Malta’s tax landscape continues to develop through a series of legislative amendments introduced under the Budget Measures Implementation Act 2026, together with ongoing implementation of EU initiatives such as the VAT in the Digital Age (ViDA) package and international tax standards developed by the OECD. A number of direct and indirect tax amendments have come into effect during 2026, while businesses should also begin preparing for a broader package of VAT reforms, many of which are expected to apply from 1 January 2027.
Direct Tax Developments
The most notable direct tax measure is the introduction of a 175% tax deduction for qualifying expenditure on research, development and innovation activities, as introduced through the Budget Measures Implementation Act 2026. This enhanced deduction is intended to stimulate investment in innovation and strengthen Malta’s competitiveness as a business hub.
Additional amendments include updates to the income tax framework, changes affecting specific investment and fund structures, and continued developments related to Malta’s implementation of international tax standards, including the OECD’s Pillar Two global minimum tax framework and the EU’s DAC8 Directive governing the reporting of crypto-asset transactions.
VAT and Indirect Tax Changes
Several VAT amendments became effective on 1 January 2026. These include new VAT registration rules for non-Maltese established businesses, expanded powers for the tax authorities to offset VAT refunds against liabilities arising under other revenue laws, and the introduction of open market value rules for certain related-party transactions. Changes have also been made to deemed supply provisions and the VAT treatment of specific transactions and organisations.
A significant focus of Malta’s VAT reform agenda is digitalisation. The Malta Tax and Customs Administration is moving towards a more digital VAT environment, reflecting wider EU developments under the VAT in the Digital Age (ViDA) package. Businesses should expect increased use of electronic invoicing, enhanced reporting requirements and greater real-time interaction with tax authorities over the coming years.
Preparing for 2027
Many of the more extensive VAT reforms associated with the EU’s VAT in the Digital Age (ViDA) initiative are expected to become operational from 1 January 2027, subject to the applicable implementation timelines. These changes are aimed at improving compliance, increasing transparency and aligning Malta’s VAT framework with evolving EU standards. Companies operating multi-entity structures, cross-border e-commerce businesses and organisations relying on manual VAT reporting processes should begin reviewing their ERP capabilities and invoicing workflows during 2026. The expected shift towards digital reporting and electronic invoicing may require system upgrades, process redesign and additional data governance controls ahead of implementation.
Business Considerations
The 2026 amendments signal a continued shift towards digital tax administration, enhanced transparency and closer alignment with international tax standards. Companies should review their VAT compliance processes, evaluate the impact of related-party transaction rules, consider opportunities arising from the enhanced R&D deduction and begin preparing for the VAT digitalisation measures expected to take effect from 2027. Early planning will be essential to minimise compliance risks and maximise available tax incentives.
Papilio Services assists businesses in navigating Malta’s evolving tax and regulatory framework through tailored corporate, compliance and business support services. Schedule a consultation with our seasoned experts to discuss your requirements in more detail.
About the Author
This article has been authored by Chanelle Mifsud, Associate Director, Accounting & Tax.
*This article provides a high-level overview of selected tax developments and does not constitute tax or legal advice.
