E–Commerce tax and VAT
Malta is often chosen as a central base for e-commerce companies as the Malta Tax System offers attractive incentives for online trading companies. We advise e-commerce companies or groups with online business and activities to maximise their E-commerce tax and VAT efficiency and utilise all that the Malta tax system offers.
Trading e-commerce companies resident in Malta or non-resident e-commerce companies carrying on activity in Malta through a branch are subject to the Maltese company tax rate of 35% on profits gained from any commercial activity. A company is resident in Malta if the company is set up in Malta, or if its management and control is exercised in Malta. However, uniquely the Malta tax system allows for a tax refund to the shareholder on any tax charged to the company in the event of a dividend distribution by the company. Maltese legislation allows for a possible 6/7th refund to shareholders on the tax paid for online trading profits and thus bringing the effective tax rate down to a possible 5%.
E commerce tax rules
An important component of e-commerce tax and VAT when setting up an online business is VAT and since 1 January 2015 the rules on telecommunication, broadcasting and electronic services has resulted in a more challenging administrative environment. EU businesses supplying electronic services to consumers within another EU member state are required to charge VAT dependent on the country to where the customer belongs. As an example, if a French individual downloads an app on his phone from a Maltese e-commerce company then French VAT should be charged. This is reported through the Mini One Stop Shop (MOSS).
Since 1st January 2015 it has also been required for Non EU businesses providing electronic services to non business consumers to charge VAT according the country the customer belongs. The Non EU business also has to register in an EU Member state in order to gain a VAT Identification number. A Non EU business providing electronic 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.
E commerce business administration
Whilst there is no doubt that this has increased the e-commerce business administration in order to remain compliant, we can assist clients to reduce this burden with the set-up of effective processes and reporting within the initial planning stages. Having assisted our clients from varying e-commerce backgrounds in many e-commerce tax issues we are able to offer holistic solutions to ensure tax efficiency, whilst making sure the company stays fully compliant in this often complicated area.
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