Malta VAT Rates and Compliance Explained
Malta, a member state of the European Union, adheres to EU VAT directives, making it essential for businesses within Malta to understand the intricacies of its VAT system. In this post, we'll take a closer look at Malta's VAT rates and compliance requirements.
- Malta’s VAT system is based on the EU Directive and administered by the Commissioner for Revenue.
- The standard rate is 18%, and the reduced rates are 7% and 5%. There is also a 0% rate.
- Businesses in Malta must comply with detailed invoicing, record-keeping, and VAT return submission requirements.
Malta's VAT system at a glance
Malta’s VAT system is founded on the EU VAT Directive, which provides a framework for all member states to follow, ensuring harmonization in VAT laws across the European Union. The local VAT authority, the Commissioner for Revenue, is responsible for the administration and collection of VAT in Malta, ensuring businesses comply with the Value Added Tax Act introduced in 1969.
Businesses conducting taxable activities like sales, purchases, and subcontracting operations within Malta need a Maltese VAT number. This number enables businesses to report their VAT transactions, including VAT incurred, and comply with local regulations.
For foreign companies, Malta implements specific reverse charge regulations applicable to intra-community supplies of goods and services from suppliers or providers not established or registered in the country.
VAT rates in Malta
Malta offers various VAT rates, including a standard rate and reduced rates for specific goods and services:
Standard VAT rate
The standard rate in Malta is 18%. This rate applies to most goods and services not specifically designated for reduced or zero rates.
Reduced VAT rates
Malta provides reduced VAT rates for certain categories of goods and services. These include:
A 7% rate for accommodation services, like hotels and holiday accommodations, as well as sporting facilities.
A 5% rate applies to specific items, such as medical accessories, items for the disabled, admission to cultural some activities, books (including e-books), and newspapers and periodicals.
Zero rate (0%)
Certain goods and services in Malta are subject to a zero VAT rate. This includes exports, intra-community supplies, international transport services, and prescribed medicines. Although no VAT is charged, businesses must still record these transactions and report them in their VAT returns.
Exempt goods and services
Some goods and services in Malta are exempt from VAT without the right to deduct input VAT. This includes financial services, insurance, and certain types of lease or rental of immovable property.
VAT registration requirements
VAT registration requirements in Malta differ for resident and non-resident companies. For resident companies, the VAT registration threshold is set at 35,000 Euros per annum for goods and €30,000 for services. In contrast, non-resident companies don’t have a VAT registration threshold in Malta, hence they must register for VAT, regardless of their annual turnover.
For those engaged in EU cross-border trade, the there is a distance selling threshold in place of €10,000.
To register for VAT, companies should utilize the CFR Registrations Online Services, complete the VAT registration form, and submit it with the necessary supporting documentation. The Malta VAT Act provides for three types of VAT registration: Article 10, Article 11, and Article 12, which cater to various business needs and requirements.
Invoicing and record-keeping
Invoices in Malta must contain certain disclosure details and be issued by persons registered for taxable supplies of goods and services. Electronic invoicing is permissible in Malta, in accordance with the relevant EU Directive, as long as the requisite signature, authenticity, and acceptance by the recipient are ensured. This allows businesses to streamline their invoicing processes and reduce paper waste.
Records, including invoices, must be retained for a minimum of six years from the end of the year to which they relate, or a period prescribed by the Minister. In some cases, the retention period for transactions conducted in Malta may extend to 10 years. Adhering to these record-keeping requirements ensures businesses maintain accurate documentation and comply with Malta’s VAT regulations.
VAT return deadlines and submission
In Malta, VAT returns should be submitted within a month and fifteen days after the end of the relevant VAT period. The VAT period in Malta is quarterly, making it easy for businesses to track their VAT obligations and prepare their returns. The VAT due must be paid by the filing deadline for the relevant VAT return to avoid penalties and ensure compliance.
In certain scenarios, exceptions to the standard VAT period may apply. For example, a twelve-month period applies when the value of sales made does not exceed the applicable ‘Exit Threshold’. Alternatively, monthly VAT periods may be applied at the discretion of the Commissioner for Revenue, providing flexibility for businesses with varying VAT obligations.
Navigating Intrastat and fiscal representation
Intrastat declarations are mandatory when intra-community supplies transaction limits are exceeded, ensuring that businesses report their cross-border trade accurately and in a timely manner. In Malta, intra-community transactions exceeding €700 per return require the submission of an Intrastat declaration. The cut-off date for submitting an Intrastat declaration in Malta is the 10th working day of the month following the declaration period.
In Malta, a taxable person, irrespective of their affiliation with non-EU or EU companies, doesn’t require fiscal representation. This simplifies the VAT compliance process for foreign businesses operating in Malta, making it more accessible and straightforward for companies to enter the Maltese market.
Ecommerce and digital services VAT compliance
In Malta, the customer’s location determines the VAT rate for digital services, applying the appropriate rate based on their country of residence. Ecommerce and digital services providers must comply with VAT regulations, including specific registration, invoicing, and filing requirements. This ensures a level playing field for all businesses operating within the digital space.
Since December 1, 2016, VAT compliance for digital services has been enforced in Malta. Businesses providing digital services to customers in Malta are now required to adhere to these regulations, promoting transparency and fairness in the provision of digital goods and services across the European Union.
Understanding and complying with Malta's VAT system is crucial for businesses operating within the country. With different VAT rates and specific compliance requirements, it's essential to stay informed and diligent in VAT matters. Seeking professional advice can also be beneficial to ensure accurate and timely compliance.
Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.
Frequently Asked Questions
What is the VAT rate in Malta 2023?
Malta's standard VAT rate for 2023 is 18%, one of the lowest among EU member states.
Is Malta in the EU for VAT?
Yes, Malta is in the EU for VAT and is obliged to implement the VAT directives set by the European Union, which provides guidance on VAT registration, returns, and compliance. Malta introduced Value Added Tax in 1995.
Do you have to pay VAT in Malta?
Yes, VAT is required to be paid in Malta at either 18%, 7% or 5% depending on the type of goods or services provided.
What is the difference between zero-rated and exempt goods and services in Malta?
Zero-rated goods and services in Malta are subject to a VAT rate of 0%, whereas exempt supplies are not subject to any VAT.