Malta’s Budget for 2027 was presented on 26 October 2026 by Minister for Finance Clyde Caruana, setting out the Government’s fiscal and economic priorities for the coming year.
Budget 2027 combines continued support for households with targeted tax measures for families, pension increases and a new Super Bonus for workers. For businesses, one of the most significant developments is a new 25% corporate tax rate on qualifying retained or reinvested profits for smaller companies. At the same time, the Budget introduces higher costs affecting tourism and third-country nationals working and living in Malta.
Malta’s economic outlook for 2027
The Budget was presented against a backdrop of continued economic expansion.
Malta’s economy grew by 4.7% in real terms in 2025, followed by growth of approximately 4.4% during the first half of 2026. Real GDP growth is expected to reach approximately 4.1% for 2026 before moderating to 3.8% in 2027.
Further projections include:
- GDP growth:8% in 2027
- Unemployment: forecast to decline from 3.3% in 2026 to 2% in 2027
- Inflation: projected at approximately 7% in 2027
- Government deficit: estimated at around 6% of GDP
- Government debt: projected at approximately 8% of GDP
- Private consumption: forecast to increase by 3.8%
- Investment: forecast to increase by approximately 7%
- Exports: forecast to increase by approximately 2%.
Employment also continued to expand strongly, increasing by 4.6% during the first half of 2026, while compensation per employee increased by 5.1%.
Business and Corporate Tax Measures
25% tax rate for qualifying smaller companies
One of the Budget’s most important measures for Malta’s SME sector is the introduction of a 25% corporate income tax rate on undistributed profits for companies with annual turnover not exceeding €1 million, compared with Malta’s standard 35% corporate income tax rate.
The aforementioned measure applies to qualifying small businesses where profits are retained or reinvested. The change is particularly relevant to owner-managed companies and growing SMEs that intend to retain profits within their businesses to finance expansion and investment.
The detailed eligibility criteria and mechanics will, however, need to be considered once the relevant implementing legislation and guidance are available.
Why this matters
Historically, Malta’s corporate tax system has combined the 35% headline corporate income tax rate with its shareholder tax refund system.
A reduced rate applying at company level to qualifying retained profits potentially changes the timing of taxation for eligible smaller companies and may influence decisions around:
- dividend distributions;
- reinvestment;
- working capital;
- business expansion; and
- corporate structuring.
Businesses should therefore consider the measure alongside Malta’s existing tax refund and imputation framework rather than viewing the 25% rate in isolation.
Support for business investment
Malta will continue incentives administered through Malta Enterprise aimed at areas including:
- digitalisation;
- automation;
- high-value-added investment;
- emerging economic niches; and
- economic diversification.
Existing schemes will also be renewed across areas including electric vehicles (EVs), renewable energy, housing, NGOs and sport. This direction is particularly relevant for Malta-based businesses considering technology investment, productivity improvements and automation.
VAT Measures
Budget 2027 signals additional changes in VAT administration and enforcement. Notably, the VAT reverse-charge mechanism is expected to be extended within the construction industry. Measures are also being introduced to address incorrectly issued VAT invoices and fiscal receipts.
Additionally, new initiatives are aimed at combating VAT evasion as one of the principal Budget measures. Companies operating in construction and related sectors should consequently review their invoicing and VAT procedures once detailed implementing rules are published.
Personal Income Tax Measures
Further tax reductions for families
Budget 2027 continues the Government’s multi-year reduction in personal income taxation for families with children.
For 2027, the 0% income tax thresholds will rise to:
| Category | 0% threshold for 2027 |
|---|---|
| Married, one child | €20,000 |
| Parent, one child | €16,000 |
| Married, two or more children | €30,000 |
| Parent, two or more children | €24,000 |
Further increases are scheduled for 2028, when the corresponding thresholds are expected to rise to €22,500, €18,000, €37,000 and €30,000 respectively.
| Category | 0% threshold for 2028 |
|---|---|
| Married, one child | €22,500 |
| Parent, one child | €18,000 |
| Married, two or more children | €37,000 |
| Parent, two or more children | €30,000 |
Around 68,000 parents are expected to benefit from the personal income tax changes.
New Super Bonus for Workers
Another headline Budget 2027 measure is the introduction of a tax-free Super Bonus. Eligible workers are expected to receive between €500 and €1,000, with the amount determined by their 2025 earnings. Eligibility includes employees as well as qualifying:
- self-employed persons;
- working pensioners; and
- part-time employees.
The measure is expected to cost approximately €200 million annually. For employers and payroll teams, further administrative guidance will be important in determining how eligibility, payment and reporting will operate in practice.
Cost of Living Adjustment and Minimum Wage
The statutory Cost of Living Adjustment (COLA) for 2027 will amount to €6.41 per week, equivalent to approximately €333.32 over 52 weeks.
The national minimum wage will increase by €10.41 per week, inclusive of the COLA adjustment. A revised COLA-related support mechanism is also expected to provide eligible households with annual payments ranging from €200 to €1,500.
Pensions and Social Security
Budget 2027 also introduces several measures affecting pensioners and social security. Certain retirement, invalidity, widow’s and old-age pensions will increase by €10 per week, inclusive of the relevant COLA adjustment.
The annual amount of pension income that may be received tax-free is also set to increase by €520 to €37,624. A further notable change will permit spouses, subject to applicable conditions, to transfer social security contributions between each other. Discussions are also progressing on the legal framework for Malta’s proposed auto-enrolment pension scheme, following agreement among social partners.
Families and Social Measures
Other measures announced include:
- the Carers’ Grant increasing to €7,500 annually;
- the adoption grant increasing by €1,000 to €13,000;
- an additional 10 working days of leave for foster parents;
- up to two years of social security contribution credits for employees temporarily stopping work because of domestic violence or mental-health circumstances; and
- 10 days’ paid sports leave for elite athletes participating in European or world championships, together with accompanying technical and medical personnel.
Third-Country Nationals: Significant Changes from 2027
Businesses employing third-country nationals should pay particular attention to Budget 2027. Several of the new measures are specifically directed toward non-EU workers and are likely to increase employment-related and relocation costs.
Work permit costs
The fee associated with bringing a new third-country national worker to Malta will increase from €600 to €800. A further €400 infrastructure contribution is being introduced in connection with new applications and residence renewals, with minors exempted.
Free public transport and childcare
From 1 January 2027, free public transport and childcare will be restricted to Maltese and EU citizens and qualifying long-term residents. Third-country nationals who have not met the applicable long-term residence requirements will therefore no longer benefit from these services free of charge.
Tourism and Eco-Contribution
The tourism sector faces some of the Budget’s most substantial fee increases. From 2027, the eco-contribution for hotel accommodation is set to increase from €1.50 to €8 per night, with a maximum charge of €64. For short-let accommodation, it will increase to €10 per night, subject to a maximum charge of €80.
New or expanded charges will also affect:
- certain cruise passengers;
- visitors to Comino, with a €5 contribution;
- fast ferry passengers; and
- non-residents travelling on the Gozo ferry.
For tourism operators, hotels, holiday accommodation providers and destination-management businesses, the changes should be factored into 2027 pricing and booking strategies.
Energy Support Continues
Government support designed to stabilise electricity and fuel prices will continue.
Approximately €400 million is expected to be allocated toward energy subsidies in 2027.
Pre-Budget estimates indicated that removing these subsidies could have meaningful wider economic consequences, including lower economic activity and consumption and higher unemployment.
The continuation of energy support therefore remains relevant not only to households but also to the operating-cost environment for businesses based in Malta.
What Malta Budget 2027 Means for Businesses
From a corporate perspective, five areas deserve particular attention.
1. Small companies
Businesses with turnover below €1 million should assess whether the new 25% rate on qualifying retained or reinvested profits could apply to them.
2. Employers
Payroll budgets should incorporate the €6.41 weekly COLA, while businesses employing third-country nationals should assess the additional permit and employment-related costs.
3. Foreign workforce
For employers, the Budget introduces changes that may influence recruitment costs, workforce planning and investment decisions.
4. Tourism businesses
Hotels, short-let operators and other tourism businesses will need to incorporate higher eco-contributions and related visitor charges into their 2027 planning.
5. Investment and transformation
Businesses planning automation, digitalisation or higher-value activities should monitor the continuation and introduction of relevant Malta Enterprise support schemes.
Malta Budget 2027 at a Glance
| Measure | Budget 2027 |
|---|---|
| Real GDP growth forecast | 3.8% |
| Unemployment forecast | 3.2% |
| Government deficit | 2.6% of GDP |
| Government debt | 46.8% of GDP |
| COLA | €6.41/week |
| Pension increase | €10/week |
| Super Bonus | €500 to €1,000 |
| SME qualifying corporate tax rate | 25% |
| SME turnover threshold | €1 million |
| Hotel eco-contribution | €8/night |
| Short-let eco-contribution | €10/night |
| New TCN application fee | €800 |
| TCN infrastructure contribution | €400 |
| Carers’ Grant | €7,500/year |
| Adoption Grant | €13,000 |
| Tax-free pension threshold | €37,624 |
The figures above are drawn from the Budget analyses published immediately after the 26 October announcement.
Looking Ahead
Malta Budget 2027 continues to prioritise support for household disposable income while maintaining energy subsidies and introducing further tax relief for families.
For businesses, however, the picture is more nuanced. The reduced 25% rate for qualifying smaller businesses and continued support for digitalisation and investment offer potential opportunities. As with every Budget announcement, several measures will require implementing legislation, subsidiary legislation or administrative guidance before their complete application can be determined.
Businesses and individuals should therefore assess the measures not simply in isolation but within their wider Malta tax, employment, immigration and investment arrangements.
How Papilio can help
The Budget measures may have different implications depending on your personal circumstances, corporate structure and business activities.
Papilio can assist businesses, entrepreneurs and internationally mobile individuals in assessing how developments in Malta’s tax and regulatory environment may affect their operations and planning. Contact us today.
*This article is intended to provide a general overview of selected measures announced in Malta Budget 2027 and does not constitute tax, legal or professional advice. Certain measures remain subject to legislation, regulations and/or administrative guidance.
1. What are the main measures announced in Malta Budget 2027?
Malta Budget 2027 includes measures affecting personal income tax, families, pensions, businesses, employment costs, third-country nationals and the tourism sector. Key measures include new family tax thresholds, a Super Bonus for eligible workers, increases in pensions and COLA, and a proposed 25% corporate tax rate on qualifying retained or reinvested profits for eligible smaller companies.
2. What is the COLA increase in Malta for 2027?
The Cost of Living Adjustment (COLA) for 2027 is €6.41 per week. Employers should take the increase into consideration when planning their payroll and employment costs for 2027.
3. What are the new income tax thresholds for families in Malta in 2027?
For 2027, the 0% income tax threshold rises to €20,000 for married taxpayers with one child and €16,000 for taxpayers using the parent rates with one child. For those with two or more children, the respective thresholds rise to €30,000 and €24,000.
4. Will Malta’s family income tax thresholds change again in 2028?
Yes. Further increases are planned for 2028. The 0% threshold is expected to increase to €22,500 for married taxpayers with one child and €18,000 for taxpayers using the parent rates with one child. For those with two or more children, the thresholds are expected to rise to €37,000 and €30,000 respectively.
5. What is the Malta Budget 2027 Super Bonus?
Budget 2027 introduces a tax-free Super Bonus for eligible workers. The bonus is expected to range from €500 to €1,000, depending on the individual’s applicable earnings and eligibility conditions.
6. Does Malta Budget 2027 introduce a new corporate tax rate for small businesses?
Budget 2027 announced a 25% corporate income tax rate on qualifying undistributed profits for eligible smaller companies with annual turnover not exceeding €1 million. Businesses should consider the final legislation, eligibility requirements and interaction with Malta’s existing corporate tax system before determining how the measure applies to them.
7. How does Malta Budget 2027 affect third-country nationals?
Budget 2027 includes a number of measures affecting third-country nationals, including higher employment-related permit costs and changes affecting access to certain benefits and services. Employers that recruit non-EU nationals should therefore review their workforce, recruitment and relocation costs for 2027.
8. How will Malta Budget 2027 affect pensions?
Certain pension payments will increase by €10 per week, inclusive of the applicable COLA adjustment. The tax-free pension income threshold is also set to increase to €37,624.
9. How does Malta Budget 2027 affect hotels and short-let accommodation?
The tourism sector will face higher eco-contributions in 2027. The contribution for hotel accommodation is set at €8 per night, while the contribution for short-let accommodation is set at €10 per night, subject to the applicable limits and conditions.
10. What should businesses in Malta consider following Budget 2027?
Businesses should assess the measures relevant to their circumstances, including corporate tax changes, payroll costs, COLA, recruitment of third-country nationals, VAT developments and available business incentives. Companies should also monitor the publication of implementing legislation and official guidance before making tax or restructuring decisions.
