Malta has enacted Act No. IX of 2025 on 17 April 2025, implementing key income tax measures for the 2025 financial year. The Act introduces an Elective Tax, allowing for the application of Pillar 2 top-up taxes on an optional basis.
This follows Malta’s partial transposition of Council Directive (EU) 2022/2523, while deferring the income inclusion rule (IIR) and undertaxed payment/profit rule (UTPR).
The Minister for Finance is empowered to issue regulations detailing the scope, rate, and administration of the elective tax, applicable from the year of assessment 2025.
The Act also introduces new rules allowing tax deductions for certain capital expenditures incurred from 1 January 2025. These include costs related to the acquisition of business permits, concessions, or commercial leases used in income-generating activities. The deduction is subject to conditions such as a 15-year maximum term, written documentation, and restrictions on related party transactions.
The Act also introduces amendments to the progressive tax rates applicable to individuals, reflecting adjustments to personal income taxation. Additionally, it provides for an increase in personal tax deductions for school fees paid for children, further enhancing family-focused tax reliefs.
Earlier, Malta’s finance minister, Clyde Caruana, presented the 2025 budget in the parliament on Monday, 28 October 2024.
