Value-Added Tax (VAT)

In principle, a taxable person who carries out supplies of goods or services for a consideration in Malta is required to register for VAT purposes in Malta. A taxable person means any person, physical or corporate, who independently carries out any economic activity. An economic activity is any activity of producers, traders or persons supplying services and includes also the activities of the professions, the exploitation of tangible and intangible property for the purpose of obtaining income therefrom on a continuing basis as well as the admission of persons in any place for a consideration.

As a rule, businesses that only carry out exempt without credit supplies (such as insurance and financial services, medical care and education) or holding companies which merely hold shares in their subsidiaries are not generally required to register for VAT purposes.

A business that is not established in Malta is deemed to be a non-established taxable person and shall be required to register for VAT if he makes taxable supplies for consideration to non-taxable persons in Malta. However, if the supplies are made to a VAT registered taxable person established in Malta, then the non-established taxable person is not required to register for VAT in Malta.

In Malta we have three types of VAT registrations:

1. Article 10 Registration – Standard VAT registration
2. Article 11 Registration – Small and Medium Enterprises established in Malta carrying out supplies in Malta
3. Article 11A Registration – Small and Medium Enterprises established in Malta carrying out cross-border supplies in other Member States
4. Article 11B Registration – Small and Medium Enterprises established in a Member States carrying out supplies in Malta.
5. Article 12 Registration – For taxable persons suppling exempt (without credit) supplies, but would be registered under this article if, they have an obligation to pay VAT in Malta.

Article 10 VAT Registration

Who is obliged to be registered under this Article?

1. If you are a taxable person established in Malta and you are supplying goods or services (in Malta) which are not treated as exempt without credit and you are not registered under Article 11, then you are obliged to be registered under this article, within thirty (30) days of your first supply.
2. If you are a taxable person established in Malta, rendering general services to another VAT registered customer established in another Member State for which VAT is payable by the Customer (via the reverse charge mechanism), then you are obliged to be registered under this Article.
3. If you are a taxable person not established in Malta and you are supplying goods or services taking place in Malta and you are the person responsible to charge and collect Maltese VAT, then you are obliged to be registered in Malta by not later than thirty (30) days from the date of that supply.
4. If you are a taxable person established in Malta and you are requested by the Commissioner for Tax and Customs to register under this Article, you shall apply to be registered within thirty (30) days from the date on which he is served with a notice of containing such request.

What if I am in the process of setting up a business and I not carrying on any activity at the moment, do I need to be registered for VAT?

If you have an intention to carry out a taxable economic activity, then you have the option to register for VAT under in terms of Article 10(5) of the Malta VAT Act.

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Article 11 VAT Registration

Who qualifies as a small and medium enterprise?

If you are registered in Malta and you are not registered under Article 10, insofar as your Domestic annual turnover during the preceding year, if any, is not more than the Domestic threshold of €35,000, you qualify as a small and medium enterprise.

If you are a taxable person and you qualify as a small and medium enterprise, are you obliged to be registered under Article 11?

No. You still can opt to be registered for VAT under Article 10 of the Malta VAT Act.

‍What are the benefits of being registered under Article 11?

If you qualify as a small and medium enterprise and you apply to be registered under Article 11, the taxable person will not charge any VAT on his supplies, however, he will not have a right to deduct input VAT.

On the other hand, the taxable person would only have limited compliance obligations, such as submitting one declaration per year, contrary to the obligation of submitting quarterly VAT returns where registered under Article 10. Possibly, should the taxable person not exceed the €7,000 turnover in a calendar year, he would not be obliged to submit any declarations. However, once the €7,000 threshold is exceeded, the Commissioner for Tax and Customs needs to be informed accordingly, so as to start submitting an online declaration.

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Article 11A VAT Registration

Who may apply to be registered under Article 11A?

A taxable person who is established in Malta, who makes supplies of goods and services within the territory of another Member State and who intends to avail of the exemption in terms of the special scheme for small enterprises applicable in the respective Member State in which the supplies are made in accordance with Chapter 1 of Title XII of Council Directive 2006/112/E may apply to the Commissioner to be registered under this article,.

What are the conditions to be registered under Article 11A?

• The taxable person qualifies as a small enterprise at the time of application
• The taxable person’s Union annual turnover during the preceding calendar year is less than €100,000
• The taxable person makes supplies in at least one Member State in which he is not established, where is eligible to avail himself of the special scheme for small enterprises
• The value of supplies made in the preceding calendar year, in the Member State referred to above, does not exceed the threshold applicable in the Member State granting the exemption.

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‍Article 11B VAT Registration

Who may apply to be registered under Article 11B?

Article 11B registration is available for taxable persons established in another Member State. This VAT registration enables taxable persons established in other Member States to avail themselves of the SME scheme in Malta in respect of supplies of goods or services they make in Malta.

Article 12 VAT Registration

Who is obliged to be registered under Article 12?

In principle, a taxable person supplying exempt (without credit) supplies is not obliged to be VAT registered in Malta. However, in case the same taxable person receives services for which he is the person liable to account for VAT in Malta (via the reverse charge mechanism), then he is obliged to register for VAT under Article 12 by not later than the date on which he receives such a service.

On the other hand, if a taxable person or a non-taxable legal person (such as a public authority) intends to make an intra-Community acquisition (“ICA”) in Malta during a calendar year and the value of the ICA exceeds €10,000, then he shall be obliged to register for VAT under this article by not later than the date of that acquisition.

In accordance with Council Directive 2006/112/EC (“VAT Directive”), Member States shall apply one standard rate of VAT, which shall be fixed by each Member State as a percentage of the taxable amount and which shall be the same for the supply of goods and for the supply of services. The standard rate shall not be lower than 15%.

However, Member States may also apply reduced rates. Such reduced rates shall be fixed as a percentage of the taxable amount which may not be less than 5%.

The current VAT rates in Malta are as follows:

• Standard Rate – 18%
• Reduced Rate (1) – 12%
• Reduced Rate (2) – 7%
• Reduced Rate (3) – 5%

The reduced rate of 12% is applied on:

• Custody and management of services
• Management of credit and credit guarantees by a person or body other than those who granted the credit
• Hiring of pleasure boats under certain specified terms and conditions
• Services consisting in the care of the human body made by a person in the exercise of the Health Care Professions Act, including services supplied in the course of a health studio business or similar business (excluding services falling under the exemption in item 11 of Part Two of the Fifth Schedule)

The reduced rate of 7% is applied on:

• Accommodation services (where premises should be licensed in virtue of the Malta Travel and Tourism Services Act)
• Use of sporting facilities

The reduced rate of 5% is applied on:

• The supply of electricity
• Confectionery items and similar items
• Medical accessories
• Printed matter
• Items for the exclusive use of the disabled
• The importation of works’ of arts collector’s items and antiques
• Minor repairing of bicycles/shoes and leather goods/clothing and household linen
• Domestic care services such as home help and care of the young, elderly, sick and disabled.
• Admission to museums, art exhibitions, concerts and theatres.

VAT Return

Article 10

A taxable person identified for VAT purposes under Article 10 is required to submit with the Office of the Commissioner for Tax and Customs a VAT Return for each VAT period. The VAT periods typically cover three (3) month periods and are generally (but not necessarily), calendar quarters. However, the CfTC may allow a taxable person to have monthly (e.g. exporting companies) or annual (e.g. small undertakings with limited turnover) VAT periods. A VAT Return together with the respective VAT payment (if any) shall be due for submission within one month and fifteen days from the end of that VAT period. In other words, the deadline shall be the 15^th day of the second month following the end of the VAT period. Should the 15^th fall on a weekend or on a Public Holiday, the deadline would be extended to the next working day.

Taxable Persons are obliged to submit their VAT Returns online by accessing the VAT online portal. When submitting the VAT Return through the online portal the deadline is extended by an additional seven days (that is, the 22^nd) when the return is submitted online. However, if the 22^nd falls on a weekend or on a Public Holiday, there are no additional extensions.

If the return is submitted after the 15^th but before the 22^nd and it results in a VAT payment due to the CfTC and that payment does not reach the CfTC by the 22^nd, the seven days benefit shall be revoked, and that return will be deemed to be submitted late. As a result, the taxable person shall become subject to penalties and interest.

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Other Declarations

Article 11

A taxable person identified for VAT purposes under Article 11 should electronically submit to the Commissioner for Tax and Customs a periodical declaration covering a twelve (12) month calendar period. The deadline is also set at one month and fifteen days after the end of that calendar year (15^th February) however, it is generally extended by an additional month (that is, 15^th March).

If during the calendar year, the taxable person’s turnover does not exceed € 7,000, he is not required to submit the annual declaration.

Article 11A

A taxable person identified for VAT purposes under Article 11A should electronically submit to the Commissioner for Tax and Customs a periodical declaration covering a calendar quarter period (every three (3) months). The deadline is set for the last day of the month following the end of the respective calendar quarter. In cases where the taxable person does not have any sales to report, a nil declaration would still be required to be submitted.

Article 12

A taxable person or a non-taxable legal person who is identified for VAT purposes under this VAT Article, and who makes:

1. a taxable intra-Community acquisition of goods in Malta; or
2. communicates their VAT identification number with the supplier and receives services falling under the general B2B place of supply of services rule, which are taxable in Malta;

should electronically submit a Notice of Payment together with the respective VAT payment to the Commissioner for Tax and Customs. Malta VAT at 18% applies on the taxable amount of the aforementioned transactions and every person liable for the payment of that VAT should pass it onto the Commissioner, as follows:

• The payment of VAT on supplies listed in point A. above, by not later than the fifteenth day of the month following that during which it becomes chargeable.
• The payment of VAT on supplied listed in point B. above, by not later than the fifteenth day of the second month next following either the date of the invoice or of the month during which the supply of services is received, whichever is the earlier.

The Notice of Payment may be submitted electronically through the VAT online portal of the taxable person.

In addition, an annual ‘Declaration of the Payment of VAT’ should also be submitted online. This is a declaration/statement of all the tax paid during a particular year and is normally due for submission within one month and fifteen days after end of a calendar year.

The Office of the Commissioner for Tax and Customs put at the disposal of taxable persons registered for VAT purposes in Malta electronic services for the purpose of filling statutory returns and other forms through an efficient and friendly way which is the VAT online portal.

A taxpayer or a taxable person may submit online forms himself using his personal e-ID by using the Personal Services. Alternatively, he may, appoint a representative to file electronic forms on his behalf and use the Assigned and Delegated Services.

The submission of VAT returns and VAT adjustments, recapitulative declarations, requests for change of address and lately upgraded to requests for call-off stock are amongst the several submissions via the VAT online portal.

Taxable persons who wish to submit forms electronically must first be registered for this purpose with the Commissioner for Tax and Customs by filing the Form CFR03. If the taxable person has opted to appoint a registered tax representative to file statutory returns on his behalf, the form CFR02 has to be completed and filed.

Yes, two or more persons (corporate not physical) established in Malta that are bound together by financial, organisational and economic links and which meet the set eligibility conditions may apply for a VAT registration as a single person. VAT group registration is limited to licensed operators in the Finance and Insurance sectors as well as operators in the Gaming sector. The principal benefit of a VAT group registration is that transactions between the members of the group are disregarded for VAT purposes.

Read More: VAT Grouping in Malta

In the case of gaming, the VAT implications depend on type of gaming transaction, the place of supply and whether the supply of gaming is treated as taxable in the Member State of the customer. Supplies of gaming that are treated as taxable trigger an obligation to register for VAT purposes in the Member State where the transaction falls to be taxed. Given the real possibility of having to register for VAT in multiple jurisdictions, an optional simplification scheme is available (the One Stop Shop aka “OSS”) under which one on-line registration in the Member State of establishment is required and only one on-line VAT return needs to be furnished accounting for the VAT due to the respective Member States. A gaming operator established in Malta is obliged to register for VAT if he carries supplies of gaming which are treated as taxable in Malta or if he wishes to opt for registration under the OSS.

DLT assets can be a virtual token, a virtual financial asset, electronic money or a financial instrument that is intrinsically dependent on, or utilises, Distributed Ledger Technology (a database system in which information is recorded, consensually shared, and synchronised across a network of multiple nodes). The VAT treatment of transactions involving DLT assets will not necessarily be determined by their categorisation but will depend on the purpose for and the context in which the transaction is made according to VAT legislation.

In principle it is exempt from VAT but if the letting is for the purposes of accommodation, under certain conditions, then it is treated as a taxable supply at a reduced rate of 7%. The letting of property by a limited liability company to an Article 10 VAT registered person for the purpose of the economic activity of the latter is also treated as a taxable supply but at the standard rate of 18%. Certain types of letting of property for not more than thirty days by a taxable person in the course of an economic activity, such as a the letting of a wedding reception venue, is also treated as a taxable supply of letting at the standard rate of 18%.

Article 10 registered persons are required to furnish to the Commissioner for Tax and Customs a periodical VAT return containing a summary of VAT transactions carried during the reporting period together with payment of the tax, if any. Generally, the reporting periods are set at calendar quarters with the return required to be submitted electronically on-line via the web portal of the Commissioner by not later than the 22^nd day of the month next following the end of the reporting period.