Company in Malta

Malta is an EU Member State with
an Exceptionally Advantageous Tax Regime

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Malta company formation package: 345 EURO – arrangement of Malta company formation and bank account (via officially licensed local member / partner firms) including VAT and Tax registration. "FBS KOTSOMITIS", operating since 1998, is a well-known and established international professional services network with officially licensed and regulated local member / partner firms. Contact us to start process by sending an email to enquiries@fbsmalta.com, by using our contact form or by calling at +356 2338 1500.

Malta Value Added Tax

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Malta Value Added Tax Overview

Maltese VAT is regulated by the Value Added Tax Act – Chapter 406 of the Laws of Malta, periodically updated by means of separate Legal Notices  which transpose EU VAT Directives.

As of 1 January 2010, Council Directive 2008/9/EC of 12 February 2008 laying down detailed rules for the refund of value added tax, provided for in Directive 2006/112/EC, to taxable persons not established in the member State of Refund but established in another Member State, more commonly known as “The Eight Directive” has been transposed by means of Legal Notice 357 of 2009.  Further changes to the Value Added Tax Act, shall be done in furtherance to announced changes to the place of supply rules to be implemented as of 1 January 2013 and 1 January 2015, notably in telecommunications, broadcasting and electronically supplied services.

Other notable changes was the implementation of new rules for recapitulative statements which tansposed Council Directive 2008/117/EC on the common system of value added tax to combat tax evasion connected with intra-Community transactions, whereby as of 1 January 2010, taxable persons making supplies of intra-community supplies of goods to customers identified with a valid VAT registration number in another Member State must file a recapitulative statement which have to be submitted electronically, by not later than the fifteenth day of the month following the relative calendar month.

The Maltese Commissioner of VAT shall issue a VAT certification attesting VAT Registration, provided that the following conditions are met:

  • The applicant is a taxable person carrying out an economic activity;
  • The economic activity has a turnover which exceeds the minimum threshold prescribed by law;
  • The applicant is established in Malta.

In the case of corporate taxable persons, these are, as from date of incorporation, deemed to be  income tax resident in Malta, unless their effective management and control is exercised outside Malta.  However, for the purposes of VAT, the threshold of presence is greater than Income Tax.  The Value Added Tax lays down a number of rules to determine whether a person is “established” in Malta, as follows:-

  • A taxable person is established in a country if he has established his economic activity or has a fixed place of establishment from which he carries on that economic activity in that country, or being a physical person who has not fixed his economic activity or who does have a fixed place of establishment in any country, has a permanent establishment or usually resides in that country;
  • A non-taxable legal person shall be deemed to be established in the country where it is incorporated if it has a fixed place in that countr from which it carries out its activities;
  • A non-taxable physical person is established in the country where he has a permanent establishment or usually resides.

No doubt, the aforesaid provisions have been modelled on the VAT Committee Working Paper No. 634 (2009), which has consistently equated “establishment” to the places of business where the central, core decisions concerning the general management are adopted and where the functions of central administration are carried out.  The place of establishment is inferred from maintaining a sufficient degree of permance, together with the adequate structure – human and technical resources.  It follows that post boxes and brass-plates fall outside the scope of the “establishment test”, and therefore the aforesaid taxable persons shall not be entitled to VAT Registration.

Where a VAT certificate is issued, taxable persons  must submit periodic returns detailing all taxable supplies (sales) and inputs (costs).  Returns are submitted on a quarterly basis.

 

Malta VAT Rates

Article 19 of the Value Added Tax Act prescribes that the applicable rate of VAT shall be of 18%, unless otherwise derogated. The Eighth Schedule to the aforesaid Act, lays down the applicable rate of VAT with regard to certain goods, which derogate from the aforesaid 18% rate. A list of such derogations are set forth in the table below:

Description of Goods Rate
1. Accommodation
The letting of or the provision of accommodation in any premises which for the purpose of the provision of such accommodation is required to be licensed in virtue of the Malta Travel and Tourism Services Act.
7%
2. The supply of electricity 5%
3. Confectionery and similar items 5%
4. Medical accessories 5%
5. Printed matter 5%
6. Items for the exclusive use of the disabled 5%
7. Works of art, collector’s items and antiques 5%
8. Minor repairing of:(a) bicycles;
(b) shoes and leather goods;
(c) clothing and household linen (including mending and alteration)
5%
9. Domestic care services such as home help and care of the young, elderly, sick or disabled. 5%
10. Admission to museums, art exhibitions, concerts and theatres. 5%

 

Malta VAT Exemptions

The Fifth Schedule of the Value Added Tax Act enlists which supplies are exempt from VAT, dividing supplies into Exemptions with Credit and Exemptions without Credit

Exemptions with credit include the following:

  • Exports and like transactions of goods dispatched and transported to a destination outside the EU by and on behalf of the seller;
  • International goods traffic placed under a customs duty suspension regime;
  • Intra-community supply of goods to a person identified on a relative invoice as a person identified for value added tax purposes by a valid and active value added tax identification number;
  • International transport of persons, luggage and motor vehicles accompanying passengers and ancilllary services thereto;
  • Brokers or other intermediaries;
  • Sea vessels;
  • The supply of aircraft destined to be used by airline operators for reward chiefly for international transport of passengers and/or goods;
  • The supply of gold;
  • The supply of food for human consumption (excluding foods supplied in the course of catering);
  • Pharmaceutical goods;
  • The supply of transport by scheduled bus service, inter-island sea transport, school transport and like transport; and
  • Supplies of goods on board cruise liners

Supplies which are exempt without credit include the following:

  • The letting and/or transfer of immovable property;
  • Insurance services;
  • Credit, banking and other services;
  • Cultural and religious services;
  • The supply by non-profit organisations of services related to sport or physical recreation provided to persons taking part in sport or educational eduction;
  • Services related to certain exempt services e.g. supply of staff by religious and philosophical institutions;
  • Services by non-profit making organisations to their members;
  • Lotteries and supplies related to gambling;
  • Postal Services;
  • Health and Welfare;
  • Education or educational research;
  • Broadcasting by public radio and television bodies other than those of a commercial nature; and
  • The supply of water services by a public authority

 

Malta VAT Registration

Registration for VAT is obligatory to all “taxable persons” – defined in Section 5 of the VAT Act as any person (physical or legal), who carries on an economic activity, whatever the purpose or result of that activity.

An economic activity consists of any or more of the following:

  • Any trade or business;
  • Any profession or vocation and the provision of any personal services;
  • The exploitation of tangible and intangible property for the purpose of obtaining income therefore from a continuing basis;
  • The provision by a club, association or organisation of the facilities and advantages available to its members;
  • The admission, for a consideration, of persons to any premises.

However, a taxable person whose turnover does not exceed €7,000 in a relevant period (1 January to 31 December) shall be exempt from registration.

A taxable person established in Malta shall register for VAT must register for VAT within thirty (30) days from the date on which he/she makes a supply for consideration in Malta other than an exempt without credit supply.

Likewise a taxable person established in Malta who supplies services within the territory of another Member State for which the tax is payable solely by the recipient shall apply to be registered for VAT by not later than thirty (30) days from the date on which he/she makes a supply for consideration.

Similarly, small undertakings, which fall below the thresholds set forth in the Sixth Schedule of the VAT Act, may opt for Voluntary Registration with the Commissioner of VAT.

Furthermore, non-taxable legal person intending to make an intracommunity acquisition in Malta must apply for registration by not later than the date of such acquisition.

Taxable persons established in Malta, receiving a service for which they are liable to pay VAT, must also be registered for VAT purposes. This would typically be the case of Remote Gaming Companies and Collective Investment Schemes, which are exempt without credit on supplies, but which exemption is only permissible insofar as supplies acquired are intrinsic and inherent to their licensable activity. Any supply of service which is not intrinsic and inherent to their licensable activity would not be deemed to be an exempt supply and would constitute a liability on these taxable persons to pay VAT.

Registration is submitted by means of a submission of an application form and must be accompanied by the identity card / passport copy of the taxable person. Where the taxable person is a body corporate a copy of the constitutive document, such as the Memorandum and Articles of Association together with a copy of the identity card or passport copy of the director or any other officer of the corporate entity must be submitted with the application form.

The Commissioner of VAT shall issue a VAT certificate, upon satisfaction on the following cumulative conditions:

  • The applicant is a taxable person carrying out an economic activity;
  • The economic activity has a turnover which exceeds the minimum threshold prescribed by law;
  • The applicant is established in Malta.

Although all companies registered in Malta are automatically income tax resident in Malta, unless their effective management and control is exercised outside Malta, for the purposes of VAT, the company must prove and maintain its establishment in Malta, by maintaining its effective management and control in Malta, by having a resident director or by maintaining a presence in Malta by means of an office.

 

Voluntary Registration

A person may opt for registration as an exempt person when the turnover of the business is below the thresholds established in the Sixth Schedule of the VAT Act, set forth below:

  • €35,000 – economic activities consisting principally in the supply of goods;
  • €24,000 – economic activities consisting principally in the supply of goods with a relatively low added value;
  • €14,000 – Any other economic activity.

However, in terms of the Value Added Tax (Exemption from Registration) Regulations 2010 (L.N. 524 of 2010), any taxable person whose turnover does not exceed €7,000 in a relevant period (1 January to 31 December) may not opt for registration.

The turnover of a business is calculated on the total value of sales, excluding:

  • Exempt without credit supplies;
  • The transfer of a business as a going concern;
  • The sale of fixed assets;

Supplies made to the business and deemed to be made by that business under the reverse charge provisions.

Any person whose turnover is below the established entry threshold may apply to register under article 11 of the VAT Act in order to be exempt from charging VAT when supplying taxable goods or taxable services.

A person registered under Article 11 of the VAT Act would not be able to claim deduction or any input VAT that may be incurred pursuant to his economic activity.

A person who is registered as an exempt person is required to:

  • Issue fiscal receipts or tax invoices, as the case may be, on all supplies made;
  • Submit a declaration (simplified tax return) at the end of each calendar year which must be submitted by the 15th February of the following year

An exempt taxable person intending to make Intra-Community Acquisitions and pay VAT thereon in Malta, must also register also under Article 12 to obtain a valid identification number for this purpose and qualify for such an arrangement. Registration under Article 12 is necessary if the total value of such purchases exceeds the threshold of €10,000 since the start of the calendar year.

Right of Registration

Registration for VAT is obligatory to all “taxable persons” – defined in Section 5 of the VAT Act as any person (physical or legal), who carries on an economic activity, whatever the purpose or result of that activity.

An economic activity consists of any or more of the following:

  • Any trade or business;
  • Any profession or vocation and the provision of any personal services;
  • The exploitation of tangible and intangible property for the purpose of obtaining income therefore from a continuing basis;
  • The provision by a club, association or organisation of the facilities and advantages available to its members;
  • the admission, for a consideration, of persons to any premises.

A person who does not carry out an economic activity but who, sporadically, makes an intra-community supply of new means of transport, shall be treated as a taxable person.

Based on this definition, a purely Holding Company, the sole purpose of which is to acquire holdings in other undertakings without involving itself in the management of those undertakings would not qualify as a taxable person, and would therefore not be eligible for VAT registration.

It is however possible for a Maltese company to partake the business of both a holding and a trading company simultaneously.

 

Malta VAT Official Forms

Taxable persons registered for VAT, or who wish to be registered for VAT, have to submit returns by means of bespoke applications or notification forms as may be prescribed in the Malta Value Added Tax Act or by the Malta VAT Department.  A full list of the aforesaid forms and applications, are set forth below:

For bespoke VAT advice, please click here to contact our tax advisors or send us an email on enquiries@fbsmalta.com

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