By Endevio
Published on: October 29, 2024
The Malta Budget 2025 was unveiled yesterday, presenting a forward-looking approach aimed at economic growth, fiscal prudence, social support, and environmental sustainability. With the global economic backdrop still in flux, Malta continues to prioritize its economic resilience while introducing social and environmental measures to support its citizens. Here is an in-depth look at the budget's key highlights.
Economic Outlook
The 2025 Malta budget reflects Malta’s commitment to robust economic growth and fiscal responsibility, positioning itself as one of the European Union’s (EU) fastest-growing economies.
Global & EU Context
- Global Growth: The global economy grew by 3.3% in 2023, with a stable outlook at 3.2% projected for 2024.
- EU Economy: The EU economy experienced stagnation in 2023, with some member countries facing mild recessions. Economic growth in the EU is expected to be limited to 1.0% in 2024.
- Global Inflation: Inflation globally is trending downward, aiming for a target of 2.0%.
- EU Inflation: EU inflation is forecasted to decline from 6.4% in 2023 to 2.7% in 2024, with a further reduction to 2.2% anticipated in 2025.
- EU Employment: In 2023, the EU’s employment rate stood at 75.3%.
Malta’s Context
- Economic Growth: Malta achieved the highest economic growth in the EU in 2023 at 7.5%, driven largely by robust net exports. Additionally, real GDP growth was recorded at 5.9% in early 2024, with forecasts of 4.9% in 2024 and 4.3% in 2025.
- Inflation: Moreover, Malta’s inflation rate is on a downward trend, with projections indicating a moderation to 2.5% in 2024 and 2.1% by 2025.
- Employment: In addition, Malta’s employment rate in 2023 was higher than the EU average, standing at 81.3%, with job growth of 6.1% in the same year. The unemployment rate was recorded at 3.5%. Predictably, future job growth is expected at 4.6% in 2024 and 4.1% in 2025.
- Social Subsidies: While the EU is phasing out subsidies, especially in the energy sector, Malta has committed to maintaining subsidies on energy, fuel, cereals, and animal feed to shield its citizens from global price increases despite EU pressure.
Fiscal Measures in the Malta Budget 2025
- Income Tax Adjustments
The Malta budget 2025 provides increased tax-free income thresholds across single, married, and parent tax brackets, resulting in annual savings of €345 to €675 for households, helping reduce the tax burden for many Maltese citizens.
- Single Tax Bands: Increased from €9,100 to €12,000.
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- Income up to €12,000: 0%
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- €12,001 to €16,000: 15%
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- €16,001 to €60,000: 25%
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- Above €60,001: 35%
- Married Tax Bands: Increased from €12,700 to €15,000.
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- Income up to €15,000: 0%
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- €15,001 to €23,000: 15%
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- €23,001 to €60,000: 25%
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- Above €60,001: 35%
- Parent Tax Bands: Increased from €10,500 to €13,000.
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- Income up to €13,000: 0%
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- €13,001 to €17,500: 15%
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- €17,501 to €60,000: 25%
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- Above €60,001: 35%
- Family Business Transfer Relief
The Maltese government extends the reduced 1.5% stamp duty on family business transfers between generations, supporting continuity and growth in family-owned enterprises.
- Tax Incentives for Property Restoration and Purchase
The Malta budget 2025 continues to offer incentives aimed at restoring and purchasing older properties and vacant homes within Urban Conservation Areas (UCA).
- Capital Gains Tax and Stamp Duty Exemption: Applies to the first €750,000 of property value for eligible properties.
- VAT Relief: Up to €54,000 in VAT savings on restoration and finishing costs for properties valued up to €300,000.
- Grants for First-Time Buyers: €15,000 grant for properties in Malta and a €40,000 grant for properties in Gozo, specifically targeting first-time buyers.
- Increase in Personal Income Tax Deductions on School Fees
The Malta budget 2025 raises allowable personal income tax deductions for school fees, providing relief for families with children in educational institutions.
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- Kindergarten: Increased from €1,600 to €3,500
- Primary School: Increased from €1,900 to €4,600
- Secondary School: Increased from €2,600 to €6,500
- Pension Tax Exemptions
Beginning in 2025, 80% of income from pensions will be tax-exempt for retirees who continue working, up from the current 60%. This measure reduces tax burdens on working retirees and supports those who choose to remain in the workforce.
- Highly Qualified Persons Scheme
The 15% flat tax rate will be extended to skilled foreign professionals filling key roles in Malta’s strategic industries, reinforcing Malta’s position as a hub for top international talent.
- Reduction in VAT Rates on Sanitary Items
VAT on select sanitary items will be reduced from 18% to 0%, making essential items more affordable and improving public access to hygiene products.
- International Tax Compliance
Malta is continuing its deferment of the 15% global minimum tax implementation, while collaborating with the European Commission to introduce Qualifying Refundable Tax Credits (QRTCs) to maintain competitiveness and align with EU and OECD standards.
- Excise Duty Reduction for Small Wine and Beer Producers
To support small-scale producers in Malta, excise duties on locally produced wine and beer have been reduced, encouraging growth within Malta’s craft beverage sector.
Social Measures and Incentives in the 2025 Malta Budget
The Malta budget 2025 introduces several initiatives aimed at mitigating the cost of living, enhancing financial support for families, and incentivizing healthy lifestyles.
- Cost of Living Adjustment (COLA): A weekly increase of €5.24 to help offset inflation and support citizens in managing rising living expenses.
- Minimum Wage Increase: The minimum wage will rise by €8.24 per week, providing more substantial income support for low-wage workers.
- Enhanced Support for Pensioners: Pensioners will receive an additional €8 per week on top of the COLA adjustment, ensuring further financial relief for the elderly.
- Increased Children’s Allowance: The allowance per child will rise by €250, providing enhanced support to families with dependent children.
- Education Allowance Continuation: Parents whose children pursue post-secondary education will continue to receive a €500 allowance.
- Family Birth Bonus: A new family bonus of €1,500 will be awarded on the birth of a third child or subsequent children, further supporting growing families.
- Marriage Grant Increase: The marriage grant will increase to €500 per spouse, offering financial assistance to newly married couples.
- Parental Incentives for IVF: Prospective parents undergoing IVF who are self-employed will receive new paid leave benefits, with up to 60 hours for mothers, 40 hours for partners, and an additional 10 days of paternity leave for self-employed fathers, based on the national minimum wage.
- Gym Membership Program: Individuals born between 2005 and 2007 will benefit from a six-month gym membership fully paid by the government, promoting health and wellness among young people.
- Occupational Pension Scheme: The government will launch occupational pension schemes, matching employee contributions up to €100 monthly, with additional tax benefits to encourage retirement savings.
Grants and Investment Incentives in the Malta Budget 2025
To drive growth in Malta’s startup ecosystem and promote digital innovation, the government is introducing a series of targeted funding initiatives and incentives in the 2025 budget, aimed particularly at high-growth and technologically innovative sectors.
- Relaunch of the Seed Investment Scheme: This scheme has been reintroduced to provide incentives for investments in local startups, enhancing capital flow and support for emerging businesses in Malta.
- Malta Government Venture Capital Fund: A new venture capital fund with €10 million in capital has been launched in the 2025 Malta budget. This fund is designated to invest in shares of new companies, supporting businesses with innovative models and strong growth potential, and contributing to Malta’s economic development.
- Digital Identity Wallet: Malta will introduce a digital identity wallet for both citizens and businesses in its 2025 budget. This smartphone-based app will allow secure, efficient sharing of digital identities, enhancing accessibility and ensuring safety in digital verification for personal and business use. This project reflects Malta’s commitment to fostering a streamlined digital economy.
- Industry-Specific Incentives: New incentives are available to attract foreign investment in key sectors, including family offices, fintech, aircraft leasing, and artificial intelligence. The government is also encouraging the formation of limited partnerships, set to launch in 2025, to support diverse investment structures.
- Esports Visa Introduction: To position Malta as a European hub for esports, a new esports visa will be introduced, specifically aimed at attracting top talent and international teams looking to establish their European base on the island.
- Back-Office Operations Support: In the Malta budget 2025, initiatives will be introduced to establish back-office operations, encompassing both licensed and unlicensed administrative and support services. These efforts will enhance Malta’s role as an operational center for international businesses, expanding service offerings and workforce opportunities.
Environmental and Sustainable Development Measures in the 2025 Malta Budget
- Reflecting Malta’s dedication to environmental sustainability, the 2025 budget introduces a range of incentives that support renewable energy, efficient waste management, and clean transportation initiatives.
- Renewable Energy Incentives: The Maltese government is promoting the adoption of renewable energy through grants and subsidies that encourage the installation of solar photovoltaic panels, battery storage systems, heat pump water heaters, and solar water heaters. These incentives also extend to support energy-efficient water and waste systems, particularly in older homes, aiming to lower energy costs and reduce environmental impact across Malta’s housing sector.
- Electric Vehicle Incentives: To further incentivize cleaner transportation, electric and plug-in hybrid vehicles with a minimum 50 km range will remain exempt from registration taxes and road license fees for five years. Additionally, grants for electric bike and scooter purchases, VAT refunds for bicycles, and subsidies for electric vehicle purchases will continue into 2025. This suite of incentives is designed to support Malta’s transition to sustainable transportation and reduce reliance on fossil fuels.
- Support for Large-Scale Renewable Projects: The Maltese government is actively encouraging the private sector to invest in large-scale renewable energy projects. These initiatives focus on the development of extensive offshore wind and solar energy installations within Malta's exclusive economic zone. By supporting these large projects, Malta aims to enhance its renewable energy capacity and contribute to a sustainable future.
In conclusion, the 2025 Malta Budget demonstrates a balanced approach, integrating economic development, social welfare, and environmental sustainability. With measures aimed at reducing the cost of living, supporting businesses, and fostering a greener Malta, the government’s roadmap paves the way for a prosperous, inclusive, and resilient future.
For a detailed overview of the Malta budget 2025, refer to this government document.