Introduction
Malta, being a Member of the European Union (EU), has its own Value Added Tax (VAT) Legislation which is in accordance with the EU VAT Directive. However, in Malta, unlike in some other EU Member States, a VAT number is not issued automatically upon an incorporation of a Maltese Company. On the contrary, a Maltese VAT number is issued only when there is an obligation to be so registered (i.e. mandatory registration), or if the person1 concerned would like to be so registered (i.e. voluntary registration), subject to certain conditions.
VAT in Malta
Charging provision
According to the Malta VAT Act, VAT is charged, levied, and collected on behalf of the Government upon:
- Every supply of goods and services that takes place in Malta for a consideration by a taxable person2 acting as such, subject to certain exceptions;
- Every Intra-Community Acquisition (ICA) made for consideration [...]; and
- Every importation that takes place in Malta;
The following are some examples where VAT is imposed:
- Supply of goods or services in Malta to Maltese consumers;
- Purchase of goods from a taxable person situated in another EU Member State, which goods are physically transported from that EU Member State to Malta (ICA); and
- Importation of goods in Malta.
Fixed Establishment in Malta
According to the Maltese VAT Act, a taxable person is established in Malta if he has established his economic activity or has a fixed place of establishment from which he carries on that economic activity in Malta.
In line with the above, Article 10 of the EU Council Implementing Regulation (EU) No 282/2011 states that:
‘1. For the application of Articles 44 and 45 of Directive 2006/112/EC, the place where the business of a taxable person is established shall be the place where the functions of the business’s central administration are carried out.
2. In order to determine the place referred to in paragraph 1, account shall be taken of the place where essential decisions concerning the general management of the business are taken, the place where the registered office of the business is located and the place where management meets. Where these criteria do not allow the place of establishment of a business to be determined with certainty, the place where essential decisions concerning the general management of the business are taken shall take precedence.
3. The mere presence of a postal address may not be taken to be the place of establishment of a business of a taxable person.’
It is important to note that some VAT registration types require that such taxable person is ‘established in Malta’ for VAT purposes.
Types of VAT registrations
There are three types of VAT registrations
- Article 10 VAT registration
- Article 11 VAT registration
- Article 12 VAT registration
Different VAT obligations apply for each of the VAT registrations.
Article 11 VAT registration
A person who qualifies to be registered in terms of Article 11:
- Must be a taxable person;
- Must be established in Malta;
- Must qualify as a “small undertaking” (as defined in the VAT Act).
Article 10 VAT registration
Article 10 of VAT Act covers both mandatory and voluntary VAT registrations.
An obligation to register in terms of Article 10 depends on several circumstances such as:
- The type of supplies made;
- Whether the supplier is a taxable person or not;
- Whether the supplier is established in Malta or not.
Mandatory Article 10 VAT registration
The following are some examples where Article 10 VAT registration is mandatory:
- A taxable person established in Malta who is not registered under Article 10 or under Article 11 and who makes a supply for consideration in Malta other than an exempt without credit supply;
- A taxable person established in Malta who is not registered under Article 10 or under Article 11 and who supplies services (for a consideration) within the territory of another Member State for which the tax is payable solely by the recipient;
- A taxable person established in Malta who is not registered under Article 10 shall register under Article 10 is requested by the Commissioner;
- A taxable person who is not established in Malta, who is not registered under Article 10 and who is liable for the payment of the tax on a supply in terms of Article 20 of the VAT Act.
Voluntary Article 10 registration
The Maltese VAT Act also allows for any person who carries on or intends to carry on an economic activity to be so registered.
A voluntary registration under Article 10 will only be accepted by the Commissioner for Revenue if he is satisfied that:
- The person carries on or intends to carry on can economic activity and is likely to be entitled, to claim input tax credits; or
- The person has made or is likely to make ICA
A person who voluntarily would like to register under Article 10 may do so at any point in time. In other words there is no time limit for such registration.
Article 12
Article 12 VAT registrations are relevant to:
- Taxable persons not registered under Article 10;
- Non-taxable legal persons who intend to make ICA of goods in Malta and exceed the applicable threshold of €10,000 in a calendar year.
A voluntary registration under Article 12 is possible at any time in the case of:
- A taxable person who is not registered or liable to be registered under Article 10;
- A non-taxable legal person.
VAT Rates in Malta
The standard VAT rate in Malta is 18%.
A reduced tax rate of 5% applies for some supplies of goods and services (supply of electricity, medical accessories, confectionery and similar items, printed matter and other).
The Licensed Letting of or provision of accommodation and the use of sporting facilities are subject to a VAT Rate of 7%.
VAT Returns
The VAT return of an Article 10 VAT registered person, along with the VAT payment (if any), must be submitted on a quarterly basis and are due for submission a month and a half after the VAT period end, with an extension of a further week for online VAT Return submissions. By way of an example, the VAT return of an Article 10 VAT registered person, covering the period January to March 2021 will be due for submission (including payment) on 15 May 2021, with the online submission being due on 22 May 2021.
Under certain circumstances returns may be delivered annually (Article 11) or monthly (Article 10/12).
Failure to comply with the established deadlines will lead to penalties and/or interest when VAT payments are involved. The VAT Act requires that a VAT registered person to maintain detailed accounts and information.
How to register for VAT purposes in Malta?
VAT registration in Malta is done via the Commissioner for Revenue online web portal.
Taxable persons who are obliged to register for VAT under Article 10, must do so within thirty days from the commencement of the economic activity.
The VAT application includes information about the company and its planned activities and it must be accompanied by some documents to process the application. Such documents include a copy of the company’s certificate of registration, passport or ID card copy of the director and a copy of the company’s Memorandum & Articles of Association. Another document which may be required is a declaration from the director of the company confirming that the effective management and control of the company is in Malta. The VAT department may require evidence of such statement, for example by checking if the company has a unique business address in Malta, or requesting a personal interview with the directors, or looking at the number of employees’ resident in Malta.
Once the registration is submitted and all the required information and/or clarifications have been provided, a VAT number is issued. Upon an Article 10 VAT registration, the taxable person will be assigned with a unique VAT number, which includes the country prefix “MT” followed by a collection of 8 numbers. Amongst other obligations, this will imply that the taxable person would going forward be obliged to submit VAT returns and pay any VAT or entitled to recover input VAT as applicable.
How can we help?
NEWCO assists its clients in their VAT registration in Malta both with the formalities and documentation to be submitted as well as with the physical set-up of the company (finding dedicated office space for the company’s unique business address, hiring personnel, relocating directors and families or any other assistance the company may need when investing in Malta). Contact us for further information.
1The term ‘person’ includes a physical person, a body of persons, a public authority and any entity capable of carrying on an economic activity.
2A ‘taxable person’ is defined as a person who carries on an economic activity, whatever the purpose or result of that activity (i.e. applicable to both individuals and businesses).
