Malta's Budget Measures Implementation Act 2026 reshapes the country's tax landscape across multiple fronts — introducing a generous 175% R&D deduction, tightening VAT rules on related-party transactions, and overhauling personal income tax brackets — while also targeting high-emission vehicles and raising the eco-contribution on tourist accommodation.

RF Report

Malta has gazetted the Budget Measures Implementation Act 2026 (Act No. III of 2026) on 10 March 2026. introduces a comprehensive series of adjustments to Malta’s fiscal landscape. These changes, largely retroactive to 01 January 2026, touch upon everything from personal income tax relief to tightened regulations on excise duties and corporate compliance.

R&D and business deductions

  • To encourage local innovation, the government has introduced a massive 175% tax deduction on expenditure related to research, development, and innovation activities.
  • For investment entities, the definition of a “company” under the Income Tax Act now explicitly includes Special Limited Partnership Funds.

VAT and related-party transactions

  • New VAT rules target transactions between “related persons” (such as family members, cohabitants, or businesses with more than 50% shared ownership). If a transaction between related parties is not conducted at open market value, the Commissioner may step in to adjust the taxable amount to reflect its true market cost.
  • From 1 January 2027, electronic marketplaces (platforms or portals) that facilitate the supply of goods within the EU will be “deemed” to have received and supplied those goods themselves for VAT purposes, increasing their responsibility for tax collection.

Excise duty adjustments

  • Effective 01 April 2024, the tax on ethyl alcohol has been streamlined to a flat rate of EUR 0.136 per % vol. per litre.
  • The Act also introduces strict definitions for “smokeless tobacco products” and “nicotine pouches,” ensuring these newer products are captured within the excise framework.
  • For individuals, an exemption now exists for non-harmonised excisable goods imported via post or courier for private use, provided the intrinsic value does not exceed EUR 150.

The eco-contribution on accommodation 

Travellers and residents staying in licensed premises will face a revised eco-contribution starting 01 July 2026. The rate is set at EUR 1.50 per night for anyone aged 18 or older, capped at a maximum of EUR 22.50 per visit. A “visit” is defined as an uninterrupted stay, though breaks of up to 15 days in unlicensed premises do not “reset” the visit for the purpose of reaching the cap.

Customs and motor vehicles 

  • Customs officials have been granted broader powers to request information, with failure to comply resulting in fines between EUR 250 and EUR 2,500, or even imprisonment for up to three years.
  • High-emission M1 vehicles (with COâ‚‚ emissions of at least 200 NEDC or 220 WLTP) may be restricted to road use only on Fridays after 18:00, as well as on Saturdays, Sundays, and public holidays.

Personal income tax

The 2026 budget introduces a significant overhaul of personal income tax brackets, with the new rates taking effect from the 2027 year of assessment, though certain provisions on company definitions apply from 2026.

  • Married couples filing jointly will benefit from a tax-free threshold of EUR 15,000, with income up to EUR 23,000 taxed at 15% and the top rate of 35% applying above EUR 60,000.
  • Families with children receive progressively greater relief: couples with one child see the tax-free threshold rise to EUR 17,500, while those with two or more children pay no tax on income up to EUR 22,500, with the 15% band extending to EUR 32,000.
  • For single individuals, the basic tax-free threshold is set at EUR 12,000.
  • Single parents benefit from enhanced “Parent Rates” depending on their circumstances. Those with sole custody of one child pay no tax on the first EUR 14,500, with the 15% rate applying up to EUR 21,000. Single parents with sole custody of two or more children enjoy a tax-free allowance of EUR 18,500, with the 15% band stretching to EUR 25,500.