The Council of Ministers approved the government’s tax reform proposal, which has been submitted to Parliament for discussion and voting. The main provisions include the following:
Tax relief measures for individuals
- The tax-free threshold increases from €19,500 to €20,500 and various tax credits are provided for family incomes below €80,000 (or €100,000 for large families).
- The CGT lifetime exemptions bands are increased from €85,430 to €100,000 for private residence disposals, from €25,629 to €30,000 for agricultural property and from €17,086 to €20,000 for any other disposals.
New tax measures for businesses
- The deemed distribution of dividends for profits from January 1, 2026, is abolished.
- The special defence contribution (SDC) on actual dividend distribution is reduced from 17% to 5%.
- The SDC contribution 3% on rental income is abolished.
- Corporate tax rate increases from 12.5% to 15%.
- A reduced 8% tax rate is established for gains from the disposal of crypto assets.
- Loss carry-forward period is extended from five to seven years.
- Additional capital allowance of 20% on capital expenditure incurred during the years 2025 to 2030.
- A transitional period of 5 years for the treatment of gain from the redemption of units in investment funds. As from 2031, such gain will be considered as dividend rather than capital gain.
- A Listing exemption of €300,000 is given for every three-year period to a Company listed on the Stock Exchange for first time.
- Green Transition and Digital Transformation incentives for businesses in the form of super deductions on qualifying expenditures, along with accelerated depreciation benefits.
- Elimination of stamp duty’s horizontal imposition. Stamp duty will only be applied to agreements involving real estate, banking and insurance.
- The threshold for intra-group transactions subject to audit is increased to €2.5 million.
- Strengthening of the existing 60-day rule for non-Dom status.
- Implementation of a framework for intangible assets (IP Box)
Changes following stakeholder consultations
Following consultations with social partners, significant improvements were made to the bills:
- The tax-free amount for voluntary retirement increases from €20,000 to €200,000.
- No property tax or business levy will be introduced at this stage.
- For non-dom companies, the levy is reduced from €250,000 to €50,000 for five years, in order to maintain incentives for foreign investment.
Tackling tax evasion and new audit mechanism
The reform also introduces mechanisms to combat tax evasion, with a more effective and fair process.
Businesses found with irregularities will receive three warnings, and if the issue recurs within 30 days, they may appeal to court, which will decide whether to impose a temporary closure or other sanctions.
Timeline for final vote
The Minister of Finance called on Parliament to approve the reform by the end of 2025 so that it can become effective on January 1, 2026.
The finalization of the above proposals is expected to take place upon their approval by the House of Representatives and their publication in the official gazette.
