• The Maltese economy continued its upward trend with Real GDP growth expected to reach 4.1% by end of 2025. This growth was driven mainly by domestic demand, capital investments and exports such as digital services and tourism.
• On the fiscal side, the Maltese Government is expecting a further reduction in the budget deficit to 3.3% in 2025 and 2.8% in 2026. This should lead the country to exit the current Excessive Deficit Procedure mechanism by next year.
• The Debt to GDP ratio will stabilise in the 46% to 47% range in the short to medium term. This will be supported by the buoyant growth that the Maltese economy is experiencing, with GDP expected to reach €30.2 billion by 2028 from the current €24.7 billion this year.
• Labour market conditions remained strong, with activity rates exceeding 80% among the working-age population as at end of the first half of this year with employment growth rates expected to remain above the 80% supported by an increased female participation rate and expatriates working in Malta.

• COLA for 2026 is expected to be set at €4.66 per week, denoting a lower increase in inflation compared to prior years.

Tax deductions on research and innovation

• A 175% tax deduction is expected to be granted on eligible research and innovation expenditure to encourage companies to consistently invest in technology, knowledge and innovative development.

Accelerated tax deductions on qualifying tech investment

• Tax deductions on investment related to Artificial Intelligence (AI), digitalisation, modernisation, automation and cybersecurity will be accelerated over a span of two years.

Personal tax measures

• Significant changes have been announced in the progressive income tax rates for parents with a view to address Malta’s declining birth rate.

• Changes to the income tax rates are to be staggered over the coming three years, lasting until the child or children are 18 years old, or 23 years old if still attending formal education, and making a distinction between parents who have one child, and those who have two or more. The changes also distinguish between taxpayers under the married computations and parent computations.

• The following are the tax rates which have been announced:

Married computation with one child

Parent computation with one child

Married computation with two children or more

Parent computation with two children or more

Social benefits

• A collective effort will be made to extend remote working across all relevant work sectors with the goal of improving work life balance.
• Social security contributions paid before the age of 18 years will count towards the quantification of pension entitlement.
• A €10 weekly increase in retirement pensions.
• Widowers pensions are to increase by €3.50 per week, whilst widowers raising children are to be given an additional €10 allowance per week until the child turns 23 years old.
• A €500 increase (up to €9,000 annually) in the grant for elderly people opting to hire a live-in carer.
• The children’s allowance for families that earn less than €30,000 per annum is to increase by €250 per child.
  
  

• The reduced duty rate of 1.5% for donations between qualifying family members is set to continue in 2026.
• The existing consultancy grants for succession and governance, and assistance for training, digitalisation and procurement of finance shall also be extended.
• The First-Time Buyers scheme shall be enshrined in law permanently, and the rules shall be amended so that ownership of non-residential property will not disqualify eligibility to the scheme. Additionally, the availability of further financial assistance of €10,000 over a ten-year period shall be renewed.
• The 3.5% reduced duty rate on inherited residential immovable property will now apply on the first €400,000 (previously €200,000).

• Whilst Government will not be reducing income tax rates applicable to companies, based on proposals from social partners, an agreement has been reached on a set of measures that will provide approximately €50 million in aid to the business community.

• By means of the Micro Invest Scheme, government will finance 65% of wage increases in respect of employees working with the same company for more than four years. This aid shall be provided for a two-year period, up to a maximum of €780 per year per employee. For Gozo, this aid shall finance 80% of wage increases, up to a maximum of €960 per year per employee.

• The maximum benefit under the Micro Invest Scheme is to increase to €65,000 in Malta and €80,000 in Gozo.

• Local enterprises are to receive a 60% tax credit on qualifying investments over a four year period.

• An extension of the Business Development Scheme, to assist enterprises which are undergoing transformations and creating specialised jobs, has been announced.

• Get Qualified and Higher Educational Qualifications tax credits are to be continued.

• SMEs and start-ups are to gain free access to AI, HPC, and cloud computing via the European Digital Innovation Hub.

Small and medium enterprises

• To support self-employed and small businesses, the Government shall fund up to 50% of the cost of industrial garages up to a maximum of €300,000.
• A new SME complex shall be built in Ħal Far.
• Additionally, efforts are underway to create modern facilities for health, pharmaceutical, light industry, and marine biotechnology enterprises, aiming to build a value chain from local innovation to international markets.

Land reclamation

• The Government is preparing to launch a large-scale land reclamation project beyond the Freeport area to support industrial and maritime activities and relocate commercial operations, while emphasising the need for boldness and determination in such ambitious initiatives.

Logistics and free zone

• The Government announced that it considering inviting international bids to create a new free-zone logistics hub near the airport, potentially directly linked to the Freeport, to boost supply chain efficiency and attract valuable maritime and aviation activities.

Investment in digitalisation

• Malta will be investing €100 million in digitalisation and the adoption of technologies such as AI, the Internet of Things, cybersecurity, augmented and virtual reality (AR/VR), blockchain, and robotics. Funding is expected to be allocated through Malta Enterprise schemes, the Malta Digital Innovation Authority, EU funds, and other government agencies to eliminate manual processes, improve efficiency, and strengthen competitiveness.

Maritime and aviation

• The creation of national academy for aviation was announced, as a partnership between private operators and government, to provide specialised training (practical and accredited) leading to high value careers.
• Malta will maintain high standards in its shipping sector, holding the position as the sixth largest flag state worldwide and the largest in Europe, as well as the top superyacht registry. In aviation, the country plans to expand its aircraft registry beyond the current 930 planes in 2026.

iGaming

• The Minister reaffirmed that the gaming industry continues to be a key pillar of the Maltese economy, contributing around 8% to the country’s GDP, emphasising Government’s commitment to strengthening the sector through enhanced protective measures aimed at supporting sustainable growth.
• Malta will be reviewing the framework governing the gaming industry, with particular focus on improvements to the VAT system.
• The agreement with Unity will be extended to provide individuals with the opportunity to specialise in game production, immersive technologies, simulation and animation, as well as AR/VR.

Technology

• The Government announced plans to make AI accessible to all by offering free courses, national certifications, hands-on sessions, and free subscriptions to AI services, helping people study and work more effectively and live more comfortably, with the initiative set to launch early next year.
• A digital identity wallet aimed at reduced bureaucracy and faster and more efficient processes.

Tourism

• The eco-contribution per tourist per day to increase from €0.50 to €1.50.

• The Government announced a commitment of €1 million for 2026 to enable Special Olympics Malta aimed to offer additional services as well as to improve the personal developments of the athletes.
• Student stipends shall increase by 15% over the next year.

• A new scheme will offer young people under the age of 30 a €5,000 annual grant for five years if they give up their driving license.
• Existing grants for electric cars and scrappage schemes will be maintained, alongside new grants of €1,500 per year for those buying motorcycles or switching from cars to motorcycles.
• Investments of €85 million in a new organic waste processing plant, €17 million in a skip management facility, and the completion of environmental studies for a new facility for hazardous waste have been announced.
• Feed-in tariffs for electricity generated from small photovoltaic installations (under 40 kWp) will remain in place, and strong schemes will continue to encourage both families and industry to use energy more efficiently and sustainably.
• A call for interest has been issued for renewable energy supply through offshore wind turbines in Malta’s exclusive economic zone, with an evaluation of submissions currently underway.