Malta is set to introduce new tax bands at even more favourable rates to encourage parents to have more than one child.

The measure, announced by Finance Minister Clyde Caruana for the 2026 Budget, is intended to tackle the problem of Malta’s low birth rate.

This is how the system will work.

The current rates through which people can benefit from 0% tax on their earnings without children will remain untouched – ie the first €12,000 for the ‘single’ rate and the first €15,000 for the ‘married’ rate (defined as households with one main breadwinner).

However, they will increase substantially for families with children over the next three years as follows.

1. Parents with one child who are on the ‘married’ rate (one breadwinner)

In 2026, they won’t pay tax on the first €17,000 they earn, up from the current €15,000. This will increase to €20,000 in 2027 and €22,500 in 2028.

2. Parents with one child who are on the ‘parent’ rate (two breadwinners)

In 2026, they won’t pay tax on the first €14,500 they earn, up from the current €13,000. This will increase to €16,000 in 2027 and €18,000 in 2028.

3. Parents with two ore more children who are on the ‘married’ rate (one breadwinner).

In 2026, they won’t pay tax on the first €22,500 they earn, up from the current €15,000. This will increase to €30,000 in 2027 and €37,000 in 2028.

4. Parents with two or more children on the ‘parent’ rate (two breadwinners):

In 2026, they won’t pay tax on the first €18,500 they earn, up from the current €13,000. It will increase to €24,000 in 2027 and €30,000 in 2028.

Caruana said that the government is investing around €160 million over the next three years in this scheme, which is intended to incentivise more people to have children and therefore boost Malta’s birth rate, which has long been the lowest in Europe.

Photo: Clyde Caruana