A Complete Guide to Efficient VAT Compliance and Financial Optimization in Malta
Many small businesses are unfamiliar with VAT compliance and are unsure if it applies to them. If you think you don’t need to register for VAT, it’s a good idea to double-check. Failure to register at the small business VAT level can have harmful consequences, including heavy penalties and fines.

Malta’s VAT  taxation system is one of the essential elements of business taxation to get right. It might be a significant accounting burden, but it can also impact your competitiveness and profit margins. Handling VAT is essential to running any successful small business – it’s not just about pleasing HMRC.

In this post, we’ll define VAT, explain why VAT compliance is important to understand for your business and discuss whether you need to be VAT registered.

What is VAT?

The usual VAT rate is 20%, but some products and services have different rates. VAT (Value Added Tax) is levied on most products and services at the point of sale.

In other words, VAT raises the price of most consumer transactions. The VAT rate has been decided at the rate of 20%. VAT doesn’t apply to businesses. It is taken from customers and paid to HMRC. This is why VAT is known as an indirect tax.

Understanding Malta’s VAT System

Malta’s VAT system follows the laws of the European Union as its member. Here’s an explanation of how VAT registration works in Malta, including the thresholds, incentives, and what’s required to register. Businesses must understand the fundamentals of Malta’s VAT legislation to run their operations efficiently. Understanding these guidelines simplifies the process of conducting business in Malta.

Malta’s VAT Rates

Malta follows the VAT rate of 18%, which is considered one of the lowest rates in European Union member countries. Some goods and services follow a lower tax rate of 7%, 5%, or no tax (0%). If anything does not fall into one of these lower tax brackets, it is subject to the ordinary 18% rate.

VAT at 7% Malta

In Malta, tourist lodgings and sports facilities are charged a 7% VAT.

VAT at 5% Malta

Malta has a 5% lower VAT rate, which applies to the following items:

  • specialised food goods, such as confectionary items,
  • medical equipment and related accessories,
  • equipment designed for those with disabilities,
  • printed materials, such as newspapers and books,
  • electricity,
  • works of art, antiques, and collectable things.

VAT rate of 0% Malta

Malta has the lowest VAT rate in the EU, at 0%, and it applies to intra-community transport as it does in other EU member states. This rate also includes processed food, prescription drugs, and the operation of food manufacturing plants.

What is the procedure for registering for VAT in Malta

What is the procedure for registering for VAT in Malta?

To register for VAT in Malta, you can use the internet portal available at Internet VAT Registration (gov.mt). These are the documents that must be submitted to the Malta Office of the Commissioner for Revenue for the registration process:

  • A copy of the articles of incorporation.
  • A copy of the entry in the company’s registration.
  • A copy of the identification document of the individual who signs the registration application.

Malta VAT Returns and Registration Options

The VAT legislation in Malta possesses three distinct categories of VAT registration, with the choice based on a company’s yearly turnover and the nature of its operations.

What is the deadline for Maltese VAT payment?

When filing the VAT return, every taxable person liable for the tax must pay the net amount of VAT. When submitting the VAT return, every taxable person liable for the tax must pay the net amount of VAT. Members may, however, impose an alternative date for payment of this sum or collect instalments (Article 206 of the VAT Directive).

How can I reclaim VAT in Malta?

There are various ways to get Maltese VAT refunds. The practical procedures for reclaiming foreign VAT will change based on whether your company is established in Europe and/or registered for VAT in Malta:

  1. If your company has a VAT number in Malta, it must file a refund application in the form and timeframe specified by local regulations. A VAT credit is generally carried forward to the next period unless a tax refund is requested.
  2. If your firm is based in Europe and does not have a VAT number in Malta, it must request an electronic VAT refund from its home country. , in the form and within the time constraints specified in Directive 2008/9.
  3. In case your firm is based outside of Europe and has no VAT number in Malta. In that case, it may be necessary to designate a tax representative to submit its refund application in the form and time frame required by the 13th Directive.

A Complete Guide to Efficient VAT Compliance and Financial Optimization in Malta

Is VAT in Malta reclaimable on all expenses?

VAT is paid on purchases, imports, or intra-community acquisitions of goods and services by a foreign company and can be reclaimed if the expenses are for taxable activities and the necessary documentation is present.

Input VAT cannot be reclaimed on the following expenses:

  • Unless purchased for resale, alcoholic beverages
  • A lessee leases a car.
  • Offering receptions, entertainment, or hospitality
  • A person providing transportation or entertainment to his employees.

Need assistance with Maltese VAT compliance?

The first step towards knowing your VAT compliance requirements is researching Maltese VAT legislation. Outbooks has various accounting and tax options that can assist your organisation depending on where and how you trade.


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