Malta Budget 2027 proposes SME corporate-tax and VAT reforms

A conditional 25% company-tax framework

The proposed framework would reduce the rate from 35% to 25% for companies whose turnover does not exceed €1 million, but only for profits retained or reinvested in the business. Distributed profits would remain subject to the 35% rate. The speech says conditions and limitations will be set in related rules and aligned with Malta's existing corporate-tax system. It does not yet define turnover, anti-fragmentation rules or commencement. The current Income Tax Act charges companies at 35% under article 56(6), so the Budget announcement does not itself change the operative rate.^[1][2]

Construction VAT would move to the customer

For construction transactions brought within a new mechanism, the VAT obligation would move from the supplier to the purchasing business. The customer would calculate and declare the tax and could deduct the same amount where eligible, rather than paying VAT to the supplier. The stated objective is to reduce fraud involving VAT collected but not remitted and false invoices used to claim refunds. The speech does not specify the covered transaction classes, the amending provision or the start date, so businesses cannot yet apply the mechanism from the announcement alone.^[1][3]

Receipt penalties and food guidance

The Government also proposes escalating administrative penalties for failures to issue correct VAT invoices or fiscal receipts: €100 for the first failure, €200 for the second, €400 for the third and €500 for the fourth and each later failure within 24 months. Payment within 30 days would extinguish the criminal liability connected with the covered failure, while the breach would feed into tax-and-customs risk scoring. Planned guidance would also clarify the boundary between exempt food and catering for ready-to-eat products sold by supermarkets and similar shops. The current VAT Act exempts food for human consumption but excludes food supplied in catering.^[1][3]

Property and sector measures remain proposals

A prospective property framework would require fuller disclosure of consideration for transfers of development rights or 'air', strengthen valuation and tax transactions according to economic substance, including arrangements involving intermediaries not named in the deed. The wider package also raises tourism accommodation contributions from 1 January 2027 and proposes cruise, Comino, work-permit, transport and vessel charges. Those sector measures have differing scope and timing. The corporate and VAT reforms still require implementing legislation, rules or guidance; groups should therefore map affected transactions and monitor the operative texts rather than treat the speech as enacted law.^[1]