Understanding COLA in Malta 2026: Cost of Living Adjustment Guide
COLA is a crucial component of every salary in Malta. Learn what it is, how it's calculated, and how much you'll receive in 2026.
1. What is COLA?
COLA (Cost of Living Adjustment) is a mandatory annual allowance that all employers in Malta must pay to their employees. It's designed to help workers keep up with inflation and maintain their purchasing power.
Key characteristics of COLA:
- Universal - Every employee receives it, regardless of salary level
- Flat rate - The same amount for everyone (not percentage-based)
- Annual increase - Adjusted each year based on inflation
- Tax-free - Not subject to income tax
- Cumulative - Each year's COLA is added to the previous total
2. COLA Rates for 2026
For 2026, the COLA increase is €10.36 per week, which translates to approximately €538.72 per year. This is added to the cumulative COLA from previous years.
3. How is COLA Calculated?
COLA is calculated by the government based on the Retail Price Index (RPI), which measures the change in prices of goods and services consumed by households.
The formula considers:
- The 12-month average of the RPI
- Comparison with the previous year's RPI
- Conversion to a weekly monetary value
This ensures COLA reflects actual inflation experienced by consumers in Malta.
4. COLA History (2020-2026)
Here's how COLA has increased over recent years:
| Year | Weekly Increase | Annual Increase | Context |
|---|---|---|---|
| 2020 | €1.75 | €91.00 | Pre-pandemic levels |
| 2021 | €1.75 | €91.00 | COVID-19 impact |
| 2022 | €1.75 | €91.00 | Government price caps |
| 2023 | €9.90 | €514.80 | High inflation year |
| 2024 | €5.84 | €303.68 | Continued adjustments |
| 2025 | €5.24 | €272.48 | Stabilizing inflation |
| 2026 | €10.36 | €538.72 | Current year |
5. Tax Treatment of COLA
One of the key benefits of COLA is that it is completely tax-free. This means:
- COLA is not subject to income tax
- It does not count toward your taxable income
- You receive the full COLA amount without any deductions
✅ Tax-Free Benefit: Your €538.72 annual COLA for 2026 is yours to keep in full — it's not taxed and doesn't push you into a higher tax bracket.
6. Impact on Your Salary
COLA is typically included in your total salary package. Here's an example:
Example: Employee with €25,000 base salary
- • Base salary: €25,000
- • COLA 2026: €538.72
- • Total gross: €25,538.72
- Taxable portion: €25,000 (COLA is tax-free)
This means you benefit from the full COLA amount without it increasing your tax liability.
See COLA in Your Salary Breakdown
Our Malta Salary Calculator shows exactly how COLA affects your net salary, with a detailed breakdown of all components.
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