Key takeaways
- Malta’s VAT system is based on the EU Directive and administered by the Malta Tax and Customs Administration (formerly the Commissioner for Revenue).
- The standard rate is 18%, and the reduced rates are 12%, 7% and 5%. There is also a 0% rate.
- Businesses in Malta must comply with detailed invoicing, record-keeping, and VAT return submission requirements.
In short: Malta's standard VAT rate is 18%, with reduced rates of 12%, 7% and 5% and a 0% rate for items such as exports. Malta VAT follows the EU VAT Directive. Resident businesses must register above €35,000 in annual turnover, while non-resident businesses must register for Malta VAT regardless of turnover.
Malta is a member state of the European Union, so it follows EU VAT directives. That makes it essential for businesses in Malta to understand how its VAT system works. In this post, we take a closer look at Malta's VAT rates and compliance requirements.
How does Malta's VAT system work?
Malta's VAT system is based on the EU VAT Directive, which sets a common framework so that VAT laws are harmonized across the European Union. The local VAT authority is the Malta Tax and Customs Administration (formerly the Commissioner for Revenue). It runs and collects VAT in Malta and makes sure businesses comply with the Value Added Tax Act of 1998.
Businesses with taxable activities in Malta, like sales, purchases and subcontracting, need a Maltese VAT number. With this number, you can report your VAT transactions, including VAT incurred, and follow local rules.
For foreign companies, Malta applies specific reverse charge rules. These cover intra-community supplies of goods and services from suppliers that are not established or registered in Malta.
What are the VAT rates in Malta?
Malta has a standard VAT rate of 18%, plus reduced rates and a zero rate for specific goods and services:
Standard VAT rate
The standard VAT rate in Malta is 18%. It applies to most goods and services that don't qualify for reduced or zero rates. You can also read VAT Changes and Updates 2024.
Reduced VAT rates
Malta's reduced VAT rates apply to certain types of goods and services. These include:
A 12% rate for certain services, such as the custody and management of securities, short-term hire of pleasure boats and some body care services.
A 7% rate for accommodation services, like hotels and holiday accommodation, as well as sporting facilities.
A 5% rate for specific items, such as medical accessories, items for disabled people, admission to some cultural activities, books (including e-books), and newspapers and periodicals.
Zero rate (0%)
Some goods and services in Malta have a zero VAT rate. These include exports, intra-community supplies, international transport services and prescribed medicines. No VAT is charged, but you must still record these sales and report them in your VAT returns.
Exempt goods and services
Some goods and services in Malta are exempt from VAT without the right to deduct input VAT. These include financial services, insurance and certain types of lease or rental of property.
Who needs to register for VAT in Malta?
Malta's VAT registration rules differ for resident and non-resident companies. For resident companies, the VAT registration threshold is €35,000 a year. Non-resident companies have no VAT registration threshold in Malta, so they must register for VAT whatever their annual turnover.
If you trade across EU borders, there is a distance selling threshold of €10,000.
To register for Malta VAT, use the CFR Registrations Online Services. Complete the VAT registration form and submit it with the supporting documents. The Malta VAT Act has three types of VAT registration: Article 10, Article 11 and Article 12. Each one suits different business needs.
What are Malta's invoicing and record-keeping rules?
Malta VAT invoices must include certain required details and be issued by persons registered for taxable supplies of goods and services. Electronic invoicing is allowed in Malta under the relevant EU Directive. The signature, authenticity and acceptance by the recipient must be ensured. E-invoicing helps you simplify your invoicing and cut paper waste.
You must keep records, including invoices, for at least six years from the end of the year they relate to, or for a period set by the Minister. In some cases, the retention period for transactions in Malta may extend to 10 years. Following these record-keeping rules keeps your documents accurate and helps you comply with Malta's VAT rules.
When are Malta VAT returns due?
Malta VAT returns are due within one month and fifteen days after the end of the relevant VAT period. The VAT period in Malta is quarterly, which makes it easy to track your VAT obligations and prepare your returns. Pay the VAT due by the filing deadline for that VAT return to avoid penalties. We cover this in more detail in Romania VAT Rates and Compliance Explained.
In some cases, a different VAT period may apply. For example, a twelve-month period applies when your sales do not exceed the applicable ‘Exit Threshold’. Alternatively, the Commissioner for Tax and Customs may set monthly VAT periods. This gives flexibility to businesses with different VAT obligations.
How do Intrastat and fiscal representation work in Malta?
Intrastat declarations are mandatory once your intra-community trade passes a set limit. They make sure you report cross-border trade accurately and on time. In Malta, you must submit an Intrastat declaration once the combined annual value of your intra-community arrivals and dispatches reaches €700. The deadline for an Intrastat declaration in Malta is the 10th working day of the month after the declaration period.
In Malta, a taxable person doesn't need fiscal representation, whether it is linked to EU or non-EU companies. This makes VAT compliance simpler for foreign businesses in Malta. It also makes it easier for companies to enter the Maltese market.
How does Malta VAT apply to ecommerce and digital services?
In Malta, the VAT rate for digital services depends on the customer's location, based on their country of residence. Ecommerce and digital services providers must follow VAT rules, including specific registration, invoicing and filing requirements. This keeps things fair for all businesses in the digital space.
Malta enforces VAT compliance for digital services. If you provide digital services to customers in Malta, you must follow these rules. They support transparency and fairness in digital goods and services across the European Union.
Conclusion
Understanding and complying with Malta's VAT system is crucial for businesses in Malta. With different VAT rates and specific compliance rules, you need to stay informed and careful with VAT. Professional advice can also help you comply accurately and on time.
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.
How Taxually handles this
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Frequently asked questions
What is the VAT rate in Malta?
Malta's standard VAT rate 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%, 12%, 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.
