Chapter 3: Penalties – The Cost of Non-Compliance in Malta

If you’ve read this far through our series “The Essential Guide to Keeping a Maltese Company in Good Standing”, it means that you’re on the right path towards understanding how to keep your company in good standing and ensure compliance with statutory requirements. You’ve now developed a clear understanding of the key obligations that arise the moment a company is registered in Malta and familiarised yourself with the filing submission deadlines associated with these obligations. We’ve also emphasised that failing to adhere to such deadlines, will result in the imposition of fines and penalties, which, as outlined below, can reach substantial amounts. Gaining insight into these penalties, we hope, will motivate you to keep your company in good standing. If you want to protect your business and avoid potentially thousands in penalties, we encourage you to continue reading this article and understand the significant financial impact that non-compliance can have on your company.

This article aims to provide a structured overview of the fines and penalties that come into effect the moment the statutory deadlines discussed earlier are not adhered to. This article also seeks to provide an overview of how the penalty structure enforced by local authorities functions in cases where the required filing submissions remain outstanding for extended periods.

Late filing penalties: Annual Return & BO Forms

The penalties for the late filing of forms, namely the Annual Return and the BO Form as well as those imposed for the late submission of the annual financial statements, are principally enforced by the MBR. In line with one of MBR’s main priorities, which is to have as many entities as possible in good standing, the imposition of these penalties strongly supports this objective. Essentially, the imposition of such penalties reinforces the importance of the timely submission of these documents, encouraging companies to maintain good standing and keep their records up to date on the public registry in a consistent manner.

Let us now examine the actual penalties and assess their potential severity. Starting with the corporate governance obligations, the penalty for late filing of the Annual Return consists of a default penalty of €25, along with a daily charge of €0.25 until the actual filing date and can reach up to a maximum penalty value of €2,329.37 per annual return. Even more significant is the penalty for late filing of a BO Form, which amounts to a default penalty of €500 and a daily penalty of €5 until the filing date.

Your read that right. If the filing of these forms is left outstanding for extended periods, the applicable penalties can accumulate to substantial levels, a scenario we strongly advise clients to avoid. This is also why we recommended addressing these obligations first, ensuring you understand what’s required (what obligations arise) to keep your company in good standing, before diving into your specific tax matters. If neglected, these penalties may even exceed the actual tax you owe. Whenever in doubt or needing confirmation that you are managing your obligations correctly, and adhering to the required deadlines, it’s always best to seek the professional support from your accountant or advisor immediately.

Companies undergoing liquidation, or those already been liquidated and having filed the necessary documents with the registry, are not required to submit these forms if they fall due after the effective date stated in the liquidation documents. While company liquidation is another key topic covered in this article, it’s key to point out that these forms will not need to be filed if their due date falls after the submission of the liquidation documents, meaning that no late filing penalties will apply.

Late filing penalties: submission of financial statements

Now let’s turn our attention to the penalties applicable for the late submission of a company’s annual financial statements. These mainly consist of a default penalty of a €25, along with a daily charge of €0.50 per day until the filing date and can potentially reach a total yearly penalty value of €207.50.

The table below provides a clear and structured reference for company officers, assisting them in determining the applicable penalties for late filing.

Tax penalties

So far, we’ve covered the penalties associated with the late filings, which are rigorously enforced by the MBR. The key takeaway is how substantial these can become if company directors fail to address them promptly. As we guide our clients through the process of keeping their company in good standing, we’re also aware of the severity of the tax and VAT penalties, imposed by the Commissioner for Revenue (CFR), which can also escalate significantly if the underlying obligations remain outstanding.

We frequently come across cases where clients struggle to understand the penalty structure for late corporate tax filings. To simplify and clarify this, we have compiled and consolidated key data surrounding this matter, as presented in the table above, to provide a clearer overview of the applicable specifics.

The penalties for late corporate tax filing follow a different structure compared to other penalties. Instead of incurring a default penalty and accruing daily charges, they are determined based on the number of months the return remains outstanding, categorised into timeframe clusters ranging from six to twelve months. While the structure may seem straightforward at first glance, confusion often arises regarding which penalties apply to manual submissions, and which apply to electronic filings.

With the exception of the first penalty tier of €50, the timeframe for applying penalties is based on the manual submission deadline rather than the extended online submission deadline. To clarify, for corporate tax returns with a manual submission deadline of 30^th September 2025 for instance, the first penalty tier amounting to €50, will apply if the tax return is not submitted by the extended online submission deadline of 30^th November 2025. The next penalty tier of €200 applies if the corporate tax return has been outstanding between 6 to 12 months from the manual submission deadline of 30^th September 2025.

For instance, if a company does not submit its tax return by 30^th March 2026, the penalty will increase to €200. It is also key to note that these charges are not cumulative, therefore, the maximum penalty for late submission is capped at €1,500 per corporate tax return.

VAT penalties

Malta imposes various penalties for VAT non-compliance under the VAT Act Cap. 406, including:

• Late or Failure to Register: Penalties equal to the higher of 1% of VAT due for the first period after registration or €20 per month of delay, capped based on VAT due, with a maximum of 20% of VAT payable or €250 if VAT is €2,000 or less.
• Incomplete or Incorrect VAT Returns: A penalty of 20% of the understated output VAT plus overstated input VAT, reduced to 10% if corrected before provisional assessment.
• Non-Compliance with Invoicing and Record-Keeping: Criminal fines ranging from €700 to €10,000, possible imprisonment, and additional fines for endangered tax amounts (at least twice the amount endangered, with a minimum fine of €1,000). Daily fines for ongoing non-compliance and increased penalties for repeat offenses may apply.
• Non-Payment or Late Payment of VAT: Malta increased the interest rate for missing or late VAT payments from 0.33% to 0.6% per month as from 01^st September 2022.
• Late or Non-Submission of VAT Returns: Penalty of the higher of 1% of VAT due or €20 per month of delay, capped at €250 per return or minimum of €50 where VAT due is less than €250.

Administrative penalties introduced under Article 38A impose fines for VAT not fully paid by due dates, with penalties being the higher of 1% of the unpaid VAT amount or €20 per month, capped at €250 per return, alongside existing interest charges.

Criminal sanctions may be applied in serious cases with potential imprisonment. Some penalty relief measures and agreements with the Commissioner may be available to taxpayers.

But fines and penalties are only the beginning. In the next article of this series, we’ll explore the wider repercussions of non-compliance – including restrictions on directors, banking risks, and the potential loss of good standing.