Background
On 26 October 2026, Malta's Minister for Finance, Clyde Caruana, presented the Malta Budget 2027 (the ‘Budget’).
The Budget was presented against a backdrop of rising energy costs, the ongoing war in Ukraine, tensions in the Middle East and concerns surrounding the Strait of Hormuz.
In his opening remarks, the Minister acknowledged these challenges and reaffirmed the Government's commitment to absorbing higher energy costs to support households and businesses. He contrasted Malta's approach with conditions elsewhere in Europe, where rising living costs and high levels of public debt continue to place pressure on national economies.
Malta's Economic Performance & Outlook
The Minister reported that Malta's economy grew by 4.7% in 2025 and by 4.4% during the first half of 2026, compared with average European growth of 1.2%. He also reported employment growth of 4.6%, a 5.1% increase in compensation per employee and investment growth of 8.2%.
For 2026 as a whole, the Minister projected economic growth of 4.1%, followed by a further 3.8% in 2027. Investment is expected to increase by 10.2% in 2026 and by 7% in 2027.
Malta is also projected to remain the fastest-growing economy in the European Union over the next two years.
General Themes
A Greater Focus on Productivity
The Budget signals a shift towards productivity-led economic growth, with an emphasis on improving business output and efficiency rather than relying primarily on further increases in employment.
Continued Energy Subsidies
The Government will maintain subsidies for electricity, gas and fuels, notwithstanding continued pressure on global energy prices.
Key Measures for Businesses
Reduced Corporate Tax on Retained or Reinvested Profits
Companies with an annual turnover of less than €1 million will be eligible for a reduced corporate income tax rate of 25% on profits retained or reinvested in the business. Distributed profits will remain subject to the standard corporate income tax rate of 35%.
VAT Reverse Charge for the Construction Sector
A VAT reverse-charge mechanism will be introduced in the construction sector to address VAT fraud.
Under this mechanism, suppliers will no longer charge VAT on supplies falling within its scope. Instead, business customers receiving those supplies will be responsible for accounting for the applicable VAT. They may also recover that VAT, subject to their entitlement to input VAT deductions.
Penalties for Incorrect VAT Invoices and Fiscal Receipts
Businesses that fail to issue correct VAT invoices or fiscal receipts will face administrative penalties ranging from €100 to €500 per offence.
Payment of the applicable penalty within 30 days will extinguish criminal liability associated with the breach.
Tourism & Hospitality
Increased Environmental Contributions
The Budget provides for increases in environmental contributions across the tourism sector:
- Hotels: €8 per person per night, capped at €64.
- Short-let accommodation, including Airbnb properties: €10 per person per night, capped at €80.
- Cruise passengers: a new contribution of €10 per night, with an exemption for passengers beginning their cruise in Malta.
- Visitors to Comino: a new contribution of €5 for tourists visiting the island.
Social & Household Measures
Income Tax, VAT and Social Security Contributions
The Budget provides for no increases in income tax, VAT or social security contributions.
Tax-free income thresholds for parents will also be increased.
Cost-of-Living Adjustment and Minimum Wage
The cost-of-living adjustment (COLA) for 2027 will be €6.41 per week.
The minimum wage will rise by a further €4 per week, excluding COLA.
Pensions
Weekly Pension Increase
From 2027, pensions will increase by €10 per week. The maximum pension for individuals born before 1962 will also rise to €28,000.
Pension Transfers Between Spouses and Survivor Benefits
From 2027, a pensioner will be able to transfer their pension to a spouse who does not receive a pension.
Widowed spouses will also be able to claim a full pension calculated as though their deceased spouse were still alive.
Increased Tax Exemption for Pension Income
The annual tax-exempt threshold for pension income will increase by €520, bringing it to €37,624.
Conclusion
The Budget signals confidence in Malta's ability to continue absorbing rising energy costs despite international uncertainty, providing stability for businesses and supporting their continued growth. Its focus on productivity, investment and targeted tax measures further underlines the Government's commitment to supporting a resilient and competitive economy.
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