EU VAT Guide – Malta

VAT rates in Malta 

How much is VAT in Malta? 

The Standard VAT Rate (Value Added Tax (VAT)) in Malta is 18%. 

Some supplies are exempt from VAT. This applies to business activities like health care, insurance, and educational services.

The exact list of taxable transactions and allocated Malta VAT rate can be found in VAT Malta regulations. 

VAT thresholds in Malta 

The VAT legislation contains valuable information about the VAT threshold in Malta and its applicable provisions. Interpreting the appropriate information shared by Tax Authority officials is also a helpful source of information. 

VAT registration threshold for resident businesses: There is no registration threshold in general. However, small businesses can operate exempted from VAT liability if their turnover is below the threshold of EUR 35,000 or EUR 30,000, depending on the type of their main business activity.

VAT registration threshold for non-resident businesses: In most cases, there is no registration threshold for foreign businesses without a permanent establishment in the country. 

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000.

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold.

VAT Taxable Activities in Malta

A taxable person by Malta VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Malta VAT: 

• The supply of goods and rendering of services in Malta for consideration;
• Receipt of reverse-charge services by a taxable person in Malta;
• Export of goods;
• Import of goods;
• Intra-community acquisition of goods.

Other case scenarios exist where domestic or foreign businesses should impose Malta VAT on their transactions. 

Tax Representative in Malta 

For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is often mandatory. Tax persons with tax residence in third countries or territories with mutual assistance agreements signed with Malta can fulfill their tax obligations without contracting a tax representative. 

Having a tax intermediary isn’t compulsory for EU-established companies. Still, the economic operator could acquire the professionals to ease and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Malta 

Electronically Supplied Services 

The EU VAT Directive defines Electronically Supplied Services (ESS) as services whose delivery relies on the Internet or similar digital networks. The delivery of these services is heavily dependent on digital networks or the Internet. This is one of the parameters that clearly distinguishes these services from most other types of services. 

Malta has incorporated the principles and related concepts of Electronically Supplied Services as defined in the EU VAT Directive.  By adopting these provisions from the EU VAT framework, Malta simplifies compliance for digital service providers, tax authorities, and customers. 

Domestic regulators have harmonized the VAT Act with EU-based standards. This adaptation has introduced many benefits for non-resident digital services providers whose customers reside in the country. First, it simplified the determination of the taxability rules applicable to these kinds of supplies. 

However, despite these clarifications, the interchangeable use of terms such as “digital services,” “digital products,” and “electronic services” can still create confusion regarding their definitions and associated tax implications.

Taxability Rules for ESS

Implementing the E-Commerce VAT package on July 1, 2021, introduced significant changes to the EU VAT framework. The new provisions shed new transparency on the taxability rules in this sector and the ones closely related to it. This was just one of the relevant modifications of the VAT rules within the Community. 

The primary goal of EU regulators was to reduce the bureaucratic burden on EU and non-EU businesses involved in cross-border operations, particularly those engaged in distance sales of goods and the provision of digital services.

The new rules introduced simplified reporting schemes, possibly eliminating the burden of multiple VAT registrations based on the more formal reasons mandated by the destination country. The possibility for taxable persons to report their supplies in an aggregate manner significantly decreased the expected budget allocation for compliance services that were necessary before the EU VAT modernization.

Some of the provisions introduced through the last VAT package:

• B2B Electronically Supplied Services: For business-to-business transactions, an EU-wide harmonized rule for the general supply of services should be used here;
• B2C Electronically Supplied Services: Vendors without a fixed establishment in any EU member state should treat the transactions according to the destination principle(the place of supply is determined based on the customer location);
• Distance Sales of Goods and ESS: EU-based vendors and suppliers of electronically supplied services (ESS) can take advantage of the EU-wide threshold of EUR 10,000 for intra-EU distance sales and ESS supplies to EU customers. If their turnover is below this threshold, they may apply domestic tax rules or use the One Stop Shop (OSS) system;
• Exceeding the Distance Sales Threshold: For EU-based vendors whose turnover exceeds EUR 10,000, the destination principle determines the place of supply rules for delivery of ESS.

These updates aim to streamline VAT compliance, making it more manageable for businesses operating within the Single Market.

How much is VAT in Malta for Electronically Supplied Services?

VAT rate Malta: A standard VAT rate of 18% is applied in most cases on sales of Electronically Supplied Services in Malta

E-Commerce VAT Rules in Malta 

July 1, 2021, is an important date concerning the scope of modifications within the EU VAT landscape. On that day, the EU regulators adopted a significant reform. The extent of the reform is quite considerable, with a primary focus on modernizing the tax rules around E-Commerce and Platform economy. 

Important modifications of the EU VAT Directive introduced through E-Commerce Reform:

Cross-Border Sales of Low-Value Goods: The amendments introduced a unified threshold of EUR 150 for importing low-value goods in consignments from third countries or territories. 

Intra-Community Distance Sales: The previous national thresholds for intra-community distance sales have been removed, simplifying VAT obligations for non-resident sellers and reducing compliance complexity.

Domestic Sales by Deemed Suppliers: In specific scenarios, digital platform operators are now responsible for charging, collecting, and reporting VAT to tax authorities. This shift in VAT compliance duties from the original vendor to the digital platform operator streamlines the process.

Provision of B2C Electronically Supplied Services (ESS): The scope of services that could be reported under the common scheme has been expanded, making VAT reporting more manageable for businesses engaged in cross-border activities.

Improvements for uniform reporting systems:

In addition to revising the taxability rules for various B2C transactions, the 2021 EU VAT reform introduced several changes to simplified reporting systems. These changes include the launch of the enhanced Mini One-Stop Shop (MOSS) scheme, now known as the One-Stop Shop (OSS) scheme, and the introduction of the Import One-Stop Shop (IOSS) scheme.

The main goal of these simplified reporting tools is to reduce the compliance costs associated with taxable persons who mostly operate cross-borders. This idea has been realized through drastic changes concerning the scope of triggering situations that demand from the non-resident supplier to register locally. 

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes

Conditions for Using the Non-Union OSS:

This simplified scheme allows taxable persons whose place of business is outside the EU to report their EU-based B2C transactions in one place. However, this doesn’t mean that all their B2C services supplies can be reported by leveraging this scheme. The designated list can be traced in the EU VAT Directive and accompanying regulation.  

Conditions for Using the Union OSS:

Taxable persons established within an EU Member State can utilize the Union OSS scheme to report intra-community distance sales of goods and cross-border B2C services. Additionally, non-EU-based taxable persons can use this scheme to report their intra-community distance sales of goods to EU customers.

Conditions for Using the Import One-Stop-Shop (IOSS) Scheme:

The Import One-Stop-Shop (IOSS) scheme is accessible to taxable persons whose place of business is within the countries belonging to the EU, as well as to those that are outside of it.  This scheme facilitates the reporting of import VAT on low-value goods imported from third countries and territories. 

It simplifies customs procedures and tax reporting by allowing suppliers to remit VAT at the point of sale rather than at the import point.

OSS Return and Payment 

Malta doesn’t offer a simplified reporting mechanism for foreign providers of digital services or products.  However, it has incorporated into its national framework the harmonized rules concerning digital economy from the EU VAT Directive. 

This alignment simplifies matters for foreign digital service providers when the place of supply is within Malta. It allows non-established sellers to access the OSS schemes, enabling them to operate as registered taxable persons under OSS, thereby eliminating the need for local VAT registration.

The introduction and national implementation of the OSS schemes under the EU VAT Directive have significantly reduced the need for multiple VAT registrations and lowered compliance burdens for foreign digital service providers and those involved in intra-community distance sales of goods.

However, users of the OSS schemes should be aware that registration for one or more special OSS schemes does not eliminate the possibility of mandatory registration in certain circumstances. 

Electronic Platform and Deemed Supplier Rules 

Malta has introduced the novelties incorporated in the EU VAT Directive into its national framework after adopting the E-commerce package. These updates have notably decreased compliance and administrative costs for non-resident taxable persons supplying goods and services to Maltese customers.

The E-commerce reform introduced the concept of the deemed supplier for digital platform operators. This implies that when the conditions are met, the VAT liability shall be shifted from the original vendor to the digital platform operator. 

The deemed supplier scenario can be triggered within the scope of two different categories of transactions, as explained below:

• Import of Low-Value Goods: This applies when EU and non-EU suppliers sell low-value goods imported into the EU via digital marketplaces;
• Sales of Goods Within the EU: This applies when non-EU vendors supply goods already in free circulation within the EU to customers in Member States, irrespective of the value of the supply.

When conditions are met, the deemed supplier rule is triggered, effectively transferring VAT liability from the original vendor to the digital platform operator. Consequently, the marketplace becomes responsible for fulfilling VAT obligations that originally should have been managed by the original vendor.

This multi-sided transaction is composed of two parts:

• Business-to-Business (B2B): The initial transaction from the original vendor to the digital marketplace is treated as an exempt or zero-rated B2B transaction;
• Business-to-Consumer (B2C): The subsequent transaction from the marketplace to the end consumer is categorized as a B2C transaction.

This rule simplifies the reporting processes for online vendors and digital platforms, streamlining VAT compliance and enhancing operational efficiency.

Invoice Requirements in Malta 

General invoice information:

• Date of invoice issuance;
• Date of the supply of goods or provision of services if different from the date of the invoice issuance;
• Unique invoice numbers issued in sequence.

Seller information:

• Company name;
• Full address (head office);
• Billing address if different from company address;
•  VAT number.

Customer information:

• Name;
• Full address;
• VAT number;
• Delivery address;
• The billing address if different from the delivery address.

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price, excl. VAT;
• Total without VAT;
• VAT amount;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – term if applicable;
• Self-billing – term if applicable;
• Tax Representative information.

Foreign Currency Invoice in Malta  

In Malta, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in EUR.

VAT Return in Malta 

Domestic returns

Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Malta rules, in general, submit declarations:

1. Quarterly;
2. Annually.

Penalties for late reporting and omitted declarations 

Taxpayers should charge Malta VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame. 

If a taxable person makes a late payment, late registration, or erroneous declaration, different types of penalties could be assessed against the non-compliant taxable person. 

The fine in the scope of EUR 700 to EUR 3,500, upon confirmation of liability, shall be pronounced for the following offenses:

• Failure to apply for registration by the deadlines stipulated;
• Failure to keep records and supporting documents;
• Failure to issue a tax return.

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