Updates to the VAT Act – SME Scheme

Significant changes to the VAT Act were enacted by Act XXXVIII of 2024, which was passed on December 17, 2024, to bring it into compliance with the EU VAT Directive (Dir 2006/112/EC), as amended by Directive 2020/285. These changes were particularly pertinent with regard to the special scheme for small and medium-sized companies. The key aspects are as follows:

Supplementary Legal Notices

Multiple Legal Notices (345 to 353 of 2024) have been issued to amend various schedules of the VAT Act. These updates are intended to facilitate the smooth implementation of the new rules.

Expansion of Scope for SMEs

The updated rules broaden the definition of ‘Small Enterprises’ (referred to as Small Undertakings under Article 11 of the VAT Act). Businesses registered under this scheme can now opt for special treatment for:

– Domestic supplies within Malta.

– Intra-EU supplies made to other EU Member States.

However, eligibility is contingent on not exceeding certain financial thresholds specified by the Act.

Alignment with EU Standards

The amendments aim to simplify VAT compliance processes for small businesses and to reduce the administrative burden for SMEs operating both domestically and in cross-border transactions within the EU. These updates reflect Malta’s commitment to aligning its tax regulations with broader EU policies, ensuring a consistent approach to VAT compliance for small enterprises across the EU and represent a significant step toward making the VAT system more accessible and manageable for small and medium-sized businesses. The expanded eligibility and simplified procedures are expected to enhance cross-border trade while reducing compliance challenges for SMEs.

For further clarity, businesses are advised to review the complete legislative texts and legal notices or to seek professional guidance tailored to their individual circumstances. Please contact us so we can arrange a consultation to better understand your situation. This will enable us to provide you with more effective advice on VAT matters.