Tax Rebate on Pension Income Received after 61 years of age

(applicable from basis years 2017 to 2025)

 As announced in the Budget for 2017, L.N. 42 of 2017, Tax Rebate (Pensioners) Rules, 2017,  grants individuals in receipt of pensions chargeable to tax under Article 4(1)(d) of the Income Tax Act, who are at least 61 years of age, a tax rebate on their pension income. The rebate will result in special rate of tax for all pensioners and the benefit in the form of a rebate is dependent on the tax status of the individual (single, parent or married). The amount of tax due should be calculated using the method as shown in the following table.

The rebate is calculated as follows (Year of Assessment 2026, basis year 2025):   

Table 1 – Tax Rebate

All income, excluding any exempt pension income, is first to be charged to tax rates applicable to the person concerned: single rates, parent rates or married rates. The tax rebate will than depend on the tax status of the taxpayer with the rebate than being calculated.

As per S.L. 123.174, Tax Rebate Pension Rules, the tax rebates (deductions) outlined above are subject to the following maximum capped annual deductions:

Table 2 – Maximum Annual Deductions

No refund or balance carry forward is permitted upon application of the above tax rebates. Furthermore, the above rebates apply to both self-employed and employed individuals.

The tax due by the pensioner is therefore the tax calculated using the normal rates, less the rebate calculated as shown above.

 Category (d) highlighted in the above table, available only to those applying the married rate, refers to additional rebates computed on the total income of the married couple, including any other income besides the pension income. The additional rebate will than cover their total income from both pensions and other income in the basis year in question.

​The tax thresholds for pensioners (for single, parent and married tax status) for each basis year are as follows:

Table 3 – Tax Thresholds

*Thresholds applicable to single, parent and married tax status without distinction

It is important to note that EU and other pensioners living in Malta may also benefit from Tax Rebates given to pensioners, as long as these pensioners are subject to tax at the rates prescribed in Article 56(1)(a) and 56(1)(b) of the Income Tax Act, that is, at the single, married or parent rates of tax.

Examples – Tax Rebate on Pensions

The following are examples on the application of the 2021 tax rebate amounts and seeks to illustrate the application of tax rebates (deductions) based pension income and other income, as the case may apply.

1. Single Tax Status

In the case of an individual who is chargeable to tax at the single rates, a tax rebate shall be allowed as a set off against the tax on his chargeable income as follows:

• Taxable Pension Income: €13,000
• Non-taxable threshold: €9,100 (single rate)
• Rebate (deduction) capping (2021 basis year): €744

Computation:

Tax rebate = (pensions income less €9,100) x 15% (rebate capping of €744)

Tax rebate = Pension income €13,000 - €9,100 = €3,900 x 15% = €585.

The tax rebate amounts to €585 can be claimed in full as it is below the maximum capped amount of €744.

2. Parent Rate Status

In the case of an individual who is chargeable to tax at the parent rates a tax rebate shall be allowed as a set-off against the tax on his chargeable income as follows:

• Taxable Pension Income: €13,100
• Non-taxable threshold: €10,500 (parent rate)
• Rebate (deduction) capping (2021 basis year): €534

Computation:

Tax rebate = (pensions income less €10,500) x 15% (with a rebate capping of    €534).  Pension income €13,100 - €10,500 = €2,600 x 15% = €390.

The tax rebate amounts to €390 can be claimed in full as it is below the maximum capped amount of €534.

3. Married Rate Tax Status

In the case of an individual who is chargeable to tax at the married rates a tax rebate shall be allowed as a set-off against the tax on his chargeable income as follows:

• Taxable Pension Income: €13,200
• Non-taxable threshold: €12,700 (married rate)
• Rebate (deduction) capping (2021 basis year): €204

Computation:

Tax rebate = (pensions income less 12,700) x 15% (with a rebate capping of €204)

Pension income €13,200 - €12,700 = €500 x 15% = €75

The tax rebate amounts to €75 can be claimed in full as it is below the maximum capped amount of €204.

4. Married Rate Tax Status with additional Income

If a married taxpayer also earns a further €400 from another source of income over and above their pension an additional tax rebate would be allowed against the tax on his chargeable income as follows:

• Taxable Pension Income: €13,200
• Other Income: €400
• Non-taxable threshold: €12,700 (married rate)
• Rebate (deduction) capping (2021 basis year): €744.

Computation:

Tax rebate = (chargeable income less €12,700) x 15% (with a rebate capping of €204

Chargeable income = (€13,200 + €400) - €12,700 = €900 * 15% = €135

Further Rebate = €135 - €75 = €60

The total tax rebate amounts to €135 (€75 + €60) can be claimed in full as it is less than the maximum capped amount of €744

As from basis year 2026, the tax rebates have ceased to be applicable since the pension income from this year onwards is exempt (see the Tax Exemption on Pension Income page). The one exception is the “further rebate” available to a person on the standard married rates, which remains the same as shown below and is discussed further in the Tax Exemption on Pension Income page.