Malta Budget 2025 - An Overview

Oct 31, 20243 min read

On October 28, 2024, Malta's Minister for Finance and Employment presented the Budget for 2025, outlining key measures set against a backdrop of changing economic challenges and rising societal expectations. This overview will dive into the anticipated measures and allocations that could significantly shape Malta's economic landscape in 2025.

Key Highlights of the 2025 Malta Budget

Economic Growth Projections

GDP Growth: The Maltese economy grew by 7.5% in 2023, mainly driven by net exports. Projected growth is 4.9% in 2024 and 4.3% in 2025, with the contributing factors being domestic consumption.
Debt and Deficit: The debt-to-GDP ratio is anticipated to be 49.5% in 2024, rising slightly to 50.1% in 2025. The deficit is expected to decrease from 4.0% of GDP in 2024 to 3.5% in 2025, and further to 2.6% by 2027.
Inflation and Employment: Inflation is projected to drop to 2.5% in 2024 from 5.7% in 2023, while unemployment is expected to remain stable at 3.5%. On the other hand, employment is expected to grow by 4.6% in 2024.

Social Welfare and Support Measures

Cost of Living Adjustment (COLA): Set at €5.24 per week, with proportional increases for students' stipends and full adjustments for pensioners and social benefit recipients.
Minimum Wage: Will rise by €8.24 per week.
Occupational Pensions: Employers will be obligated to set up occupational pension schemes for new employees, with government employees receiving matching contributions up to €100 per month.
Pension Increases: Pensioners will see an €8 weekly increase, with additional adjustments for those born before 1962 and widowed pensioners.
Children’s Allowance: Will increase by €250 per child per year.
Youth Health Incentives: Free six-month gym memberships for individuals born between 2005-2007 to promote youth health.

Investments in Infrastructure

Infrastructure development is critical for maintaining Malta's competitiveness. The 2025 budget is set to allocate over 300 million euros to modernizing transport, telecommunications, and utilities.

Improving infrastructure supports the government's long-term vision of becoming an innovation and sustainability leader. Investments in public transport, such as expanding the bus fleet by 40 percent, and boosting digital connectivity are likely to feature prominently in budget plans.

Bird's eye view of Maltese infrastructure — Bird's eye view of Valletta, Malta

Tax Reforms and Incentives

Personal Income Tax: Tax-free income brackets will be widened, resulting in annual tax savings ranging from €345 to €675.
Tax Refunds: Individuals earning less than €60,000 will receive tax refunds between €60 and €140.
Pension Income: 80% of pension income will be exempt from tax in 2025.
Private School Fees: Increased deductions against chargeable income for parents with children in private schools.
Stamp Duty: The reduced stamp duty rate of 1.5% for certain business transfers to descendants has been extended.
Highly Qualified Persons Rules: These will be extended to entities providing back-office services.
VAT Adjustments: The VAT rate for essential sanitary products and medical accessories for women will be reduced to 0%.

Impact on Small and Medium Enterprises (SMEs)

Tax and Financial Support:
- Reduced VAT Rates: VAT on sanitary products and medical accessories will be reduced to 0%, which could reduce operating costs for SMEs in the retail sector.
- Extended Reduced Stamp Duty: The 1.5% reduced stamp duty rate for business transfers to descendants is extended, easing generational business continuity.
- Highly Qualified Persons Rules: These rules will now cover back-office service providers, benefiting SMEs in sectors like finance and IT by attracting highly skilled workers.
Access to Financing and Support:
- Increased funding and incentives for industries like aviation, fintech, AI, and other technology-based sectors, aiding SMEs in these fields.
- Ongoing support for start-ups through incentives, including the restoration and acquisition of vacant properties for business purposes.
Energy and Sustainability Incentives:
- Continuation of grants for transitioning to clean energy solutions, including electric vehicles, which SMEs can leverage to reduce operational costs and environmental impact

High angle view of education institutions in Malta — High angle view of Malta's coastline

Sustainability and Environmental Considerations

Clean Transport Incentives: Existing incentives for clean transport will be extended, including grants for the acquisition of electric motor vehicles and motorcycles.
Infrastructure Projects: Continuation of projects such as the second interconnector and zones for offshore floating wind turbines and solar farms.
Public Green Spaces: Plans for more public green spaces and a national water irrigation management plan.
Waste Management: Launch of a new bulky waste regeneration plant and measures to transform organic waste into clean energy and soil additives..

Healthcare Initiatives

Community Health Investments:
- Expansion of community health services, including an emphasis on mental health and long-term care, ensuring broader access to healthcare facilities.
Youth Health Initiatives:
- Free six-month gym memberships for youths born between 2005-2007 to promote healthier lifestyles.
Public Health Infrastructure:
- Continued investment in national healthcare, aiming to improve accessibility and quality across all regions.