Indirect taxation such as Value Added Tax or VAT as it is commonly known is increasingly becoming more complex and it is the responsibility of the business to ensure that it is VAT compliant. Transactions of the business must be in accordance with both local Malta VAT laws and legislation as well as EU VAT legislation.
Malta is a full European Union Member State and as such falls under the general provisions of the EU VAT System and the EU VAT Directive. This is transposed into local VAT law within the Malta VAT Act and several subsidiary legislations support it. The Malta VAT Department oversees the implementation of this legislation and as the regulatory authority responsible for VAT in Malta oversees the upholding of VAT within the Maltese islands. The standard rate of VAT in Malta is 18%, with certain services and products entitled to charge a reduced VAT rates in Malta.
If you are a person that is performing an economic activity, then you are usually deemed as a taxable person for VAT purposes. An economic activity is usually deemed as carrying out any trade or business activity but is not limited to this.
Unless the economic activity qualifies for an exemption there is usually a requirement to register for a VAT number in Malta. The Malta VAT Act provides for three types of VAT registration in Malta.
Article 10 of the Malta VAT Act if you are supplying goods or services and your annual turnover is in excess of the exempt threshold. The business would charge VAT on your taxable supplies and the business would have a right to claim back VAT on qualifying business expenditure. Individuals or businesses registered under Article 10 would receive a VAT number from the Malta VAT Department with a prefix MT. The individual or business would have to issue a tax invoice or fiscal receipts for supplies made. The VAT department on acceptance of VAT registration would then require the individual or business to submit a VAT return every three months within 6 weeks of the accounting period closing.
Article 11 of the Malta VAT Act if you are supplying goods or services and your annual turnover is not in excess of the relevant thresholds. The individual or business may register as exempt on the basis is it a small operation and would not charge VAT on its supplies but would also not be able to claim VAT back on qualifying business expenditure. Individuals or businesses registered under Article 11 would receive from the VAT Department a VAT number without the MT prefix, would have to issue tax invoices or fiscal receipts on all supplies and submit to the VAT Department on an annual basis a VAT Declaration.
Article 12 of the Malta VAT Act if you a non-taxable person or a taxable person who is not registered under Article 10 and the individual or business makes intra-community acquisition of goods in Malta with a value over €10,000 in a calendar year. The individual or business is then required to register for VAT with the VAT Department and pay VAT in Malta on each intra community acquisition. The VAT Department will issue a valid VAT number and a declaration is made on an ongoing basis.
In order to ensure that you’re business is compliant with Malta VAT laws, you need to register for VAT. Once it is clear that the individual or business needs to register for VAT in Malta an individual will need to supply a copy of their ID Card or Passport and in the case of a business the same for a Director or Partner of the business. A copy of the Memorandum and Articles of Association should also be provided. A VAT registration needs to be submitted with relevant details of the business and the transactions involved and this is submitted with the VAT Department in Malta. The Malta VAT Department usually issues the VAT number within seven days. If the transaction is more complex or involves transactions crossing international border’s then a meeting can be called to explain the VAT Registration and transactions in more detail before the VAT number is issued.
It is important to note that there are several exemptions from registering and it is also very important to understand the full transaction before the VAT registration process. Additionally, the place of supply for services can be very different then the place of supply for the purchase and movement of goods supplied.
VAT, in general can be quite complex and a business should ensure it is fully compliant with the relevant VAT legislation. Increasingly, VAT Departments in EU Member States trigger VAT Investigations because reporting obligations are not adhered to or for businesses not completing VAT returns correctly. This is even more likely when numerous parties are involved, and a business has customers and suppliers in multiple jurisdictions.
Contact Our Tax Team Regarding Malta VAT laws
If you’re tax planning and looking at becoming more tax effective in Malta or you have questions about the VAT laws in Malta, enquire with our team directly by filling out our short enquiry form below. We will reach out to you for an inital consultation within 24 hours.