What is Malta’s VAT Rate
The standard rate for value added tax (VAT) in Malta is 18%. Malta also has reduced VAT rates of 5%, 7% for certain products and services. Refer to the table below to identify the rate applicable to your type of digital product or service.
|Type of Digital Product or Service||VAT Rate|
|Standard Rate (if none of the above)||18%|
Who Needs to Implement VAT
Supplies Within Malta
Registration for VAT and charging VAT may be voluntary if revenues fall below certain thresholds. Please consult your local tax advisor to learn whether any thresholds apply. If your business is registered for VAT, a supply between two parties in Malta is always charged the VAT at Malta’s rate.
If a customer in Malta buys a 12.00 EUR eBook from a supplier also based in Malta, the total price increases by 0.60 (5%) to 12.60 EUR. It’s up to the customer to determine whether he or she is eligible to reclaim the VAT charged. This is something to be dealt with between the customer and the tax administration, not with the supplier.
It is common in the EU to always display prices inclusive of VAT. You may want to take this into consideration when pricing your products.
Since Malta (ISO 3166 country code “MT”) comes under the European Union VAT regime and is part of the EU single market economy, you can file VAT returns with the simplified Mini One Stop Shop (MOSS). We are going to explain VAT MOSS in more detail below.
VAT directives are issued by the EU which lay out the principles of the VAT regime to be adopted by the member states. These directives take precedent over the local legislation. In January 2019, a new threshold to ease the regulatory tax burden of micro-businesses and SMEs came into effect:
- If your annual turnover for digital products or services sold in the EU is below 10,000 EUR, you can charge the VAT rate of your home country for all intra-community supplies.
- Once you pass the 10,000 EUR threshold, you must charge the VAT rate of your customer’s country.
Supplies by Non-EU Businesses
“I don’t charge VAT because my business is neither registered in Malta nor in the EU.” This is a common excuse by a large percentage of online businesses operating outside the EU, but they are risking to be prosecuted by authorities.
If your business is based in the United States, Australia, Canada or any other non-EU country, you are responsible to collect and remit VAT as soon as you get your first customer residing in Malta. Article 58 of the Directive 2006/112/EC places VAT requirements on non-EU suppliers to consumers (non-taxable persons), where earlier this was not required.
There are no thresholds, meaning that your first Euro of revenue originating from a customer residing in the EU must already be accounted for VAT.
Why is VAT Important for a Business
Supplies to End-Consumers
Before you charge VAT, you have to know which VAT rate is applicable for the customer, so your invoices always state the correct VAT amount. The applicable rate is determined by the location where your customer normally resides.
You must collect two non-conflicting pieces of evidence that confirm your customer’s location and keep them on file for 10 years. An evidence could be:
- the billing address of the customer (valid only if provided by a 3rd party)
- location of the customer’s bank
- country of credit card issuance
- the Internet Protocol (IP) address of the device used by the customer or any method of geolocation
- country of the SIM card (in cases where the purchase was made on a mobile device)
- the location of the customer’s fixed land line through which the service is supplied to him
- other commercially relevant information (e.g. product coding information which electronically links the sale to a particular jurisdiction)
If your business has less than 100,000 EUR in cross-border sales of digital products annually, then you only need to collect one piece of customer location evidence. All evidence must be gathered from a third party, such as the bank’s address or IP address, and not from the customer directly. After all, the customer could twist the facts to evade paying tax.
Mind that the concept of VAT is not to tax you as a business, but to tax your customer. VAT is a consumption tax specifically for the end-consumer. You can see yourself as the middleman that collects VAT on behalf of the various tax administrations. VAT is generally a zero-sum for businesses, so you don’t have any monetary disadvantage other than the efforts for implementation and compliance.
The collected VAT has be recorded and remitted to the relevant tax administrations every month or every quarter, or through VAT MOSS every quarter.
Supplies to Business or Corporate Customers
If you have a business or corporate customer, the VAT will be zero-rated. This is a mechanism called ‘reverse charge’ whereby the obligation to report and pay VAT is reversed to the buyer. In this situation, you need to
- show evidence that a customer has actively communicated the VAT number to you (it is not enough to search for the customer’s VAT number on the internet),
- state the VAT number on the customer invoice to legitimize zero-rating and
- file a European Commission Sales List (ESL) for zero-rated sales.
Using an API such as the Vatstack Validations API can help you save hours of manual work and reduce risks of non-compliance. You can use Vatstack’s API to check and validate a customer’s VAT number. All records are stored securely in the cloud for exporting and reporting purposes.
When to Submit VAT Returns in Malta
Local businesses have to file VAT returns for VAT collected by end-consumers in Malta. They are filed on a monthly or quarterly basis depending on the size of the business. The local tax administration will officially determine the interval.
VAT MOSS filings for cross-border sales are due electronically on the 20th day following the end of a each calendar quarter.
- 1st calendar quarter by 20 April,
- 2nd calendar quarter by 20 July,
- 3rd calendar quarter by 20 October,
- 4th calendar quarter by 20 January (of the following year).
Even if no sales were carried out with EU customers in the relevant calendar quarter, a ‘nil return’ must be submitted. Failing to file will trigger reminders and potential fines.
Where Can I Register for VAT
Before you can charge VAT or validate the VAT number of other business customers, you have to register your business for VAT. Businesses located in Malta register for VAT with their local tax administration and obtain a unique VAT identification number called Vat reg. no. (or Vat No. in short).
There are two types of schemes:
- Union VAT MOSS: for businesses based in the EU, including Malta
- Non-Union VAT MOSS: for businesses based outside the EU
Union VAT MOSS
If you carry out intra-community supplies, you can activate your Vat No. for Union VAT MOSS. Activation usually requires a separate application which must be submitted within 10 days of the first sale to an EU customer. Once activated, you’ll file a VAT return for VAT collected from customers in Malta and a separate VAT MOSS return for all intra-community supplies.
Non-Union VAT MOSS
VAT registration is mandatory for non-EU businesses supplying telecommunications, broadcasting and electronic (TBE) services (otherwise known as ‘electronically supplied services’, or ESS) with the first sale to a customer in the EU.
You can register for Non-Union VAT MOSS with any tax administration of an EU member state. A MOSS is the tax administration of your choice to which you remit all collected VAT centrally and it will re-distribute the funds to the respective EU member states. English speakers generally prefer to register for VAT MOSS with the UK or Ireland. Since Brexit, the safer option is Ireland.
How to Check VAT Numbers in Malta
To do it manually, you will need the Vat No. of your customer to search on the VAT Information Exchange Service (VIES) of the European Commission. You can search and validate one number at a time. The VIES portal may experience scheduled maintenance and downtime periods on a regular basis and you would not be able to validate the number during that period. Just try again at another time.
You can also validate VAT numbers using Vatstack Validations from within the dashboard or use our mass validation service to check VAT numbers in bulk. Our bulk validation service is easy to use by uploading a CSV file. Vatstack intelligently handles government service downtimes by continuously running the process in the background for automated re-validation.