Chamber of SMEs proposes 25% corporate tax rate, scheme for public to invest in businesses

The Malta Chamber of SMEs has officially released its strategic priority document for the upcoming 2026 General Election, titled “SMEs at the Centre”.

The SME Chamber is calling on all political parties to adopt a “Think Small First” approach “to ensure long-term economic resilience and fairness.”

While the country’s economy grew, the SME Barometer clearly shows that economic success alone is no longer sufficient, the chamber added. Its President, Paul Abela said: “The next phase must be built on sustainability, productivity, and an improved quality of life for all, including the business owners who form the backbone of our economy.”

Included in its proposals are suggestions for tax changes.

The Chamber of SMEs is calling for a reduction in the corporate tax rate from 35 per cent to 25 per cent across the board.

It is also calling for a 15 per cent deferred tax rate for SMEs that reinvest their profits. For the deferred tax rate, the company must also be tax compliant.

Another point the Chamber calls for is the removal of excise duty (SISA). “Malta Chamber of SMEs has long advocated against the introduction of SISA on certain product (non-Harmonised Goods) specifically, Toiletries, Cosmetics, Personal Care, Certain Food & Beverages. This further creates an un-level playing field as it is difficult to enforce. SISA is an unfair hidden tax,” it said.

The Chamber is also calling for the complete exemption of taxes and document duties on business transfers between family members.

Among other points, it suggests that National Insurance contributions should become tax deductible.

VAT system

One of the proposals made by the Chamber of SMEs involves a change to the VAT system.

“The current VAT system requires businesses to pay VAT on purchases and then reclaim it later, creating cash flow challenges and administrative burdens. This conventional approach can hinder business operations, particularly for small and medium sized enterprises (SMEs), and often results in delays and complexities for both businesses and tax authorities,” it said.

It is suggesting that a domestic reverse charge mechanism be introduced for B2B transactions among local VAT registered entities, resulting in no VAT being charged and subsequently no VAT being claimed.

Business Investment Scheme

With resident deposits reaching €27.4 billion, the SME Chamber said, it is proposing the creation of a Business Investment Scheme. “This would incentivise the general public to lend to local SMEs, turning passive savings into productive investment for the local economy.”

Under this scheme, the SME Chamber proposes that SMEs of good standing that are established and operational in Malta; can borrow up to €250,000 (combined), and that the lender (the public) can grant one or more micro loans up to a maximum of €50,000 per year up to a total of €250,000 across all loans. It indicates that there should be a minimum interest between 2.25 per cent and 4.50 per cent.

The Government incentive for this, it proposes, would be that the lender would benefit from an annual tax credit of 4 per cent for the first three years and then 2.5 per cent for the remaining years (Up to 8 years), and that the lender can benefit from a one-off tax credit of 50 per cent on the definitively lost principal, for example in the event of bankruptcy. This tax credit would increase to 60 per cent if the borrower is a business that focuses its activity on digital or green initiatives.

The SME Chamber also has proposals regarding the labour shortage.

It proposes the establishment of a dedicated one-stop-shop for SMEs to recruit Third Country Nationals (TCNs). “This service would guide businesses through the entire process from initial application to final approval; ensuring clarity, efficiency, and compliance.”

The SME Chamber is also advocating for a strategic transition to a less labour-intensive model.

Skills

One of the chamber’s proposals is for the next Government to set up a task force related to the skilling of workers.

This taskforce would be tasked with developing a bipartisan vision for the future of work, ensuring that all perspectives are considered, and that comprehensive, forward-looking solutions are crafted to navigate the complexities of digital transformation effectively.

In addition, it said that the aspect of financial literacy and how this can be integrated in the education system together with work based learning, should also be looked into.

This task force would “design frameworks for large-scale reskilling and upskilling initiatives, particularly targeting sectors that are likely at risk.”

It also calls for the launch of Individual Learning Accounts aimed at incentivising individuals to up-skill and re-skill.

Other proposals include the introduction of a Mandatory SME Test for all future legislation, and removing audit requirements for micro-businesses with a turnover under €250,000.

The Chamber also issued proposals specifically for Gozo, which include the setting up of a logistics hub, extending the Mġarr Harbour and promoting economic diversification.

Regarding the proposals that have been made by the political parties so far, the SME Chamber called on them to exercise caution in regards to the increasing number of promises being announced “without any form of prior consultation with social partners, and which would directly impact employers and businesses.”

It said it is concerned that several of the proposals parties made do little to enhance productivity and address the labour shortage.