The government will cover up to 65% of wage increases for employees in small and medium enterprises (SMEs) as part of a major expansion of the existing MicroInvest scheme, aimed at helping local businesses raise salaries while remaining competitive.

Finance Minister Clyde Caruana announced the measure in Parliament during his presentation of the 2025 Budget, describing it as a way to “reward good employers” who invest in their workforce while easing the cost of wage growth in a tight labour market.

The scheme will apply to salary increases spread over two years, with refunds rising to 80% for Gozo-based companies. Each participating business can claim up to €780 per employee per year, provided the increases reflect genuine, long-term pay adjustments rather than one-off bonuses.

Higher Caps And Broader Eligibility

As part of the reform, the MicroInvest tax credit cap will rise from €45,000 to €65,000 for Malta-based businesses and from €45,000 to €80,000 for those operating in Gozo.

The updated scheme will also favour businesses that invest in digitalisation, training, and innovation, reflecting a shift away from traditional tax credits toward incentives tied to productivity and skills development.

The government said the aim is to make MicroInvest a more “dynamic” tool for supporting wage growth and competitiveness across the SME sector — which employs the majority of Malta’s private-sector workforce.

175% Tax Deduction For R&D And Innovation

The Budget also introduces a 175% tax deduction on expenditure related to research, innovation, and AI projects.

This allows companies to write off 1.75 times the value of qualifying R&D investments against taxable income, encouraging more private-sector research and development in manufacturing, tech, and life sciences.

Officials described the measure as part of Malta’s broader effort to shift toward a knowledge-based, high-value economy, rewarding firms that invest in future-oriented technologies.

Reducing Bureaucracy And Supporting Businesses

Complementing these incentives, the government will move ahead with plans to reduce red tape through a new central data repository linking compliance systems — including KYC and due diligence checks — across departments. The goal is to eliminate repeated document submissions and simplify business administration.

Additional measures include the extension of family business schemes and new mental health support incentives for employers, aimed at helping companies provide assistance to staff without bearing the full cost.