Malta’s Budget Implementation Act 2026, enacted on 10 March 2026, introduces a wide range of legislative amendments spanning income tax, VAT, and eco-contribution. Whether you are a business owner, a financial professional, or an individual taxpayer, understanding these updates is essential to staying compliant and planning effectively.
Here is a clear breakdown of what has changed and what it means for you.
Income Tax Act Amendments
Special Limited Partnership Funds — Now Treated as Companies
With effect from 1 January 2025, the definition of a “company” under the Income Tax Act has been expanded to include any Special Limited Partnership Fund established under the Investment Services Act (Special Limited Partnerships Funds) Regulations. This is relevant to fund structuring and investment vehicle planning.
Dividend Exemption — Aligned with New Personal Tax Rates
The exemption from tax on certain dividends received by non-residents under Article 12(1)(c)(iii) has been updated to align with the new personal tax rates announced in the 2026 Budget, ensuring the thresholds for eligibility reflect current rates. Where a taxpayer receives multiple qualifying dividends, these continue to be treated as a single aggregate amount when assessing eligibility.
175% Tax Deduction for Research, Development and Innovation
One of the most significant measures for businesses is a new enhanced deduction under Article 14(ha)(i). From the year of assessment 2027, taxpayers engaged in a trade, business, profession or vocation may claim a deduction equal to 175% of qualifying expenditure on research, development and innovation activities — provided the expenditure is wholly for the benefit of the business and proved to the satisfaction of the Commissioner.
Where the expenditure is capital in nature, the deduction is spread equally over the year of expenditure and the following five years. The enhanced deduction does not apply to plant, machinery or premises already eligible for wear and tear allowances. Further rules defining qualifying activities and conditions are expected to be issued in due course.
Increased Deduction for Homes for the Elderly and Disabled
The tax deduction available to individuals paying fees for residence in a private home for the elderly or disabled has been increased. The deduction — previously capped at €2,500 per year — now rises to €4,500 per year (limited to the lower of the actual amount paid or the cap). This is a welcome relief for families bearing these costs.
Updated Personal Tax Rates
The personal tax rates under Article 56 of the Income Tax Act have been updated in line with the 2026 Budget. Full details of the updated rate bands are available on the Malta Tax and Customs Administration website and are discussed in detail on the CLA Malta Budget pages.
Income Tax Management Act Amendments
Electronic Notices — No Signature Required
Notices issued by the Commissioner — including tax payment receipts — no longer require a physical signature to be valid, provided they are made available through the Commissioner’s web portal or sent from an official or authorised email address. Notices requiring a person to provide information or attend as a witness must still be personally signed.
Simplified Service of Notices
The rules for serving notices have been updated. In addition to personal delivery, post, and email, notices may now also be served through the Commissioner’s designated web portal. Postal notices remain deemed served three days after posting for Malta residents and one day after expected delivery for non-residents. Where a notice cannot be served, the Commissioner may publish it on the web portal, in the Gazette, or in newspapers.
Extended Period to Dispute a Determination
Taxpayers now have significantly more time to dispute a Commissioner’s determination. The period within which an adjustment form may be filed has been extended from five years to ten years from the date of notification.
VAT Act Amendments
Who Must Register
The scope of mandatory VAT registration has been broadened. Persons making exempt-with-credit supplies — not only those making taxable supplies — are now explicitly required to register. If you were previously uncertain about your registration obligations, this update may affect you.
VAT Refunds
Businesses with excess VAT credits will now receive refunds within five months from the later of the filing deadline or the actual return submission date. The Commissioner also has the power to offset excess credits against amounts owed under any other revenue act.
Price Transparency
All prices quoted by VAT-registered persons are now deemed to be VAT-inclusive by default, unless VAT cannot yet be determined or the supply is to another VAT-registered business with VAT exclusion explicitly stated. This has direct implications for how businesses display and communicate pricing to consumers.
Tax Recovery and Appeals
The Commissioner may pursue recovery of tax, interest, and penalties within six years of the due date. This limitation period is interrupted by a registered-post demand note, a Gazette or web portal notice, or a judicial act. Appeals against VAT Tribunal decisions must now be filed with the Court of Appeal within 30 days of the decision.
Electronic Service of Notices
The Commissioner may serve VAT notices electronically without a physical signature, provided delivery is made through the designated web portal or an official electronic address. Service is effective on the third day for registered post in Malta, or upon electronic or web portal delivery.
Zero-Rating Extended to More Food Items
Zero-rating has been extended to tea and coffee in liquid form, as well as milkshakes, yogurt drinks, and liquid chocolate — unless factory-sealed. New exemptions have also been introduced for supplies benefiting disaster victims, in line with EU VAT Directive requirements.
Related-Party Transactions — New Anti-Avoidance Rule
A new rule requires supplies between related parties to be valued at open market value where either party has restricted VAT deduction rights. “Related persons” is broadly defined to cover family members, employees, cohabitants, and persons with majority ownership relationships. Businesses with intra-group transactions should review their arrangements in light of this change.
E-Commerce and Cross-Border Supplies
Several updates address the digital economy:
- The deemed supplier rule for electronic marketplaces has been updated for B2B goods supplies from non-EU sellers.
- The One-Stop-Shop (OSS) scheme has been expanded to cover all EU services, with broader eligibility for non-EU suppliers.
- The €10,000 threshold allowing Maltese-only-established suppliers to treat certain cross-border sales as Malta supplies has been restated and clarified.
- Consignment-stock simplification has been extended to goods dispatched by 30 June 2028 and will cease entirely on 30 June 2029.
Note: Several e-commerce provisions take effect from 1 January 2027.
Eco-Contribution Act Amendments
Accommodation Rate — Effective 1 July 2026
A revised eco-contribution rate for accommodation will come into force on 1 July 2026, set at €1.50 per night per person aged 18 or over, capped at €22.50 per person per visit. A “visit” means an uninterrupted stay at licensed premises. Stays of up to 15 nights in unlicensed premises do not break the visit but are not themselves subject to the charge.
Reporting Threshold
The eco-contribution reporting obligation applies only to stays exceeding 15 nights per person during the relevant period.
Ministerial Powers
The Minister may now amend the relevant Schedules of the Eco-Contribution Act by regulation, without the need for primary legislation — allowing for more agile updates to rates and procedures going forward.
What Should You Do Now?
These changes touch on a wide range of business and personal tax matters — from R&D incentives and personal tax rates to VAT registration, cross-border transactions, and accommodation levies. We recommend reviewing your position in light of these amendments, particularly if you:
- Carry out or invest in research, development or innovation activities
- Have related-party transactions within your group
- Supply goods or services cross-border or through digital platforms
- Pay fees for a family member residing in a home for the elderly or disabled
- Operate or advise in the hospitality sector
- Are uncertain about your VAT registration or income tax obligations
CLA Malta’s tax advisory team is available to guide you through the practical implications of these changes for your business or personal situation.