 are excluded.

Were any tax rates increased?

No. Income tax rates, VAT rates and social security contribution rates were all left unchanged. New revenue comes from the eco-contribution, work permit fees, the driving-licence charge, ferry fares and recreational boat registration fees.

When will EGM update this guide?

When the Budget Measures Implementation Act is published, and again when the rules for the 25% rate and any VAT legal notices are issued. The “Last reviewed” date at the top will change accordingly.

Related guides from EGM Assurance

• Malta Income Tax Rates 2026: A Complete Guide

• MicroInvest 2026 Tax Credits for SMEs

• Fiscal Unity in Malta: Group Taxation Explained

• Directors’ Fees and Taxes in Malta

• Payroll and FSS Obligations for Maltese Employers

• VAT Registration in Malta: Thresholds and Obligations

Authoritative references

• Ministry for Finance, Budget 2027 documents (speech and estimates, when published)

• Income Tax Act (Cap. 123)

• Value Added Tax Act (Cap. 406)

• Consolidated Group (Income Tax) Rules (S.L. 123.189)

This article is prepared by EGM Assurance for general informational purposes and reflects the measures announced in the Budget Speech of 26 October 2026. None of the measures described had been enacted at the date of writing; figures, conditions and effective dates may change in the Budget Measures Implementation Act and the subsidiary legislation that follows. It does not constitute legal, tax or professional advice. Always confirm the current legal position with a qualified professional before acting.