Value Added Tax (VAT)

VALUE ADDED TAX – MALTA

 

Frequently Asked Questions

 

Who is liable to register for VAT?

 

If you are a person performing an economic activity, whatever the result or scope of that activity, then you are considered as a taxable person. Under normal circumstances, you are required to register for VAT under article 10. If your annual turnover does not exceed the established threshold (see below) then you may opt to register under article 11 as an exempt person.

However, if you are established in Malta and your turnover from such economic activity does not exceed 7,000 during one year, then you are not required to register for VAT. This does not apply to persons performing an economic activity in Malta but who are not established in Malta.

 

What is an economic activity?

 

An economic activity means an activity carried on by a person, who is not an employee (see article 5(5) for the definition of employee), and consisting of any one or more of the following:

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

 

The activities of a public authority assuming functions assigned to it by law shall not be deemed to be an economic activity except as and to the extent provided in the First Schedule of the VAT Act and except where such treatment as non-taxable persons would lead to significant distortions in competition.

 

Under what registration type should you register?

 

There are three types of Registrations for VAT as follows:

(a) If you are supplying goods or services and your annual turnover exceeds the established exempt threshold below, you have to register for VAT under article 10, by which you would be liable to charge VAT on your taxable supplies and you could claim back the VAT you incur in the course of your taxable activity under certain conditions.

A person registered under article 10 would:

  • Have a VAT number with the prefix MT;
  • Have to issue fiscal receipts or tax invoices, as the case may be, on all supplies made by him;
  • Normally submit a VAT return for a tax period of three months by the not later than 6 weeks after the end of the tax period, or as directed by the Commissioner.

 

(b) If you are supplying goods or services and your annual turnover does not exceed the established entry threshold (see below), you may register for VAT as exempt under article 11. You will not charge VAT on your supplies and will not be able to claim back the VAT you incur in the course of your economic activity. However, you may instead opt to register for VAT under article 10 to charge VAT and claim a deduction of the VAT incurred in the normal way. If you decide to opt for the latter option, then you are required to remain under article 10 for a minimum of thirty-six months. It is only after that period that you would be able to register under article 11 and provided that the exit threshold is not exceeded. On the other hand, if you are established in Malta and your annual turnover does not exceed 7,000, then you are not required to register for VAT.

A person registered under article 11 would:

  • Have an identification number without the MT prefix;
  • Have to issue fiscal receipts or tax invoices, as the case may be, on all supplies made by him;
  • Submit a declaration (simplified tax return) at the end of each calendar year which must be submitted by the 15th March of the following year.

 

(c) If you are a non-taxable legal person or a taxable person not registered under article 10, and you make intra-community acquisitions of goods in Malta the value of which exceed €10,000 since the start of the year, then you are liable to register for VAT under article 12 and pay VAT in Malta each time you make such intra-community acquisitions.

If you are registered under article 11 as an exempt taxable person and you intend to make Intra-Community Acquisitions and pay VAT thereon in Malta, then you need to register also under Article 12 to obtain a valid identification number for this purpose and qualify for such an arrangement.

 

What are the entry and exit thresholds?

 

The entry threshold is the amount of turnover per annum under which a person could opt to register as an exempt person under article 11 (see above). This threshold depends on whether you are supplying goods, services with high value added, or services with low value added. The exit threshold is applied in the case where a person who is registered under article 10 would change his registration to article 11 (exempt).

Services with low value added are those services where the value of the service includes goods which are incorporated in the value of that service, e.g. an electrician or catering services. Other services are services usually with high value added where the value of the service has a very high content of value added, i.e. the value of the goods incorporated with the supply are minimal, e.g. services of an accountant or a lawyer.

The different thresholds are as follows:

Economic Activity Entry Threshold Exit Threshold
Economic activity consisting mainly of supplies of goods €35,000 €28,000
Economic activity consisting mainly of supplies of services with low value added €24,000 €19,000
Other economic activities €14,000 €12,000

 

Where a person registered under article 11 provides both goods and services, the applicable threshold shall be determined in accordance with the principal nature of the supply, taking account of the total value of all the supplies.

The turnover of a business is 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.

 

The thresholds for each economic activity pertaining to the same category are assigned by the Department and apply across the board for that category.

 

What documents do I need to register for VAT?

 

A Copy of the I.D Card/Passport of the applicant or in the case of a Limited Liability Company, of the authorised representative vested with the legal representation must be presented at the time of registration. In the case of a limited liability company or a registered partnership, a copy of the Memorandum and Articles of Association should be produced.