On 27th October, Finance Minister Clyde Caruana delivered the Budget 2026 speech, outlining a robust fiscal strategy designed to fortify Malta’s position as a premier jurisdiction for technology and innovation.
Despite global geopolitical headwinds, Malta’s economy continues to demonstrate exceptional resilience. The country recorded the highest economic growth within the EU, with real GDP increasing by 3.1% in the first half of 2025. Current projections indicate the Maltese economy will expand by 4.1% in real terms throughout 2025—a rate three times higher than the EU average.
For international investors and local enterprises alike, the 2026 Budget transforms this economic stability into tangible opportunity through aggressive new tax incentives.
Key Tax Incentives for the Digital Economy
To accelerate Malta’s transition into a digital powerhouse, the government has introduced significant business support measures. The headline announcement is a massive boost for Research & Innovation (R&I).
| Incentive Type | The Benefit | Eligible Activity |
| R&D Super-Deduction | 175% Tax Deduction | Expenditures on eligible Research & Innovation projects. |
| Digital Acceleration | 2-Year Write-off | Accelerated depreciation for investments in AI, digitalisation, automation, and cybersecurity. |
| Capital Investment | 60% Tax Credit | Investments in machinery, tools, software, and IT equipment (claimed over 4 years). |
Additionally, the government has committed a further €100 million specifically to accelerate the adoption of emerging technologies, including Artificial Intelligence (AI), Virtual Reality (VR), Augmented Reality (AR), and Blockchain.
Strengthening SME Support
The Micro Invest Scheme, a cornerstone of support for smaller enterprises, sees substantial enhancements this year:
- Increased Tax Credits: The maximum tax credit cap has been raised to €65,000, covering up to 65% of eligible costs.
- Gozo Bonus: Enterprises based in Gozo retain their additional 20% bonus, raising the total potential aid to a maximum of €85,000.
New Talent Retention Mechanism
Recognising that human capital is as vital as technology, the Budget introduces a novel mechanism to support staff retention.
- Salary Support: For employees with over four years of tenure at the same company, the government will cover 65% of any salary increase for two years, capped at €780/year.
- Gozo Uplift: For Gozo-based companies, this support increases to 80%, capped at €960/year.
How ARQ Can Help
Navigating the specific eligibility definitions for “Research & Innovation” or maximising your claim under the Micro Invest Scheme requires precise structuring. ARQ Group supports both local businesses and international investors in optimising their tax setup to fully leverage these new incentives.
Contact ARQ’s Tax Advisory Team to assess your eligibility for the 2026 incentives.
