VAT in Malta
VAT in Malta is applicable to all products and services made in Malta and those imported to the country.
VAT regulation In Malta
Most transactions in Malta are subject to value added tax (VAT). The standard rate for most products and services is 18% but reduced rates are in place for certain economic activities. Most financial services are not subject to VAT and economic activities outside the EU, VAT does not apply.
Malta’s VAT legislation is harmonized with the EUR’s Council Directive after it became a EU member state. VAT in Malta is applicable to all products and services made in Malta and those imported to the country. Taxable goods and services also extend to leasing or hiring and attributing or rendering a right. Malta has a large network of double taxation treaties to avoid double taxation on goods and services.
Registering For VAT In Malta
You are considered taxable if you are performing an economic activity, whatever the scope or result of that activity. You are required to register for VAT in Malta under article 10, but if your annual turnover does not exceed the threshold, you can opt for registering as exempt under article 11.
Documents Required When Registering For VAT
Limited Liability Companies need to present the I.D. card or passport of the authorised representative, vested with a legal representation, together with a copy of the Memorandum and Articles of Association.
Alternatively, a registered practitioner acting on behalf of the company can submit the application as well.
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VAT Registration Types
If your annual turnover exceeds the exempt threshold, you must register for VAT under article 10. This is the most common which makes you liable to charge VAT on your supplies and can claim back VAT incurred for business purposes under certain conditions.
If registered under article 10 you would:
- Have a VAT number with the MT prefix
- Obliged to issue fiscal receipts or tax invoices
- Submit a VAT return for the tax period of 3 months within 6 weeks after the end of the tax period.
If your annual turnover does not exceed the threshold, you may register for VAT as exempt under article 11. You will not charge VAT on your supplies and will neither be able to claim anything back.
You can also register for article 10 in order to be able to claim a deduction of VAT during the initial stages, and later change the registration under article 11, however this can only be done after a period of 36 months.
If registered under article 11 you would:
- Have a VAT identification number without the MT prefix;
- Have to issue fiscal receipts or tax invoices on all supplies made; and
- Submit a simplified VAT return (declaration) at the end of each calendar year, submitted by the end of 15th March the following year.
It is important to note that you are duty bound to inform the Commissioner of Revenue as soon as it becomes evident that you will exceed the threshold, or within 30 days of the occurrence. VAT has to be collected immediately after the change of tax status.
If you are non-taxable or taxable but not registered under article 10, and make inta-community acquisition of goods in Malta where the value exceeds €10,000, then you are liable to register for VAT under article 12. In this case you are liable to pay VAT in Malta each time you make intra-community acquisitions.
If you are registered under article 11 as exempt and intend to make intra-community acquisitions liable for VAT in Malta, you also need to register under article 12 in order to obtain a valid VAT identification number.
VAT Entry And Exit Thresholds
The entry thresholds refer to the amount of turnover per annum under which one could register as exempt under article 11. The threshold depends if you are supplying goods or services with high value added or services with low value added.
The exit threshold is applied when you are registered under article 10 and would change the registration to being exempt under article 11.
Low value-added services are those services where the value of the service includes goods. For example, an electrician or catering services. High value services are those that contain a low value of goods incorporated into the service, for example an accountant or lawyer.
|Economic Activity||Entry Threshold||Exit Threshold|
|Economic activity consisting mainly of supplies of goods||€35,000||€28,000|
|Economic activity consisting mainly of supplies of services with low value added||€24,000||€19,000|
|Other economic activities||€20,000||€17,000|
The turnover of a business is determined by the total value of sales excluding:
- Exempt without credit supplies
- The transfer of a business as a going concern
- The sale of fixed assets
- Supplies made to and by the business under the reverse charge porivisions.
VAT Rates in Malta
The general tax rate in Malta for the supply of goods and services is 18%. However, there are certain goods and services having a reduced rate of 7%, 5% or 0% (exempt with credit).
Supplies taxable at 7%
- Accommodation in a hotel or guest house
- Accommodation in any premises, where for the purpose of that accommodation, it is required that the premises be licensed in terms of the Malta Travel & Tourism Act.
Supplies Taxable at 5%
- Supply of electricity
- Confectionery and other edible items
- Medical Accessories
- Printed Matters
- Certain Items for the exclusive use of the disabled
- Minor repairing of bicycles, shoes and leather goods, clothing and household linen (including mending and alteration)
- Domestic care services such as home help and care of the young, elderly, sick or disabled
- Admission to museums, art exhibitions, concerts and theatres.
Supplies Taxable At 0%
The supplies that are taxed at 0% are also referred to as supplies exempt with credit or supplies exempt without credit. This means that no VAT is charged on the sale of the supplies, but in case of supplies exempt with credit, you are entitled to claim back input VAT incurred on the provision of that supply.
- Food for human consumption
- Pharmaceutical products
- Scheduled bus service (tal-linja)
- Domestic inter-island sea passenger transport
- International passenger transport
- Intra-community supplies of goods
The following supplies are exempt without credit. No VAT is charged on the value of the supply, and no input VAT can be claimed on the VAT incurred in the provision of that supply. In case of providing supplies which are exempt without credit, there is no need to register with the VAT Department.
- Supply of water by a Public Authority
- Supply of buildings and building land
- Supply of Health and Welfare services
- Supply of insurance and financial services
- Letting of immovable property is exempt without credit except in the following situations:
- Letting for the purposes of accommodation in any hotel or guest house or similar establishment or in any holiday camp or camping site (at 7%)
- Letting of accommodation in holiday flats required to be licensed in virtue of the Malta Travel and Tourism Act (at 7%)
- The letting of immovable property by a limited liability company to a registered person for the economic activity of that registered person (at 18%)
VAT Declarations and Returns in Malta
The VAT declaration, also referred to as the VAT return, can be submitted electronically which takes approximately 15 minutes to complete. The process of vetting and processing the VAT return takes maximum 90 days.
The electronic process applying for a VAT return take approximately 20 minutes to complete. The vetting process of the refund takes maximum 4 months.
Malta operates a self-assessment tax system where taxpayers are required to declare their income and calculate tax. This includes taking into account advance payments and other tax credits.
For companies, the deadline is 9 months after the financial year-end (10 months if the tax return is filed electronically). The VAT return must be accompanied by an auditor’s certificate.
Change Of Registration When Changing Ownership
Limited Liability companies can transfer the VAT registration in case of change of directors or shareholders. This has to be done via the Malta Financial Service Authority, whereby the VAT Department will be advised and receive a certified copy of the Memorandum and Articles of Association.
De-registering From VAT
In order to de-register from VAT in Malta, you are required to contact the VAT department. The application to de-register can only be accepted if all returns and payments are up to date.
The Difference Between Input and Output Tax
Input tax is the VAT paid by the business needed to operate the supply of goods or services. Output tax is the VAT charged when the supply of goods or services is taking place.
Input Tax on Services Outside Malta
Input tax incurred on supplies made outside Malta may be claimed back if they had been classified as taxable supplies in Malta. In that case, the tax return would state this amount under the exempt with credit supplies.
If there is no right to claim back the input VAT, the value has to be indicated on the VAT return under exempt without credit supplies.
Refund of Input VAT In Malta
Those registered under article 10, i.e. not VAT exempt, can claim a refund of the output tax total consisting of taxable supplies, exempt with credit and supplies made outside Malta which are classified as taxable in Malta as well.
In case of the economic activity consisting of a mixture between taxable, exempt with credit supplies and exempt without credit supplies, the input VAT has to be apportioned. This can be done by using the direct method or partial attribution. The Commissioner is empowered to decide the percentage of attribution should the methods not provide a fair result.
Blocking Of Input VAT
Under the provisions of legislation, certain input VAT incurred is blocked and cannot be claimed back even when the expenses are incurred in relation to the economic activity.
Also supplies which fall under the exempt without credit and those registered as exempt, are not able to claim input VAT incurred on supplies purchased related to running their business.
The following supplies also fall under the blocking of input VAT and cannot be claimed back even if they are purchased in relation to the economic activity:
- Tobacco or tobacco products, unless purchased for resale
- Alcoholic beverages, unless purchased for resale
- Works of art and antiques, i.e. paintings, drawings and pastels executed by hand, other than hand-painted or hand-decorated manufactured articles; original engravings, prints and lithographs; original sculptures and statuary, in any material; antiques of an age exceeding one hundred years; collections and collectors’ pieces of zoological, botanical, mineralogical, anatomical, historical, archaeological, palaeontological and ethnographic interest, unless purchased for resale
- Motor vehicles, vessels or aircraft, excluding vessels and aircraft acquired for the purpose of being provided under a charter or hire agreement, unless purchased for resale or unless acquired and used for the purpose of the carriage of goods or passengers for a consideration.
- Goods and services for the purpose of repairing, maintaining and keeping motor vehicles, vessels or aircraft and fuel used therein.
- Car leasing by a lessee, including VAT incurred on fuel
- The supply of any goods and services used in the provision of receptions, entertainment or hospitality except where that supply is made in the normal course of an economic activity
- The supply of goods and services used in the provision by a person to his employees of transport or entertainment, except where the transport is provided on vehicles with a seating capacity of not less than seven.
Certain documents and records must be kept on file and you are obliged to keep these for six years in case of the Department requesting an inspection.
- Copies of Fiscal Receipts issued Fiscal cash register FCR Z Readings
- All Customs import/export documentation
- Purchases and Sales Invoices
- Debit and Credit Notes
- Cash Books and Petty Cash Books
- Day Purchases and Sales Ledger
- Value Added Tax Account and Annual VAT Account
- Bank Account connected with the business
- Any other records and documents relevant to your economic activity
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