Malta's New 2026 Pension Tax Relief

The Pensions (Tax Exemption) (Amendment) Rules, 2026, issued under the Income Tax Act (Cap. 123), amend the existing Pensions (Tax Exemption) Rules (S.L. 123.204). These rules are to be read together with the principal legislation and are deemed to have come into force on 1 January 2026. Their purpose is to increase the pension tax exemption threshold and introduce a new tax rebate mechanism for certain pensioners.

One of the main amendments is a substantial increase in the pension income exemption under Rule 3. The amount of pension income that qualifies for exemption has been raised from €16,636 to €37,104, significantly expanding the portion of pension income that may be received tax-free.

The amendment also introduces a new Rule 4, which provides for a tax rebate applicable from the Year of Assessment 2027 onwards. This rebate applies to individuals who benefit from the pension exemption and are taxed at the standard individual income tax rates under article 56(1)(a)(i) of the Act.

Key points of the amendment include:

• The exemption threshold for pension income increases to €37,104.
• A new tax rebate is introduced for eligible individuals.
• The rebate is calculated as:
  • (Chargeable income – €15,000) × 15%
• The rebate is capped at €540.
• Any negative result from the formula is ignored.
• The rebate cannot:
  • Result in a tax refund, or
  • Be carried forward to future years.

Overall, the amendment strengthens tax relief for pensioners by both widening the tax exemption on pension income and introducing a capped rebate that further reduces tax payable, while ensuring the relief remains non-refundable and limited in scope.