Updates to the Pensions Rules and Tax Rebate Rules 2025

Legal Notice 356 of 2024, published on 24 December 2024, updates the maximum amount of pension income which may be exempt as from year of assessment 2026 onwards as indicated in the Pensions (Tax Exemption) Rules, originally introduced in 2022.

The updated amounts are applicable on pension income derived on, or after 1 January 2025, by an individual, who is at least sixty-one (61) years old in the year in which the pension income is received, and the pension income, were it not for these exemptions, is taxable in terms of Article 4(1)(d) of the Income Tax Act (the ITA). The amounts are as follows:

Applicability of the exemption	Amount exempt
Pension income derived in the year immediately preceding the year of assessment 2023	Twenty per cent (20%), but not exceeding two thousand, eight hundred and sixty-four euro (€2,864)
Pension income derived in the year immediately preceding the year of assessment 2024	Forty per cent (40%), but not exceeding five thousand, nine hundred and eighty-seven euro (€5,987)
Pension income derived in the year immediately preceding the year of assessment 2025	Sixty per cent (60%), but not exceeding nine thousand, seven hundred and thirty-two euro (€9,732)
Pension income derived in the year immediately preceding the year of assessment 2026	Eighty per cent (80%), but not exceeding thirteen thousand, three hundred and nine euro (€13,309).
Pension income derived in the year immediately preceding the year of assessment 2027 and in subsequent years	One hundred per cent (100%), but not exceeding sixteen thousand, six hundred and thirty-six euro (€16,636).

The Tax Rebate (Pensioners) Rules have also been amended through Legal Notice 357 of 2024. These are applicable to individuals who satisfy the same condition with respect to age as that which must be met for the exemption and are also in receipt of a pension chargeable to tax under Article 4(1)(d) of the ITA. Through this change, the maximum tax rebates allowed to be set-off against the tax on the chargeable income is as per below, as from 1 January 2025:

Tax Rates used to assess the amount of tax due	Maximum amount of Tax Rebate
An individual who is chargeable to tax at the single tax rates [i.e. Article 56(1)(b) of the ITA, excluding the provisos thereto]	€696
An individual who is chargeable to tax at the parent tax rates [i.e. Second proviso to Article 56(1)(b) of the ITA]	€546
An individual who is chargeable to tax at the married tax rates [i.e. Article 56(1)(a) of the ITA] Further tax rebate	€246 €540