E–Commerce Tax and VAT

Malta has turned into a hub for E-Commerce companies due to the attractive tax incentives given to online trading companies.

Trading E-Commerce companies are subject to the Maltese company tax rates of 35% on profits gained from any commercial activity. Companies that are set up in Malta and non-resident companies carrying out business in Malta through a branch are subject to this tax.

However, unique to the Malta tax system, Maltese tax laws allow for a tax refund to the shareholder on any tax charged to the company in the event of a dividend distribution by the company. They are effectively allowing for a possible 6/7th tax refund to shareholders on the tax paid for online trading profits. Therefore, this refund brings the effective tax rate down to a potential 5%.

E-Commerce Tax Rules from 1st January 2015

An essential component of E-Commerce Tax and VAT when setting up an online business in Malta is that the change of VAT rules since the 1st January 2015. Certainly, this change has resulted in a more challenging administrative environment.

EU businesses supplying e-services to consumers within another EU country are required to charge VAT dependent on the state to where the customer belongs. For example, if a French individual downloads an app on their phone from a Maltese E-Commerce company, then French VAT should be charged. Companies report this through the Mini One Stop Shop (MOSS).

However, since 1st January 2015, it has also been required for Non-EU businesses providing e-services to consumers to charge VAT according to the country the customer resides. The Non-EU company also has to register in an EU Member state to get a VAT ID number.

A Non-EU business providing e-services to an EU business does not have a requirement to charge VAT but must account for the E-Commerce tax using the reverse charge mechanism.

If your business needs help navigating the complex VAT and Tax laws, contact our specialist team for a consultation.

E-Commerce Business Administration

There is no doubt that the change in laws has increased the business administration to remain compliant. We continually help our clients from differing E-Commerce backgrounds with many tax issues, and we ensure they stay fully compliant in this often over-complicated area.

For more information on setting up an online business in Malta, you may be interested in:

Back to E-Commerce Companies Homepage
E-Commerce Business Administration
Setting Up an Online Business in Malta

Papilio Services

We can utilise our experience in this field, having worked with many E-Commerce companies. We ensure that the process is as simple as possible so that you can focus on what is essential. Growing your business.

For more information on how we can help you, contact us through email enquiries@papilioservices.com or call us directly +356 2122 7553.

We look forward to hearing from you.

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