Tax on reinvested earnings slashed to 25% for companies with under €1 million turnover

The Government has announced a new fiscal framework reducing the corporate tax rate from 35 per cent to 25 per cent for companies generating a turnover of under €1 million.

The newly unveiled measure during Finance Minister Clyde Caruana’s Budget speech for 2027 specifically targets retained or reinvested earnings.

Companies that choose to distribute their profits as dividends will still be subject to the standard 35 per cent tax rate.

According to the Government, the framework’s primary goal is to alleviate the fiscal burden on smaller enterprises, strengthen their resilience, and free up capital for domestic investment.

A reduction in the corporate tax rate has been a long-standing demand from the local business community.

Maltese-owned companies have frequently highlighted a stark competitive disadvantage when going head-to-head with foreign-owned competitors operating within the local market. Under Malta’s tax refund system, foreign shareholders can typically claim refunds that reduce their effective corporate tax rate to just 5 per cent, leaving local businesses bearing a significantly heavier fiscal load.