VAT in Malta Explained: Rates, Registration, and ESS Rules

VAT in Malta - Three Types of Rates

There are three types of VAT rates in Malta:

1. Standard VAT rate,

2. Reduced VAT rates, and

3. Zero VAT rate.

How Much is VAT in Malta’s Regions?

The Malta VAT Law, in effect, does not define any special VAT rate, meaning that standard, reduced, and zero VAT rates apply throughout the country.

VAT Registration Threshold

Information on the VAT threshold in Malta and other relevant VAT-related details can be found in VAT Malta Law, as well as official comments, opinions, and guidelines issued and provided by the Malta Ministry of Finance and governing bodies such as the Office of the Commissioner for Revenue.

The applicable VAT rules do not contain any provision on the VAT registration threshold in Malta. However, the  BAT rules and regulations define VAT exemptions for small businesses. This means that taxable persons whose annual turnover is below EUR 30,000 or EUR 35,000, depending on the type of principal business activity, are exempt from VAT.

There is also no VAT threshold in Malta for non-resident or foreign-taxable persons, meaning they are subject to VAT in any situation involving VAT-taxable activities in Malta.

As an EU Member State, Malta incorporated the EU-wide threshold of EUR 10,000 for intra-EU distance sales of goods and B2C supplies of services. EU rules do not include any VAT registration threshold for non-EU established suppliers of electronically supplied services, which is also the case with Malta VAT legislations.

Types of Taxable Activities in Malta

Under the VAT Malta legislation, taxable persons subject to VAT are those individuals or legal entities independently engaged in economic activities, regardless of the purpose or results.

Taxable activities that fall under the scope of the VAT Law are the supply of goods and provisions of services in Malta for a fee, reception of reverse-charge services by a taxable person in Malta, export and import of goods, and intra-EU acquisition of goods.

VAT Registration Process

All taxable persons, including domestic and foreign businesses, must register for VAT in Malta within 30 days from either the date of their first supply in Malta or their services in another EU Member State subject to the reverse charge. The registration is completed through the government VAT Online Services Portal.

Malta VAT Registration for Domestic Businesses

A Malta-based company engaged in taxable activities must complete the online Request for a New VAT number and submit documents such as a front and back copy of the company’s Legal Director’s identification document. The registration process is usually completed one day after the application is submitted.

Malta VAT Registration for Foreign Businesses 

Foreign businesses without a permanent establishment must register for VAT in Malta regardless of their annual turnover. Additionally, they cannot benefit from a small business regime defined for domestic taxable persons. 

Non-EU businesses must appoint a tax representative to complete the VAT registration process. However, these rules are exempt when there is a contractual agreement between the governments of Malta and third countries on mutual assistance. In those cases, a tax representative for non-EU companies is not required.

Businesses from other EU countries do not need to appoint a tax representative for VAT registration in Malta. Nevertheless, they can appoint one if they estimate that it will benefit them to do so.

VAT Returns in Malta

The general rule regarding VAT returns is that they are electronically submitted quarterly by the 15th of the second month following the reporting period.

Some taxable persons may submit annual VAT returns as an exemption from this rule. These exemptions apply to taxable persons benefiting from the small business regime and those receiving approval from the Commissioner of VAT.

Penalties for Failure to File Tax Return

Taxable persons who do not respect the deadlines for VAt registration or submission of the VAT returns could face penalties and interest, which will undoubtedly lead to additional financial burdens. 

Taxpayers who fail to register for VAT on time, keep correct and proper records and accompanying documentation, or report taxes on time may be penalized with EUR 700 to EUR 3,500. In addition, the due amount of VAT is charged an interest rate of 0.6% per month.

VAT Rules for Electronically Supplied Services 

The 2021 EU VAT reform brought many new rules and reshaped the EU VAT landscape. One of the matters that was especially important was the definition of Electronically Supplied Services (ESS), which was, under this Directive, now applicable on the EU level.

Under the 2021 EU VAT rules and legislation, ESS is defined as services delivered automatically through the Internet or similar networks, with low or no human input. Therefore, any service heavily relying on human intervention or not delivered through digital networks is excluded from the term ESS.

However, in practice, other terms, such as digital services, digital products, and electronic services, may appear, sometimes leading to confusion. The EU VAT Directive sets ground taxability rules for ESS.

Taxability Rules for ESS:

The EU VAT taxability rules implemented in 2021 define that general rules for the place of supply are applied to the B2B supply of ESS. Regarding the B2C supply of ESS, the destination principle is of the utmost importance, as it defines the place of supply as determined by the consumer's location.

The 2021 ESS rules introduced the EU-wide EUR 10,000 threshold for distance sales of goods and ESS. ESS suppliers whose turnover is below the threshold can apply their national laws to these transactions. Another option is to register for One Stop Shop (OSS) and benefit from the rules defined for that system.

In contrast, ESS suppliers whose turnover is above the threshold must use the destination principle to determine the applicable VAT rate, e.g., the VAT rate Malta.

How much is VAT in Malta on ESS?

The Malta VAT rate for ESS is 18%.

E-Commerce Rules

2021 was a significant year for e-commerce in the EU market, as the introduced EU VAT rules brought many novelties. From removing some previously established thresholds and replacing them with new ones to establishing regulations and schemes, the 202 e-commerce reform had an impeccable influence on EU and non-EU e-commerce businesses.

One of the most significant changes was the removal of the EUR 22 threshold for imports of low-value goods from outside the EU and the introduction of a new EUR 150 threshold applicable to goods imported from non-EU countries in a single consignment.

Deemed supplier rules applicable to digital platforms facilitate sales between sellers and end customers and impose additional responsibilities on digital platform operators. Under the deemed supplier rules, the operators are responsible for charging, collecting, and reporting VAT.

Besides updating or introducing rules for several B2C transactions, the reform changed the 2015 Mini One Stop Shop (MOSS) by further defining the rules under the existing Union and non-Union schemes. In addition, the Import One Stop Shop (IOSS) scheme was introduced. With this, the MOSS evolved into the bigger and more efficient One Stop Shop (OSS) system.

With all these changes, the current OSS has three schemes that businesses can use to meet their EU VAT requirements more easily:

• Union Scheme,

• Non-Union Scheme,

• Import Scheme.

VAT EU Reporting

When it comes to VAT EU reporting obligations, taxable persons in Malta must submit recapitulative statements, also known as EC Sales Lists and Intrastat reports. 

EC Sales List

EC Sales List (ESL) is a tax declaration submitted quarterly by the 15th of the month following the reporting period. It includes all relevant information about intra-community supplies of goods and services between VAT-registered businesses.

However, a monthly ESL is submitted if the value of intra-community goods supplies is more than EUR 50,000 in any quarter.

Intrastat

Intrastat as a statistical report includes relevant information on the intra-EU supply of goods between VAT-registered taxable persons. For an obligation to file an Intrastat report to be triggered, taxable persons must exceed the Intrastat import and export threshold. 

These thresholds are also known as arrival and dispatches, and in Malta, are set at EUR 700.

Digital Reporting

No B2B, B2C, or B2G e-invoicing obligations exist in Malta. Also, there are no rules or requirements for any other type of digital reporting or conscious data exchange with Tax Authorities, such as SAF-T or similar.