The 2025 Budget Measures Implementation Act: Key Changes and Implications

The Budget Measures Implementation Act, 2025, enacted through ACT No. IX of 2025 and published in the Government Gazette on April 17, 2025, introduces significant amendments to various Acts. This article highlights the salient changes to the Income Tax Act, the Income Tax Management Act, and the Duty on Documents and Transfers Act.

Income Tax Act (ITA)

1. Property Transfers Tax Exemption:
   • Article 5A(4)(c): Excludes property transfers tax if the property has been owned and occupied by the transferor as their residence for at least three consecutive years preceding the transfer date and is disposed of within twelve months of vacating the premises.
   • New Paragraph: In cases of divorce or separation, the property is considered vacant only when both spouses cease to occupy the premises.
2. Capital Expenditure Deduction:
   • Article 14(1)(m): Will be amended to introduce a deduction for capital expenditure incurred from January 1, 2025, onwards for acquiring a business permit, concession, or commercial lease used in income production. Specific conditions apply.
3. Independent School Fees Deduction:
   • Article 14B: Increases the deduction thresholds for independent school fees:
     • Kindergarten: From €1,600 to €3,500
     • Primary School: From €1,900 to €4,600
     • Secondary School: From €2,600 to €6,500
   • Applicable from the year of assessment 2026 (basis year 2025).
4. Elective Tax:
   • Article 22B: This Article will allow the Minister Responsible for Finance to introduce regulations for an elective tax higher than the established rate on Malta entities’ profits.
5. Resident Tax Rates:
   • Article 56: Updates resident married, single, and parent tax rates for the year of assessment 2026 (basis year 2025). Details are available on the Malta Tax and Customs Administration’s website by clicking on this link.
6. Endangered Tax:
   • Item 1 of the Schedule: – Endangered tax is defined as the difference between tax declared as chargeable by the taxpayer after taking into account any reliefs, allowances, exemptions, or tax credits which he may be entitled to and tax actually chargeable after considering the same deductions, but shall not include additional tax.
   • New Proviso: Where the Commissioner for Taxes and Customs is satisfied that the tax actually chargeable or part of it has been based under the Final Settlement System, the amount paid shall not be regarded as endangered tax.

Income Tax Management Act (ITMA)

1. Penalties for Incorrect Returns:
   • Article 51: Imposes penalties ranging from €58 to €465 plus double the tax undercharged for incorrect returns or information affecting tax liability.
   • New Amendment: Extends penalties to those who fail to furnish required returns.

Duty on Documents and Transfers Act (DDTA)

1. Professional Secrecy:
   • Article 19(6): Requires adherence to professional secrecy for every person having an official duty or being employed in the administration of the DDTA. The Article includes fines for breaches.
   • New Amendment: With the amendment to the DDTA, the part ‘for any relevant offence’ will now have an additional part and will read ‘for any relevant offence, or during any judicial or quasi-judicial proceedings when ordered by a court or tribunal to disclose information.’

Conclusion

The 2025 Budget Measures Implementation Act introduces comprehensive changes aimed at enhancing tax compliance, providing clearer guidelines, and offering new deductions and exemptions. These amendments reflect the government’s commitment to modernizing the tax system and ensuring fairness and transparency.