Valletta GMT +1
EY
Regional Business Centre Achille Ferris Street Msida MSD 1751 Malta
Indirect tax contacts
Robert Attard +356 2347 1458 robert.attard@mt.ey.com
Christopher J. Naudi +356 2347 1440 chris.naudi@mt.ey.com
Saviour Bezzina +356 2347 1326 saviour.bezzina@mt.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name It-taxxa fuq il-valur mizjud
Date introduced 1 January 1999
Trading bloc membership European Union (EU)
Administered by Ministry of Finance (http://www.vat.gov.mt)
VAT rates
Standard 18% Reduced 5%, 7%
Other Exempt with credit (0%) and exempt without credit
VAT number format MT12345678
VAT return periods Quarterly (Commissioner for Revenue may prescribe longer or shorter periods)
Thresholds
Registration
Established EUR30,000-EUR35,000 (certain conditions apply)
Non-established None
Distance selling EUR10,000 Intra-Community acquisitions EUR10,000
Electronically supplied supplies EUR10,000
Recovery of VAT by non-established businesses Yes
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods and the rendering of services in Malta by a taxable person for consideration, in the course or furtherance of an economic activity
• Intra-Community acquisition of goods from another European Union (EU) Member State by a taxable person (see the chapter on the EU)
• Intra-Community acquisitions of new means of transport (see the chapter on the EU)
• Intra-Community acquisitions of excise goods
• The importation of goods into Malta (other than exempt importations)
Quick Fixes. Pending introduction of a “definitive” system for the VAT treatment of intra-Com munity supplies of goods to taxable persons, the EU has adopted Quick Fixes for intra-Commu nity trade in goods. For an overview of the Quick Fixes rules, see the chapter on the EU.
The VAT Quick Fixes were transposed in the Maltese VAT legislation without any specific dero gations with effect from 1 January 2020 mainly regulating four main aspects:
• Conditions for exempting intra-Community supplies
• Proof of transport
• Attribution of transport in chain transactions
• Call-off stock arrangements
Effective use and enjoyment. To avoid instances of nontaxation or double taxation, EU Member States can apply use and enjoyment rules that allow a service that is “used and enjoyed” in the EU to be taxed or prevent a service that is “used and enjoyed” outside the EU from being taxed. If a service is taxed in the EU under the use and enjoyment provisions, a non-EU supplier of the service may be required to register for VAT in every Member State where it has customers that are not taxable persons. For the information regarding the rules relating to VAT registration, see the chapters on the respective countries of the EU.
In Malta, where a Maltese supplier supplies certain goods or services to a taxable person not established in Malta, generally, no VAT is due in Malta, and VAT should not be accounted for. However, to avoid double taxation, nontaxation or distortion of competition, the Director General of VAT may, with regard to the supply of the services referred to in Articles 44, 45, 56 and 59 of the EC Directive 2006/112/EC:
• Consider the place of supply of any service as being situated outside the EU, if the effective use and enjoyment of the services takes place outside the EU
• Consider the place of supply of any service as being situated within Malta, if the effective use and enjoyment of the services takes place within Malta
To date, the Maltese tax authorities restricted the application of the use and enjoyment provisions to the hiring of pleasure boats in line with a set of guidelines that are continuously updated and that explain the manner in which such use and enjoyment shall be calculated together with the applicable conditions.
Transfer of a going concern. For a supply to qualify as a transfer of a going concern (TOGC) for Maltese VAT purposes, the following conditions need to be satisfied:
• The assets are transferred to a person registered under article 10 to whom it transfers its economic activity, or part of that economic activity that is capable of separate operation, as a going concern.
• The said assets are to be used by the transferee in carrying on the same kind of activity, whether or not as part of an existing economic activity, as that carried on by the transferor.
• The said transfer is recorded in the records of the transferor indicating the registration number of the transferee.
Subject to approval by the Commissioner, a TOGC shall also apply where the transferee is not registered under article 10, provided that the transferor did not qualify for a credit of the input tax attributable to the acquisition and the accumulation of the assets being transferred.
C. Who is liable
A taxable person is any person that carries on an economic activity, regardless of the purpose or result of that activity.
Exemption from registration. A Maltese established taxable person exclusively involved in exempt without credit supplies (or in supplies that take place outside Malta and are not subject to the reverse-charge mechanism in another EU Member State) as a general rule is not required to register for Maltese VAT purposes (save for any intra-Community acquisitions of goods in excess of EUR10,000 per annum or receipt of taxable services from a non-Maltese established services provider that both trigger a Maltese VAT registration obligation).
A non-Maltese established taxable person is not required to register for VAT purposes in Malta as long as no supplies are rendered/received in Malta upon which it is the person liable for the payment of VAT.
Such persons, even though not registered for Maltese VAT, would still be considered as taxable persons on the basis that they are carrying on an economic activity (excluding pure holding companies).
Voluntary registration and small businesses. A taxable person who is not required to register for VAT purposes in Malta may still apply for a Maltese VAT registration to claim back any Maltese input tax incurred on expenses on the basis that the supplies carried out to which such expenses relate (both within and outside of Malta) carry a right of refund, even though such supplies do not trigger a VAT registration obligation.
Group registration. Subject to certain conditions, a group of related entities may register for Maltese VAT purposes as a single taxable person. The main applicable conditions are the follow ing:
• Country of establishment: All VAT group members must be established in Malta for VAT purposes.
• Regulated entity: At least one of the applicants must be a taxable person who is licensed or recognized in terms of the banking, financial institutions, gaming, insurance, investment ser vices, lotteries and other games, retirement, pensions or securitization legislation.
• Links: Each of the applicants must be bound to each of the others by financial, organizational and economic links (as defined in the legal notice).
• Goods standing: At the time of application, all applicants must have filed all VAT and income tax returns due (to date) and settled all amounts due with the respective authorities (except for any valid objections/appeals).
• One VAT group: No person may be a member of more than one VAT group at the same time.
• Same VAT group: Persons bound to each other by financial links, organizational links and economic links may only form part of the same VAT group.
The minimum time period required for the duration of a VAT group is 24 full calendar months. A VAT group cannot be dissolved and canceled before 24 full calendar months from effective registration date and cannot be subsequently reconstituted before 24 full calendar months from effective cancellation date.
Where a member of a VAT group no longer satisfies all eligibility criteria, the group reporting entity shall inform the VAT department within 15 days for the membership to be terminated (selfsupplies triggered as per Art 14.2 of the Second Schedule to the VAT Act).
All members of a VAT group in Malta are jointly and severally liable for VAT debts and penalties.
Holding companies. Holding companies can form part of a VAT group, subject to satisfying all applicable conditions outlined above.
Cost-sharing exemption. The VAT cost-sharing exemption (in accordance with VAT Directive 2006/112/EEC Article 132(1)f) has been implemented in Malta. This provides an option to exempt support services that the cost-sharing group supplies to its members, providing certain conditions are met (in accordance with specific requirements laid out in Malta VAT law-item 7 of part 2 of the Fifth Schedule to the Maltese VAT Act Cap.406).
Fixed establishment. The Maltese VAT Act does not define the term fixed establishment. In prac tice, the Maltese VAT department applies the principles/conditions that emerge from Article 11 of Council Implementing Regulation (EU) No 282/2011.
Non-established businesses. A “non-established business” may be any of the following persons:
• A taxable person that has not established its economic activity
• A taxable person that has no fixed place of establishment in Malta
• A physical person who has not established its economic activity in Malta
• A physical person who does not have a fixed place of establishment in Malta, has no permanent address in Malta or does not usually reside in Malta
A non-established business that makes supplies in Malta may appoint a tax representative or may be required by the Maltese tax authorities to do so. The Commissioner for Revenue may desig nate, by means of a written notice, a person resident in Malta with whom the non-established business has a business relationship to be the tax representative of the non-established business, unless the non-established business has already designated a representative. The representative must be nominated in writing to the VAT authorities. A tax representative is jointly and severally liable with the person represented.
Tax representatives. Persons who are not established in Malta and who are required to register for VAT purposes in Malta may nominate a person resident in Malta to act as their fiscal repre sentative. This is to be made in writing to the Commissioner for Revenue and is subject to its approval. Such a request may also be made by the Commissioner for Revenue itself.
The representative is liable in the same manner and to the same extent as the person for whom it acts as representative, for all obligations imposed by the VAT Act.
Reverse charge. Under the VAT directive, certain supplies received as a customer from a supplier outside Malta are required to be treated in a different way to normal supplies. In such situations, rather than being charged VAT by the supplier, the customer will account for any VAT due. This is known as the “reverse-charge” mechanism.
The reverse-charge mechanism applies to services and for certain goods, too. For example, goods with installation supplied by someone not established and not VAT registered in Malta, to a Maltese established and VAT-registered business, would fall under the reverse-charge mecha nism, too.
Where the reverse-charge mechanism applies, the Maltese recipient must act as both supplier and recipient of the services for VAT purposes. On the same VAT return, therefore, the Malta taxable person must account for output and input tax.
Domestic reverse charge. There is a domestic reverse charge in Malta for certain constructionrelated services. However, there are special rules in place for this domestic reverse charge. The use of the domestic reverse charge must be approved in writing by the Maltese VAT department on a case-by-case basis subject to the satisfaction of certain conditions upon a request to be submitted in writing.
Digital economy. Specific VAT rules apply to cross-border supplies of goods and services sold via the internet (e-commerce) in all EU Member States with effect from 1 July 2021. These new rules apply to all direct sales to nontaxable persons (in practice these are mostly private individuals),
but we refer to these rules as e-commerce VAT rules because most of these transactions are con ducted via the internet. In general, the place of supply is in the country of consumption, i.e., where the goods are shipped to or where the buyer of the goods or services resides, subject to any “use and enjoyment” provisions that may override this rule (see Section B, Effective use and enjoyment subsection above). Therefore:
• For supplies of services made by a nonresident supplier to a business customer (B2B), the busi ness customer is responsible for accounting for the VAT due, using the reverse charge.
• For supplies of goods made by a nonresident supplier to a business customer (B2B), where the goods are transported from another EU Member State, the business purchasing the goods is responsible for accounting for the VAT due, as an intra-Community acquisition. If the goods come from outside the EU, the purchaser may have to report an importation of goods.
• For supplies of goods or services made by a nonresident supplier to a final consumer (B2C), the supplier is generally responsible for charging and accounting for the VAT due at the rate applicable in the customer’s country (unless the supplier’s sales fall beneath the distance selling threshold of EUR10,000 with effect from 1 July 2021). This VAT can be reported using a single VAT registration, using a “One-Stop-Shop” mechanism.
For more details about intra-EU distance sales, see the chapter on the EU.
Effective 1 July 2021, an e-commerce supplier may have a choice of how to account for VAT on its B2C supplies.
Local VAT registration. A nonresident supplier may choose to register for VAT in each Member State and account for VAT on all supplies made and recover input tax in accordance with local rules (see the Non-established businesses subsection above). Non-EU businesses may be required to appoint a fiscal representative for accounting for the VAT due on these transactions.
In Malta, the local VAT registration can be made online (https://cfr.gov.mt/en/eServices/Pages/ Request-for-a-New-Vat-number.aspx).
One-Stop Shop. Effective 1 July 2021, a supplier can choose to account for the VAT due under the EU One-Stop Shop (OSS), which can be used for intra-EU cross-border supplies of goods and all cross-border supplies of services made to final consumers in the EU. Unlike the previous Mini One-Stop -Shop (MOSS) scheme that applied until 30 June 2021, the OSS is not limited to cross-border supplies of electronic services, telecommunication services and broadcasting services.
In Malta, the OSS registration can be made online (https://cfr.gov.mt/en/eServices/Pages/OSS. aspx).
The OSS is an electronic portal that allows businesses to:
• Register for VAT electronically in a single Member State for all intra-EU distance sales of goods and for B2C supplies of services
• Declare and pay VAT due on all supplies of goods and services in a single electronic quarterly return.
The OSS can be used by businesses established in the EU and outside the EU. If a supplier or a deemed supplier decides to register for the OSS, it must declare and pay VAT for all supplies (goods as well as services) that fall under the OSS.
For more details about the operation of the OSS, see the chapter on the EU.
Import One-Stop Shop. Effective 1 July 2021, the Import One-Stop-Shop (IOSS) scheme applies for B2C distance sales of goods from outside the EU.
Effective 1 July 2021, VAT is due on all commercial goods imported into the EU regardless of their value. The actual supply is subject to VAT in the country where the goods are imported (the country of destination). The IOSS facilitates the declaration and payment of VAT due on the sale of low-value goods (i.e., consignments valued at less than EUR150 per consignment). It allows suppliers selling low-value goods dispatched or transported from a non-EU country to customers in the EU to collect, declare and pay the VAT due. If the IOSS is used, the importation into the EU is exempt from VAT. For more details about the IOSS, see the chapter on the EU.
The use of the IOSS special scheme is not mandatory. If VAT is not collected via the IOSS scheme, the importation of goods into the EU is subject to import VAT in the country of final destination, and the Member State can decide freely who is liable to pay the import VAT, which could be the customer or the seller (or an electronic interface).
In Malta, the IOSS registration can be made online (https://cfr.gov.mt/en/eServices/Pages/OSS. aspx).
Postal Services and Couriers Scheme. If the IOSS is not used and the customer is liable for the import VAT due on the supply (and importation) of consignments with a small intrinsic value (i.e., less than EUR150), the VAT can be collected using the special scheme for postal services and couriers.
In Malta there are no additional specific local rules that apply.
For more details about the special scheme for postal services and couriers, see the chapter on the EU.
Online marketplaces and platforms. Under the new EU VAT e-commerce rules, effective 1 July 2021 taxable persons that ‘“facilitate’” certain B2C sales of goods are deemed to have purchased and then supplied those goods themselves. This means that the single supply from the “underly ing” supplier to the final consumer is split into two deemed supplies:
• A supply from the supplier to the facilitator (deemed B2B supply)
• A supply from the facilitator to the final customer (deemed B2C supply). Any intermediation service provided by the facilitator is disregarded for VAT purposes
This provision does not cover all sales facilitated via the facilitator. It only covers distance sales of goods imported from non-EU jurisdictions in consignments with an intrinsic value not exceed ing EUR150. The jurisdiction of residence of the supplier using the facilitator is irrelevant. The supply to the facilitating platform is VAT exempt and the supplies made by that platform follow the e-commerce VAT rules as described above. In addition, the provision also covers sales within the EU, if the supplier is not established within the EU. This applies to both local ship ments within one Member State as well as intra-Community shipments. In both cases, the final customer must be a nontaxable person.
In Malta there are no additional specific local rules that apply.
For more details about the rules for online marketplaces, see the chapter on the EU
Vouchers. The provisions of Council Directive (EU) 2016/1065 of 27 June 2016 amending Council Directive 2006/112/EC as regards the treatment of vouchers were transposed into local Maltese legislation as from 1 January 2019.
Single-purpose voucher (SPV) means a voucher where the place of supply of the goods or ser vices to which the voucher relates, and the VAT due on those goods or services, are known at the time of issue of the voucher. Multipurpose voucher (MPV) means a voucher, other than a singlepurpose voucher.
Each transfer of a SPV made by a taxable person acting in their own name shall be regarded as a supply of the goods or services to which the voucher relates. The actual handing over of the goods or the actual provision of the services in return for a SPV accepted as consideration or part consideration by the supplier shall not be regarded as an independent transaction.
The actual handing over of the goods or the actual provision of the services in return for a MPV accepted as consideration or part consideration by the supplier shall be subject to VAT pursuant to Article 4 of the VAT Act, whereas each preceding transfer of that MPV shall not be subject to VAT.
Registration procedures. A taxable person established in Malta who carries on an economic activity (or a non-Maltese established taxable person who is liable to charge Maltese output tax on its supplies) is liable to register for Maltese VAT under Article 10 of the VAT Act within 30 days of making a supply for consideration in Malta, other than an exempt-without-credit supply.
Maltese established taxable persons that qualify as a small undertaking may register under Article 10, but also may opt for a simpler VAT registration under Article 11, depending on the type of economic activity involved and the level of turnover, as follows:
• For new registrants who principally supply goods: those with an annual turnover lower than EUR35,000 (the “entrance threshold”) may register as a small undertaking. Taxable persons cur rently registered under the normal regime may reregister as a small undertaking if their turn over falls below EUR28,000 (the “exit threshold”).
• For new registrants who principally supply services, those with an annual turnover lower than EUR30,000 may register as a small undertaking. Such taxable persons currently registered under the normal regime may reregister as a small undertaking if turnover falls below EUR24,000.
Moreover, anyone who carries on an economic activity is not registered under Article 10 and intends to make an intra-Community acquisition in Malta is liable to register for Maltese VAT under Article 12, by not later than the date of that acquisition if its total intra-Community acquisitions in Malta during that calendar year exceed EUR10,000.
A taxable person established in Malta who is not registered under Articles 10 or 11 and who sup plies services within the territory of another Member State for which the tax is payable solely by the recipient shall apply to be registered under Article 10 by not later than 30 days from the date on which he makes a supply for consideration. Moreover, a taxable person established in Malta, other than a taxable person registered under Article 10, who receives services for which it is liable to pay the tax (reverse-charge mechanism) shall apply to be registered under Article 12 by not later than the date on which it receives a service.
An application for Maltese VAT registration should be filed online via the web portal of the Maltese VAT department. It must be accompanied by the necessary due diligence documentation (including passport copies, certificate of incorporation and memorandum and articles of asso ciation/statute) and is usually processed within 5 to 10 working days from when all information is made available to the Maltese VAT department.
Deregistration. An online VAT deregistration form needs to be filed whenever a VAT-registered person wants to deregister for VAT purposes. This includes listing among other things the reason for deregistration, whether the business will be transferred or not and details pertaining to any assets held.
Changes to VAT registration details. Every person registered under articles 10, 11 or 12 shall, within 15 days from a change in circumstances that affects the particulars declared in the applica tion for their registration under articles 10, 11 or 12 (or otherwise furnished to the Commissioner in connection with their registration or appearing in the registration certificate), notify that event in writing to the Commissioner. Certain notifications (such as change in address, change in
activities) can be affected online, whereas others are to be made via formal letter to the Maltese VAT department.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 18%
• Reduced rates: 5%, 7%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services, unless a specific measure provides a reduced rate, the zero rate or an exemption.
Some supplies are classified as “exempt with credit,” which means that no VAT is due, but the supplier may recover related input tax.
Examples of goods and services taxable at 0% (i.e., exempt with credit)
• Food, excluding catering
• Pharmaceutical goods
• International transport
• Exports of goods and related services (to territories outside the EU)
• Supplies to ships
• Supply of gold to the Central Bank of Malta
Examples of supplies of goods and services taxable at 5%
• Confectionery
• Medical equipment and accessories
• Printed matter (including e-books/audio books)
• Supply of electricity
• Items for the exclusive use of the disabled
• The importation of works of art, collectors’ items and antiques
Examples of goods and services taxable at 7%
• Tourist accommodation
• Use of sporting facilities
The term “exempt supplies” refers to supplies of goods and services not liable to tax and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Letting and transfer of immovable property
• Health and welfare
• Education
• Postal services
• Banking and insurance
• Grant and negotiation of credit and the management of credit by the grantor
• Supply by nonprofit organizations of approved services related to sports or physical recreation
• Sports
• Lotteries
• Broadcasting
• Water
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Malta.
E. Time of supply
The time when VAT becomes due is referred to as the “date when tax on supplies becomes charge able” or “tax point.”
The basic tax point for a supply of goods is the earlier of the date on which the goods are deliv ered or otherwise made available to the recipient of the supply or the date on which payment is made. The basic tax point for a supply of services is the earlier of the date on which the services are performed or the date on which payment is made.
If a VAT invoice is issued before the basic tax point or by the 15th day of the month following the basic tax point, the date on which the VAT invoice is issued becomes the actual tax point. The actual tax point overrides the basic tax point.
Deposits and prepayments. The basic tax point for a supply of goods is the earlier of the date on which the goods are delivered or otherwise made available to the recipient of the supply or the date on which payment is made. The basic tax point for a supply of services is the earlier of the date on which the services are performed or the date on which payment is made.
Continuous supplies of services. When the supply of services gives rise to successive statements of account or payments they shall be treated as performed, up to the value covered by those state ments, on the last day of each period to which such statements of account or payments refer (basic tax point).
Provided that, when a continuous supply of services does not give rise to statements of account or payments during a year, it shall be regarded as being completed at least at intervals of one year.
Goods sent on approval for sale or return. There are no special time of supply rules in Malta for the supply of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).
Reverse-charge services. The basic tax point for a supply of services is the earlier of the date on which the services are performed or the date on which payment is made.
If a VAT invoice is issued before the basic tax point or by the 15th day of the month following the basic tax point, the date on which the VAT invoice is issued becomes the actual tax point. The actual tax point overrides the basic tax point.
Leased assets. In cases of leased goods (where the delivery of goods pursuant to a contract for the hire of goods for a certain period or for the sale of goods on deferred terms, which provides that in the normal course of events ownership shall pass at the latest upon payment of the final installment) such supplies shall be treated as supplies of goods with the basic tax point being the earlier of the date on which the goods are delivered (or otherwise made available to the recipient) or the date on which payment is made.
Imported goods. When goods are, on importation, placed under a customs duty suspension regime the chargeable event takes place and the tax becomes chargeable on the date when they cease to remain subject to that regime.
Intra-Community acquisitions. The tax on an intra-Community acquisition becomes chargeable on the earlier of the following two dates: (a) the 15th day of the month following the date of the acquisition; (b) the date on which a tax invoice is issued to the person making the acquisition for the supply of goods in question.
Intra-Community supplies of goods. The basic tax point for an intra-Community supply of goods is the earliest of the 15th day of the month following the date when the chargeable event takes place or the date on which a tax invoice is issued for that supply.
If a VAT invoice is issued before the basic tax point or by the 15th day of the month following the basic tax point, the date on which the VAT invoice is issued becomes the actual tax point. The actual tax point overrides the basic tax point.
Distance sales. There are no special time of supply rules in Malta for the supplies of distance sales. As such, the general time of supply rules apply (as outlined above).
F. Recovery of VAT by taxable persons
A VAT-registered person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. Input tax is recovered by deducting the amount from output tax, which is VAT charged on supplies made in the same period.
The time limit for a taxable person to reclaim input tax is six months (i.e., two VAT return peri ods). Input VAT pertaining to previous VAT periods can be claimed back in the following/subse quent two VAT returns, as long as the omitted invoices do not exceed 5% of the VAT paid/claimed in the original VAT return in which the invoices should have been declared. Each VAT return period is quarterly in Malta.
Input tax includes VAT charged on goods and services supplied in Malta, VAT paid on imports of goods and VAT self-assessed for reverse-charge services received from outside Malta.
For a claim for input tax to be valid, the following conditions must be met:
• The claim must be supported by a tax invoice
• The person claiming the expense must have the document in its possession and provide it to the Director General of VAT if and when requested
• The amount of tax claimed must be properly accounted for in the records held by the claimant
• The VAT is recoverable to the extent allowable by the VAT Act
Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.
Examples of items for which input tax is nondeductible
• Nonbusiness expenditure
• Purchase, repair and maintenance, lease, fuel and hire of vehicles (excluding commercial vehicles)
• Business and employee entertainment
• Tobacco and alcohol
• Works of art and antiques
Examples of items for which input tax is deductible (if related to a taxable business use)
• Business expenditure (excluding blocked deductions)
• Mobile phones
• Hotel accommodation (purely for business purposes)
Partial exemption. Input tax directly related to the provision of exempt without credit supplies is generally not recoverable. If a registered person makes both exempt without credit supplies and taxable supplies, the person may not deduct input tax in full. This situation is referred to as “par tial attribution” or “partial exemption.” The amount of input tax that may be deducted from output tax by a taxable person making exempt without credit supplies is based on the percentage of taxable supplies made compared with total supplies made. Attribution is based on a provi sional rate in the first year (year 1) and is then adjusted to a definitive rate, which is based on the level of taxable supplies made compared with total supplies made on an annual basis. The definitive rate (as amended at the end of the first year) is used as the provisional rate in the sec ond year (year 2).
Approval from the tax authorities is not required to use the partial exemption standard method in Malta. However, if a taxable person wants to adopt an alternative basis for partial attribution (i.e., a special method) this would require the confirmation of the Maltese VAT authorities.
Capital goods. Capital goods are items of capital expenditure that are used in a business over several years. Input tax is deducted in the VAT year in which the goods are acquired and first taken into use. The amount of input tax recovered depends on the taxable person’s partial attribu tion recovery position in the VAT year of acquisition. However, the amount of input tax recovered for capital goods must be adjusted over time if the taxable person’s partial attribution recovery percentage changes during the adjustment period or if the use of the capital goods changes.
An adjustment may be necessary to the initial VAT deduction with respect to capital goods and immovable property, resulting from either a change in the circumstances of the business or a change in the proportion of use of the asset in the business. In the event of such change in cir cumstances, an adjustment to the initial deduction is made. The adjustment period is five years with respect to capital goods other than immovable property and 20 years with respect to immovable property.
In Malta, the capital goods adjustment also applies to certain services and circumstances. Input tax on capital goods includes input tax paid on operations related to the realization, the transfor mation or the improvement of capital goods, however, it does not include input tax paid on the repair or the maintenance of capital goods, as well as the purchase, the intra-Community acquisition or the importation of spare parts used for such operations. It also excludes input tax paid for the renting of capital goods, and more generally, input tax paid for the giving up or the granting of the use of such goods.
Refunds. If the amount of input tax recoverable in a tax period exceeds the amount of output tax payable in that period, the taxable person ends up in an excess credit position. A taxable person is entitled to a refund of such excess credit if the excess credit is not set off against any VAT due in the subsequent tax period. The refund must be paid within five months after either the due date of the VAT return or the date on which the return is submitted, whichever is later.
The VAT authorities pay interest on VAT refunds that are paid late at a rate of 0.75% per month or part of a month. Interest is payable for the period beginning with the date on which the refund becomes payable and ending on the date on which the refund is paid.
Pre-registration costs. As a general rule no amount shall be treated as input tax of a person unless it is supported by a tax invoice (including all necessary details such as VAT identification num ber) in respect of the tax relating to goods or services supplied to it. Hence, to ensure that the right of refund is not compromised, the VAT registration needs to be in effect prior to any expenses being incurred in such a way that the VAT number can be quoted on the invoices covering the costs incurred. Failure to do so will disqualify such invoices from being claimed back.
Bad debts. A claim for a deduction by way of a bad debt relief shall be subject to such directives as the Maltese VAT department may give as to the circumstances in which it may be made and the documents or other evidence that should be produced.
The conditions for claiming bad debt relief are as follows:
• Claim for bad debt relief may be made following a final court judgment showing beyond doubt and to the satisfaction of the Commissioner that the debt can never be recouped
• The claim must reach the Commissioner by not later than 12 months from the date of delivery of the final judgment
• VAT in connection with the claim must have already been accounted for and paid to the depart ment
• All VAT returns and payments due as at the date of the claim must have been submitted by that date
• The debt must have been written off in the claimant’s day-to-day VAT accounts and transferred to a separate bad debt account
• The supply must have been made to the customer or to a third party through the customer
• The value of the supply must not be more than the customary selling price
• The debt must not have been paid, sold or factored under a valid legal assignment
To claim a refund, an application to claim bad debt relief must be made by means of a registered letter addressed to the Commissioner, providing:
• A copy of the relative final court judgment
• The date and number of any invoice issued for each supply to the customer, which is included in the claim
• For each relevant supply, the amount that has been written off as a bad debt
• The amount of the claim
The Commissioner shall subsequently examine the case, accept or reject the claim and inform the claimant accordingly.
The claimant may deduct the tax relative to the bad debt relief claim in Box 41 of the VAT return for the tax period following that in which the Commissioner has authorized the relief.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Malta.
G. Recovery of VAT by non-established businesses
The Maltese VAT authorities refunds VAT incurred by businesses that are neither established nor registered for VAT in Malta. Non-established businesses may claim Maltese VAT to the same extent as VAT-registered businesses.
EU businesses. For businesses established in the EU, refunds are made under the terms of the EU Directive 2008/9/EC. The VAT refund procedure under the EU Directive 2008/9 may be used only if the business did not perform any taxable supplies in Malta during the refund period (excluding supplies covered by the reverse charge). For full details, see the chapter on the EU.
There are no specific rules in Malta, other than those established under the respective EU Directive.
Non-EU businesses. For businesses established outside the EU, refunds are made under the terms of the EU 13th Directive. For full details, see the chapter on the EU
There are no reciprocity rules in place in Malta, as there are no particular/additional restrictions other than those that apply to Maltese established businesses (i.e., the normal input tax recovery rules). As such, businesses established in any country outside of the EU can apply for a refund for input tax incurred in Malta.
Please find below specific rules for Malta:
• Claims must be made on an appropriate form and sent to the following address:
Commissioner for Revenue Value-Added Tax Department
Centre Point Building Ta’ Paris Road Birkirkara BKR 4633 Malta
• The refund application form must be filed within six months from the end of the calendar year in which the tax became chargeable.
• If the application relates to a period of less than one calendar year but not less than three months, the amount for which the application is made may not be less than EUR186.
• If the application relates to a period of one calendar year or the remainder of a calendar year, the amount may not be less than EUR23.
Late payment interest. In Malta, interest is not paid on late refunds to non-established busi nesses (for both EU and non-EU non-established businesses).
H. Invoicing
VAT invoices. Registered persons must generally provide tax invoices for all taxable supplies of goods and services made and for exports. Fiscal receipts must be issued for retail sales. A purchaser who receives a fiscal receipt for a supply must retain it for a period of at least 24 hours because the purchaser may be required to produce the receipt for inspection by the VAT authori ties.
Credit notes. A credit note may be used to reduce VAT charged and reclaimed on a supply. A credit note must be cross-referenced to the original invoice.
Electronic invoicing. Maltese VAT law permits electronic invoicing in line with EU Directive 2010/45/EU (see the chapter on the EU).
Simplified VAT invoices. For amounts not exceeding EUR100, a simplified invoice can be issued, which contains fewer details compared to a normal tax invoice.
Self-billing. Self-billing is allowed in Malta. Tax invoices may be drawn up by the customer in respect of supplies of goods or services made to them by a taxable person. A prior agreement between the two parties must be in place, along with an agreed procedure for the acceptance of each tax invoice by the taxable person supplying the goods or services. The Commissioner may require that such invoices be issued in the name and on behalf of the taxable person.
Proof of exports and intra-Community supplies. VAT is not chargeable on exports and intra-Com munity supplies of goods dispatched to a destination outside of Malta. Both supplies must be accompanied by evidence that confirms the goods have left Malta. Suitable evidence includes the stamped customs exportation documentation and other conditions as stipulated in the EU VAT Quick Fixes 2020 (see the EU chapter and the subsection Quick Fixes above).
Foreign currency invoices. Invoices may only be issued in the domestic currency, which is the euro (EUR). Foreign currency may only be quoted as a reference. The selling rate quoted by the European Central Bank on the date on which the supply takes place must be used.
Supplies to nontaxable persons. Special rules apply to the place of supply for supplies of telecom munications, broadcasting and electronic services to nontaxable customers. For further details of the VAT rules on electronic services in the EU, refer to the EU chapter
Maltese suppliers of these services to nontaxable persons are not required to issue a tax invoice to nontaxable customers but are required to issue a fiscal receipt. Fiscal receipts may be issued in three different ways:
• Fiscal cash registers (physically sealed by approved sellers/manufacturers)
• Manual fiscal receipts books issued by the Maltese VAT department
• Accounting software/point-of-sale system certified by an approved IT auditor and ratified/ authorized by the Maltese VAT department via the issuance of an EXO number
Moreover, the Maltese VAT Act states that persons supplying goods or services under the OSS or the IOSS, in terms of Chapter 6 of Title XII of Council Directive 2006/112/EC entering into
force as from 1 July 2021, shall not be required to issue fiscal receipts for such supplies of goods and services.
Transactions between related parties. In Malta, there are no specific rules for the value for VAT purposes for transactions between related parties.
Records. Every registered taxable person established in Malta must keep full and proper records of all transactions carried out in the course or furtherance of their economic activity. Every per son who is liable to tax on any transaction or who identifies as a person registered under the Maltese VAT Act for the purpose of any transaction shall keep full and proper records of any such transaction. Such records usually include proper books and records, accounting data, invoice copies and VAT workings explaining how the figures declared in the VAT forms/returns have been calculated. Such records can be stored locally in Malta, or outside, but the records must be readily available to the Maltese VAT authorities if requested.
Record retention period. Generally, the records shall be kept and stored in a manner that contains details that can be supported by such information, documents and accounts as set out in the 11th Schedule to the Maltese VAT Act. Such records, information, documents and accounts shall be retained for a period of at least six years from the end of the year to which they relate, or such other period or periods as the Minister may, in special cases, by regulations prescribe. Certain exceptions may apply in case of capital goods, adjustment forms, appeals, etc.
Electronic archiving. Invoices shall be stored in the original form in which they were sent or made available, whether paper or electronic. Additionally, in the case of invoices stored by electronic means, the Maltese VAT department may require the data guaranteeing the authenticity of the origin of the invoices and the integrity of their content shall also be stored by electronic means.
I. Returns and payment
Periodic returns. In most cases, registered persons file VAT returns quarterly. VAT returns must be filed within one-and-a-half months after the end of the tax period to which they relate.
Recently Maltese VAT law was amended to ensure that businesses sending their VAT declarations and making payments online are not charged interest and administrative fines if the declaration or payment is sent within seven days after the current deadline.
Periodic payments. Payment of the VAT due is required in full on the same date as the VAT return submission deadline, i.e., within one-and-a-half months after the end of the tax period to which they relate. Return liabilities must be paid in EUR. Payment of VAT can be made either manu ally at the approved cash collection points (currently local postal offices) or online, when filing the VAT return online via the relevant link or online via a bank transfer to the Maltese VAT department’s bank account.
Electronic filing. Electronic filing is mandatory in Malta. Electronic filing of VAT returns is mandatory for all taxable persons except for those who have less than 10 employees. There is a seven-day extension for the filing online of the VAT return and the payment of the respective VAT due, if any.
Payments on account. Payments on account are not required in Malta.
Special schemes. Professional services. A special scheme restricted for warrant holders whereby they can apply the cash accounting system for VAT accounting (as opposed to accrual account ing). Under this scheme, the warrant holder is entitled to delay the issuance of the tax invoice up until the payment is received in such a way that VAT is only to be forwarded to the VAT depart ment once received.
Secondhand goods, works of art, collectors’ items and antiques. A special scheme whereby VAT is mainly charged on the profit margin generated on the supply of such goods. (1) Secondhand goods dealers shall have the option to apply the provisions of this part, after having obtained the approval in writing of the Commissioner, in respect of supplies of (a) works of art, collectors’ items or antiques that they have imported themselves; (b) works of art supplied to them by their creators or their successors intitle. (2) Where a secondhand goods dealer exercises the option available under paragraph (1) of this item, such option shall cover at least two calendar years.
Supplies by retailers and by civil, mechanical and electrical engineering contractors. A special scheme whereby these contractors can apply the cash accounting system for VAT accounting (as opposed to accrual accounting). Unlike the professional services special scheme, in this case instead of delaying the issuance of a tax invoice, the tax invoice is issued immediately and on it the words “cash accounting must be inserted.”
Travel agents. The tour operators/travel agents margin scheme. A special scheme whereby VAT is mainly charged on the profit margin generated on the supply of such services in order to avoid the need for multiple VAT registrations in different Member States.
Tax in danger. A scheme that allows the domestic reverse-charge mechanism only in connection to construction-related supplies and subject to approval by the Maltese VAT department that is usually restricted to construction-related contracts greater than EUR70,000 per contract.
Investment gold. A special scheme regarding the VAT accounting for investment gold. Taxable persons who produce investment gold or transform any gold into investment gold have a right of option for taxation of supplies of investment gold to another taxable person that would otherwise be exempt in terms of Part One of the Fifth Schedule.
Telecommunications, broadcasting or electronically supplied services. This scheme utilizes the OSS for EU and non-EU established service providers of telecommunication, broadcasting and elec tronically supplied services. For more details about the operation of the OSS, IOSS and online marketplace, see the chapter on the EU.
Cash accounting. Professional service providers and retailers, as well as civil, mechanical and electrical engineering contractors, may use cash accounting if they have not exceeded the thresh old of EUR2 million, subject to the condition that the right to deduct input tax shall be postponed until the tax on the goods or services supplied to them has been paid.
Annual returns. Annual returns are not required in Malta.
Supplementary filings. Intrastat. A taxable person that trades goods with other EU countries must complete statistical reports, known as Intrastat returns, which must be filed on a monthly basis by the 10th working day of the following month.
The thresholds for Intrastat Arrivals and Intrastat Dispatches 2022 is EUR700 per return.
Intrastat forms can be filed both manually and electronically and contain basic statistical data, including HS code, country of consignment/origin/destination, nature of transaction, mode of transport, term of delivery, invoice value, statistical value and weight. Intrastat returns must be filed in EUR.
EU Sales Lists. In general, EU Sales Lists (ESLs), known as recapitulative statements in Malta, must be prepared for each calendar month with respect to the following:
• Intra-Community supplies of goods
• Intra-Community supplies of services made to a customer that is liable to pay the tax on that service in the EU Member State in which it is established, except when such service is exempt in that Member State
Recapitulative statements must be submitted online to the VAT department by the 15th day of the month following the relevant calendar month.
However, recapitulative statements may be submitted online for each calendar quarter by the 15th day of the month following the end of the quarter if the total amount of the supplies of goods, excluding VAT, did not exceed in the relevant quarter or in any of the four preceding quarters EUR50,000. If the EUR50,000 threshold is exceeded, the recapitulative statements must be sub mitted by the 15th day of the month following the relevant month.
Notwithstanding the above, if a person provides only supplies of services, it may submit an online recapitulative statement for each calendar quarter regardless of the total value of services supplied.
The values of supplies of goods or services required to be reported in the recapitulative statement must be declared in the period of submission over which VAT was due.
Correcting errors in previous returns. Errors can be corrected in subsequent VAT returns without any negative implications, subject to the following conditions:
• The error must not exceed 5% of the respective total output/input VAT declared in the original VAT return
• It is corrected in a subsequent VAT return that commences not later than six months from the expiration of the original VAT return in which the mistake was made
If any of these conditions are not satisfied, the errors would need to be corrected via the filing of an adjustment form, which will trigger penalties for incorrect declaration.
Digital tax administration. There are no transactional reporting requirements in Malta.
J. Penalties
Penalties for late registration. A penalty for late registration is assessed on an amount equal to the higher of the following:
• 1% of the excess, if any, of the output tax due over input tax (and any allowable deductions) for the first VAT period following registration
• EUR20 for every month or part of a month that the registration is late
The penalty is capped at a maximum of 20% of the output tax due over input tax (and any allow able deductions) for the first VAT period following registration.
Penalties for late payment and filings. A penalty for default in submitting a tax return equals the greater of the following two amounts:
• 1% of the excess, if any, of the output tax over input tax for the period (disregarding any excess credit brought forward from a previous tax period and any allowable deductions)
• EUR20 for every month or part of a month that the return is late
• Capped at EUR250
Interest is assessed on VAT paid late. The current rate is 0.33% for each month or part of a month. The interest rate may change.
Penalties for errors. For the filing of a tax return containing errors that are discovered during a VAT inspection, a penalty equal to the sum of the following is imposed:
• 20% of the excess, if any, of the correct amount of output tax over the output tax declared in the return
• 20% of the excess, if any, of the deductions declared in the return over the correct amount of the deductions
If an error is voluntarily disclosed before it is discovered by the VAT department, the penalty is reduced to 10%. This reduction also applies if the person involved cooperates with the Commissioner for Revenue, accepts an agreement and pays the amounts due within one month after signing the agreement.
For the failure to notify the tax authorities for a change in a taxable person’s VAT registration details, either at all or within the specified time frame, there is no specific penalty provided for in the Maltese VAT Act. For further details, see the subsection Changes to VAT registration details above.
Penalties for fraud. On conviction of certain irregularities in records, fraud, false representations, etc., a person shall be liable to the following penalties:
• To a fine of not less than EUR6,000 and not exceeding EUR10,000 for certain offenses committed
• To a fine of not less than EUR700 and not exceeding EUR3,500 for certain offenses committed
In addition, where tax amounting to more than EUR100 would be endangered, to a further fine equal to two times the endangered tax or to imprisonment of not more than six months or to both such fines and imprisonment:
Provided that, the two times fine for the endangered tax shall in no case be less than EUR1,000.
In addition, on a request by the prosecution, the court shall order the offender to comply with the law within a time sufficient for the purpose, but in any case, not exceeding one month, and, in default, the offender shall be liable to the payment of a further fine of EUR5 for every day on which the default continues after the lapse of the time fixed by the court.
Personal liability for company officers. Directors and other company officials qualify to be treated as representatives of the VAT-registered person for Maltese VAT purposes and shall be jointly and severally liable (with the person of whom they are representatives) for the tax due by that person. The implications will depend on whether it is established that they acted in good faith (in which case liability is limited to the funds or to the value of any property under their management or control) or not and penalties/punitive measures depend on the actions committed ranging from daily fines to imprisonment.
Statute of limitations. The statute of limitations in Malta is six years. When the Commissioner has reason to believe that a tax return furnished by a person registered under article 10 for a tax period does not contain a full and correct statement of the matters required to be declared in that return, it may make a provisional assessment and serve that provisional assessment on that person by not later than six years from the end of the said tax period or from the date in which the tax return for that tax period is submitted, whichever date is the later.
Provided that where the provisional assessment refers to the adjustment relating to input tax on capital goods mentioned in the Tenth Schedule, it shall be served by not later than six years from the end of the adjustment period mentioned in the said schedule.
Provided further that, where a person makes a correction in terms of article 28(1), the six-year period in which the Commissioner may make a provisional assessment as provided for in this sub-article shall start to run from the date on which the Commissioner receives the request for the correction.