Company officers must remain vigilant of their obligation to register for VAT purposes in Malta, along with submitting their periodic VAT returns on time to remain compliant with the statutory requirements, keep their company in good standing and avoid the imposition of the applicable penalties.
If an individual or entity engages in an economic activity, regardless of the purpose or outcome, they are classified as a taxable person. A taxable person established in Malta must register for VAT purposes under Article 10 of the VAT Act if they make taxable supplies for consideration within Malta, except where such supplies are exempt without the right to deduct input VAT.
Alternatively, if the annual turnover does not exceed the prescribed threshold, registration may be opted for under Article 11 as an exempt ‘small enterprise.’
Moreover, persons established outside Malta may also be required to register for VAT in Malta if they are liable to account for VAT within Malta.
Most private companies in Malta are required to file their VAT returns on a quarterly basis. However, the specific submission deadlines applicable to your company are determined by a careful review of the VAT Act, particularly the article under which your company is registered for VAT purposes.
The following practical scenarios provide the necessary insights into the main applicable VAT articles, helping you first ascertain under which article your company operates and outlines the relevant deadlines, ensuring that you always stay on top of your VAT submission deadlines:
Article 10 Registration
A taxable person is required to register for VAT under Article 10 of the VAT Act if they supply goods and/or services for consideration in Malta, unless such supplies are exempt without credit.
Registration must be completed no later than 30 days from the date the supply is made. However, if the person exclusively provides exempt supplies without credit, VAT registration under Article 10 is not required.
Registration under Article 10 is unique in that it permits the recovery of VAT incurred on purchases. Before claiming input VAT, the taxable person must confirm that the nature of their activity entitles them to VAT recovery. Additionally, unless the supplies fall under the exempt categories specified in the Fifth Schedule of the VAT Act (either exempt with or without credit), VAT must be charged on all supplies deemed to take place in Malta.
A person registered under Article 10 will:
- Be assigned a VAT number beginning with the ‘MT’ prefix;
- Be obligated to charge VAT on all taxable supplies within Malta;
- Be entitled to claim input VAT on purchases related to supplies that confer a right to VAT recovery;
- Be required to issue fiscal receipts or tax invoices, as stipulated in the Thirteenth and Twelfth Schedules of the VAT Act, respectively, for all supplies made;
- Submit periodic VAT returns electronically, typically covering three-month periods, by the 22nd day of the second month following the end of the respective tax period, or as otherwise directed by the Commissioner.
Article 11 Domestic Small Enterprise VAT Registration
If your annual domestic turnover from supplying goods and/or services does not exceed the prescribed threshold, you may elect to register for VAT under Article 11 of the VAT Act as a ‘small enterprise’. This registration exempts you from charging VAT on your supplies, but also means you cannot recover VAT incurred on purchases related to your economic activity. VAT registration under Article 11 is not required if you supply only exempt supplies without credit.
A person registered under Article 11 will:
- Receive a registration number without the ‘MT’ prefix, which is not valid for intra-Community trade;
- Need to assess whether an additional Article 12 registration is necessary when engaging in intra-community trade;
- Be obligated to issue fiscal receipts according to the Thirteenth Schedule of the VAT Act, but not tax invoices under the Twelfth Schedule;
- Submit an annual simplified declaration (tax return) by February 15 of the following year. If submitted electronically by March 22, no administrative penalties apply.
As of 01st January 2025, the domestic annual turnover threshold for persons seeking to register under Article 11 has increased to EUR 35,000.
This framework is designed to reduce the administrative burden on small enterprises while maintaining compliance with Maltese VAT regulations.
Article 11A EU SME Scheme Option
A new Article 11A has been introduced for taxable persons established in Malta who qualify as small undertakings under the Sixth Schedule of the Value Added Tax Act (VATA) and wish to participate in the special small undertakings scheme. To qualify, the taxable person must engage in the supply of goods or services that take place outside Malta but within the European Union. Registration under this scheme becomes effective only from the date notified by the Commissioner.
The registration number issued under Article 11A will mirror the registration number assigned under Article 10 or 11, with the addition of the suffix “EX.”
Taxable persons applying for registration under Article 11A qualify as small enterprises if they meet the following criteria:
- Their Union Annual Turnover in the previous calendar year does not exceed the Union threshold of €100,000;
- They make supplies in at least one EU Member State where they are not established and qualify for that Member State’s small enterprise exemption;
- The value of supplies in that Member State does not surpass the applicable exemption threshold.
An Article 11A registration would bring about similar VAT return submission obligations attributable to a registration under Article 10, in that a taxable person registered under Article 11A will be required to submit declarations for each calendar quarter, by not later than the last day of the month following the end of the respective calendar quarter
This scheme facilitates simplified VAT compliance for small Maltese businesses engaged in cross-border intra-EU trade
Article 11B Small Enterprises Not Established in Malta
Article 11B introduces a new VAT registration category for small enterprises established in another EU Member State that make supplies in Malta. Under this provision, a person established outside Malta is deemed to have applied for registration once the Commissioner is notified by the Member State of establishment of the taxpayer’s intention to benefit from the small enterprise exemption.
Registration under Article 11B may be approved by the Commissioner if the applicant meets the following criteria:
- their Union annual turnover in the preceding calendar year is below the Union threshold of €100,000; and
- their domestic annual turnover in Malta during the preceding year does not exceed the domestic threshold of €35,000.
The registration becomes effective only from the date the Commissioner notifies the Member State of establishment of the approval, and such notification must be issued within 15 working days from receipt of all necessary information.
This framework aligns Maltese VAT registration with EU directives, facilitating simplified VAT compliance for small cross-border enterprises supplying goods or services in Malta
Article 12 Registration
Goods:
If you are a non-taxable legal person or a taxable person not registered under Article 10 and intend to make intra-community acquisitions of goods in Malta exceeding €10,000 in a calendar year, you are required to register for VAT under Article 12 and self-account for VAT on each taxable acquisition.
Services:
If you are a taxable person established in Malta who is not registered for VAT under Article 10 and you receive services subject to Maltese VAT under the place of supply rules, you must register for VAT under Article 12 by no later than the date you receive the service.
Unlike intra-community acquisitions of goods, there is no turnover threshold for services. By way of example, if a taxable person in Malta makes a one-time acquisition of a service valued at €100 from a non-Maltese supplier who is not registered under Article 10, and the place of supply is Malta with VAT due, the recipient must register under Article 12 and self-account for VAT.
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 01st 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.