Income Tax and Business Tax Measures in the Malta Budget 2027

The second phase of Malta’s three-year income-tax reform for families with children will apply in 2027. Approximately 68,000 parents are expected to continue benefiting from the reform, with families expected to retain slightly more than €50 million annually during the reform period.

Different bands apply according to whether the taxpayer qualifies for the married computation or the parent computation, and whether the family has one child or two or more children.

The rates and tax subtractions must be applied together when calculating the final liability. The tax-free threshold or marginal rates alone do not determine the amount payable.

Married Computation With One Child

The maximum announced tax saving for a qualifying family using the married computation with one child is €1,450 in 2027.

Parent Computation With One Child

The maximum announced tax saving is €1,150 for each qualifying parent using this computation in 2027.

Married Computation With Two or More Children

The maximum announced tax saving for a qualifying family using the married computation with two or more children is €4,050 in 2027.

Parent Computation With Two or More Children

The maximum announced tax saving is €3,250 for each qualifying parent using this computation in 2027.

How Parents Should Use the 2027 Tax Bands

Parents should first establish which tax computation applies to their circumstances. They should then apply the relevant tax rate and subtraction rather than treating the tax-free threshold as the complete tax calculation.

Actual savings depend on taxable income, the number of qualifying children, the applicable computation and whether the statutory eligibility conditions are satisfied.

International families should not confuse these domestic tax bands with the separate rules governing Maltese tax residence, domicile, foreign-source income, remittances and double-taxation treaties.

Budget 2027 introduces a tax-free Super Bonus ranging from €500 to €1,000 according to qualifying income earned during 2025.

The payment is intended to be made during the first quarter of 2027. The Budget states that the measure will also cover qualifying self-employed persons, working pensioners and part-time workers.

The Super Bonus is not an automatic €1,000 payment to every worker. The amount depends on the applicable income band and the final qualifying conditions.

Persons with more than one employment, part-time work or self-employment income should confirm how their qualifying income will be determined under the implementation rules.

The Government intends to begin a project to reform the income-tax return framework for married couples.

The announced objective is that, as a general rule, each spouse would submit an individual tax return covering their own income and tax affairs. Couples wishing to use a joint-return arrangement would retain that option where permitted by law.

The Budget does not establish the commencement date, filing process or detailed eligibility rules. Married couples should therefore continue to follow the existing filing requirements until the reform is legally implemented.

The annual amount of qualifying pension income that may be received tax-free will increase by €520 to €37,624 in 2027.

State pensions will also increase by €10 per week, inclusive of the €6.41 cost-of-living adjustment. The total pension increase is therefore €10 per week, not €10 plus COLA.

Other announced pension measures include:

• an increase in maximum pensionable income to €28,000 for pensioners born before 1962;
• further widows’ pension adjustments affecting more than 7,000 widows;
• a uniform weekly cost-of-living bonus rate of €21.53 for pensioners in 2027;
• an increase in the ignored service-pension amount; and
• an increase of €333.32 in the annual bonus paid to persons who do not have sufficient social-security contributions to qualify for a pension.

The treatment of foreign pensions, occupational pensions and pension income received by resident but non-domiciled individuals must be considered separately under Maltese tax law and any applicable double-taxation treaty.

Budget 2027 proposes a new framework under which companies with annual turnover not exceeding €1 million may qualify for a 25% tax rate rather than the standard 35% rate.

The reduced rate is intended to apply to profits retained within the company or reinvested in the business. According to the Budget announcement, where profits are distributed as dividends, the 35% rate will continue to apply.

This is not a general reduction of Malta’s corporate income-tax rate from 35% to 25%.

Which Companies Could Qualify?

The Budget identifies annual turnover not exceeding €1 million as a threshold. However, the final framework will depend on conditions and limitations established in the relevant rules.

The implementing provisions will need to clarify matters including:

• the definition of qualifying retained or reinvested profits;
• the turnover reference period;
• the treatment of companies forming part of a group;
• the treatment of later distributions;
• qualifying and excluded business activities;
• reporting and documentation requirements; and
• interaction with the existing company-tax system.

Companies should not restructure, delay dividends or commit to investments solely on the basis of the Budget speech. The final rules will determine whether the company and the relevant profits qualify.

What Should Company Owners Review?

Founders, family businesses and company directors should consider:

• annual turnover and any applicable group position;
• anticipated taxable profits;
• working-capital requirements;
• planned capital expenditure and reinvestment;
• dividend policy and shareholder expectations;
• financing arrangements;
• succession and ownership plans; and
• the company’s wider tax position.

Budget 2027 announces a new administrative penalty mechanism for failures to issue correct VAT invoices and fiscal receipts.

• €100 for the first failure;
• €200 for the second failure;
• €400 for the third failure; and
• €500 for the fourth and each subsequent failure within 24 months.

Where the applicable penalty is paid within 30 days, the criminal liability connected with the failure covered by that penalty is intended to be extinguished.

The Budget also states that information concerning these failures will be incorporated into the tax administration’s risk-assessment system. This may increase the likelihood that the affected business is selected for an audit, inspection or investigation.

Businesses should await the implementing provisions before treating the announced penalty framework as legally operative.

VAT Treatment of Prepared Food

The Government also intends to issue guidance clarifying the application of the VAT exemption for prepared food sold by supermarkets, minimarkets and convenience shops.

The stated objective is to promote consistent VAT treatment where these retailers compete with each other and with restaurants.

The measure is an announcement of forthcoming guidance. It should not be interpreted as confirmation of a new VAT rate or a completed change to the existing exemption.

The cost-of-living adjustment for 2027 is €6.41 per week. The employment and payroll consequences of COLA and the National Minimum Wage are examined separately in our Malta Budget 2027 employment and workforce analysis.

The additional COLA mechanism will also continue for qualifying lower- and middle-income households, with announced annual payments ranging from €200 to €1,500 according to disposable income and household composition.

These payments are household-support measures and should be distinguished from changes to income-tax bands and tax subtractions.

International Tax Residence and Domicile

For internationally mobile individuals, the Budget’s personal tax measures form only one part of the wider analysis.

Maltese tax residence, domicile, source of income, remittances, foreign gains, treaty residence and business ownership remain separate legal and tax questions.

Qualification for a domestic parent tax band, the Super Bonus or another employment-related measure does not automatically determine:

• whether an individual is tax resident in Malta;
• whether the remittance basis applies;
• how foreign income or gains are treated;
• whether treaty relief is available;
• whether a residence programme applies; or
• how a foreign pension is taxed.

International families should assess the Budget measures alongside their residence, domicile, corporate, succession and cross-border reporting positions.

Practical Takeaways

1. Identify the correct parent computation. Confirm whether the married or parent computation applies and whether there is one child or two or more children.
2. Use the complete tax calculation. Apply the relevant rates and tax subtractions rather than relying only on the tax-free threshold.
3. Check the Super Bonus income band. The payment is based on qualifying 2025 income and ranges from €500 to €1,000.
4. Review pension taxation separately. Distinguish the €10 weekly pension increase from the €37,624 pension-income tax exemption.
5. Model retained profits and dividends. Company owners should compare business reinvestment with anticipated shareholder distributions.
6. Do not assume the 25% rate automatically applies. Eligibility remains dependent on the final rules.
7. Strengthen VAT compliance. Review invoicing, fiscal-receipt and record-keeping procedures ahead of the proposed penalty system.
8. Monitor the married-return reform. Existing filing rules continue until the proposed separate-return system is implemented.
9. Keep domestic benefits separate from international tax status. Parent bands and bonuses do not determine residence, domicile or foreign-income treatment.
10. Monitor implementing legislation. Confirm the final legal text, commencement dates and administrative guidance before acting.

[question]What are Malta’s income-tax rates for parents in 2027?[/question]

[answer]The 2027 bands depend on whether the taxpayer uses the married computation or parent computation and whether the family has one child or two or more children. The tax-free thresholds range from €16,000 to €30,000 according to the applicable category.[/answer]

[question]How much can parents save in tax in 2027?[/question]

[answer]The maximum announced savings range from €1,150 for a qualifying parent with one child to €4,050 for a qualifying family using the married computation with two or more children. Actual savings depend on taxable income and eligibility.[/answer]

[question]What is the tax-free threshold under the married computation with one child?[/question]

[answer]The 2027 tax-free threshold is €20,000 for a qualifying taxpayer using the married computation with one child.[/answer]

[question]What is the tax-free threshold for a family using the married computation with two or more children?[/question]

[answer]The 2027 tax-free threshold is €30,000 for a qualifying family using the married computation with two or more children.[/answer]

[question]What is the Malta Super Bonus for 2027?[/question]

[answer]The Super Bonus is a tax-free payment ranging from €500 to €1,000 according to the qualifying person’s 2025 income.[/answer]

[question]Who qualifies for the €1,000 Super Bonus?[/question]

[answer]The Budget states that persons with qualifying 2025 income of at least €12,000 will receive the €1,000 payment, subject to the final qualifying conditions.[/answer]

[question]When will the Super Bonus be paid?[/question]

[answer]The Budget states that the Super Bonus is intended to be paid during the first quarter of 2027.[/answer]

[question]What is the tax-free pension-income threshold for 2027?[/question]

[answer]The annual tax-exempt pension-income threshold will increase by €520 to €37,624.[/answer]

[question]Has Malta reduced its corporate tax rate to 25%?[/question]

[answer]No. Budget 2027 proposes a 25% rate for qualifying retained or reinvested profits of companies whose annual turnover does not exceed €1 million. The general 35% rate has not been replaced.[/answer]

[question]Do distributed profits qualify for the proposed 25% rate?[/question]

[answer]The Budget states that where profits are distributed as dividends, the 35% rate will continue to apply.[/answer]

[question]Will married couples submit separate tax returns?[/question]

[answer]The Government intends to begin a reform project under which each spouse would generally submit an individual return, while joint filing could remain available by election where permitted. The detailed rules and commencement date have not yet been established.[/answer]

[question]What VAT penalties were announced for businesses?[/question]

[answer]The announced penalties are €100 for the first failure, €200 for the second, €400 for the third, and €500 for the fourth and each subsequent failure within 24 months.[/answer]

[question]Does Budget 2027 change Malta’s non-dom tax rules?[/question]

[answer]The headline measures do not announce a general rewrite of Malta’s residence-and-domicile framework. Residence, domicile, source, remittances and treaty relief remain separate considerations.[/answer]

[question]Are the Malta Budget 2027 tax measures already legally effective?[/question]

[answer]Not all of them. Several measures require legislation, rules or administrative guidance before their complete scope, commencement and operating conditions are known.[/answer]

Legal Status of the Tax Measures

The measures discussed in this publication are based on the Malta Budget 2027 announcements and the legal framework available at the date of publication.

Several reforms, including the proposed 25% company rate, separate returns for married couples, VAT compliance penalties and prepared-food guidance, require further rules or administrative implementation.

Taxpayers and businesses should confirm the final legislation, commencement dates, eligibility criteria and reporting requirements before taking action.

Interested in Other Malta Budget 2027 Measures?

• Read our analysis of Malta Budget 2027 - Employment and Pension Initiatives
• Read our overview of Malta Budget 2027 - Property Tax and Stamp Duty Measures
• Read our analysis of Malta Budget 2027 - Business, Technology and Sustainable Investment

View the official Malta Budget 2027 documents published by the Ministry for Finance.