Malta 2026 Tax Changes: VAT, R&D & Excise Updates

March 25, 2026

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On March 16, 2026, Malta enacted the 2026 budgetary measures, effective retroactively from January 1, 2026, which brought wide-ranging reforms across taxation, environmental levies, and compliance rules. Some of the most notable changes include introducing the R&D deduction, overhauling personal income tax brackets, and, importantly, amending VAT rules on related-party transactions and adjusting excise duties.

Changes to VAT and Excise Duty Rules

Apart from introducing a substantial 175% deduction for research, development, and innovation spending, the 2026 Budget Measure tightened VAT rules for related-party transactions, allowing the Tax Authority to adjust values that are not at open market rates. Furthermore, starting January 1, 2027, online marketplaces supplying goods within the EU will be treated as the supplier for VAT purposes, increasing their collection responsibilities.

Concerning the excise duty adjustments, from April 1, 2026, ethyl alcohol will be taxed at a flat rate of EUR 0.136 per % vol. per litre, while strict definitions for smokeless tobacco and nicotine pouches ensure these products are fully covered. The measures also clarify that individuals importing low-value non-harmonised excisable goods via post or courier are exempt if the value does not exceed EUR 150.

Additionally, the Budget Measures strengthen customs enforcement by granting officials broader powers to request information, with non-compliance carrying penalties ranging from EUR 250 to EUR 2,500 and possible imprisonment of up to three years. At the same time, the government introduced environmental restrictions on high-emission M1 vehicles, limiting their use to Friday evenings and weekends or public holidays, signaling a push to reduce emissions and promote more sustainable transport.

Conclusion

Malta's governments introduced several tax measures, changing the tax rules across multiple fronts while targeting high-emission vehicles and raising the eco-contribution on tourist accommodation. Taken together, updated rules enhance regulatory oversight and support long-term economic resilience while remaining attractive to forward-looking businesses.

Source: Government Gazette of Malta - Budget Measures Implementation Act, 2026

What are the key tax changes in Malta’s 2026 budget?

Malta’s 2026 budget introduces major tax reforms, including a 175% deduction for research and development spending, updated personal income tax brackets, and stricter VAT rules for related-party transactions. It also includes changes to excise duties and enhanced compliance measures.

How have VAT rules changed for related-party transactions?

The new rules allow the Tax Authority to adjust transaction values between related parties if they are not aligned with open market rates, ensuring fair taxation and preventing underreporting.

What is the new VAT treatment for online marketplaces?

Starting January 1, 2027, online marketplaces supplying goods within the EU will be treated as the supplier for VAT purposes, meaning they will be responsible for collecting and remitting VAT.

What changes were made to excise duties in Malta’s 2026 budget?

Excise duties on ethyl alcohol are set at a flat rate of EUR 0.136 per % vol. per litre from April 1, 2026. The rules also expand definitions to include smokeless tobacco and nicotine pouches under excise regulations.

Are there any exemptions for low-value imports?

Yes, individuals importing low-value non-harmonised excisable goods via post or courier are exempt from excise duties if the value does not exceed EUR 150.

What compliance and environmental measures were introduced?

The budget strengthens customs enforcement by allowing authorities to request more information, with penalties for non-compliance. It also restricts the use of high-emission vehicles and increases environmental contributions to promote sustainability.

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