Value Added Tax in Malta

The main law governing the value added tax in Malta is the VAT Act and its subsidiary legislation which provide for the registration of companies and individuals for this tax. According to the law, both natural persons and legal entities involved in an economic activity, are deemed taxable. The following activities fall in the category of supply of goods and products liable for VAT: the supply of personal services; the exploitation of property with the purpose of obtaining revenue in a continuous form; the provision of facilities based on subscription.

Our lawyers in Malta can offer more information about carrying out economic activities under the VAT Act.

Categories of VAT registration in Malta

Companies and individuals are required to register for VAT in Malta under one of the following categories: 

• those supplying goods or services who will register for VAT under Article 10;

• those supplying goods or services who will register for VAT under Article 11;

• those with intra-community supply of goods and services in Malta who must register for VAT under Article 12.

Maltese companies registering for VAT under Article 10 will receive a VAT number with the MT prefix which can also be used as an EORI number. Maltese companies registering for VAT under Articles 11 and 12 will receive VAT numbers without the MT prefix.

For each of the above category, the legislation imposes certain thresholds. These are:

• activities consisting in the supply of goods or services which can bring annual turnovers, with an exit threshold of 28,000 euros and an entry threshold of 35,000 euros;

• activities consisting in the supply of goods or services with a low value added tax, with an exit threshold of 19,000 euros and an entry threshold of 24,000 euros;

• other economic undertakings with an exit threshold of 12,000 euros and an entry threshold of 14,000 euros.

Documents required when registering for VAT in Malta

Companies and individuals registering for the Maltese VAT are required to submit the following documents with the VAT Department:

• copy of ID card or valid passport of the applicant in the case of natural persons;

• copy of the ID card or valid passport of the company’s representative in the case of companies;

• copy of the statutory documents in the case of partnerships and companies.

The VAT registration procedure takes around three or four weeks.

Who must register for VAT in Malta

Companies with profits above EUR 14,000  per year are subject to VAT registration in Malta. As for the sole traders in Malta, even if the VAT registration is compulsory once the economic and financial activities are registered, there are also exemptions from this kind of taxation and that is related to a certain category of sole proprietorships: medical practitioners, particular insurance firms. We mention that the standard VAT rate in Malta is set at 18% and it is applicable to numerous goods and services with the scope of selling them on the Maltese market.

VAT rates in Malta

The standard VAT rate in Malta is 18%, but there are also two reduced rates of 7% and 5%. The reduced rate of 7% is applied to tourism accommodations, if a license from the Malta Tourism Authority (MTA) has been obtained. The 5% reduced rate applies to:

• medical equipment,

• electricity,

• certain foods,

• care services for minors, old or sick persons,

• works of art,

• printed materials,

• access fees in museums, concerts and theatres.

Goods and services exempt from VAT in Malta

There are a series of zero rated supplies or exempt with credit and they include:

• exports,

• international traffic and transportation,

• gold,

• local transportation,

• intra-Community goods and services,

• certain ships and aircrafts,

• certain categories of foodstuff,

• packaged medicines.

The products and services exempt without credit include:

• real estate property (excepting tourism accommodation with a MTA license, parking spaces, property rental by a limited company for economic activities),

• insurance and financial services,

• cultural and religious facilities,

• lottery and gambling,

• postal services,

• educational services,

• health facilities,

• the supply of water by authorities.

Maltese VAT rates for yacht leasing

The standard VAT rate in Malta is 18% and is applied on the percentage of the lease agreement based on the use of the boat while in the EU waters. According to the type of boat, the percentages apply as it follows:

• for yachts over 24 meters, the percentage is 30%,

• for yachts between 20 and 24 meters - 40%,

• for yachts between 16 and 24 meters - 40%,

• for boats between 10 and 20 meters - 50%,

• for boats between 12 and 16 meters - 50%,

• for yachts up to 10 meters - 60%,

• for yachts between 7.51 and 12 meters registered in the Maltese Commercial Register - 60%,

• for boats up to 7.5 meters registered in the Commercial Register - 90%.

Yachts sailing in protected waters only benefit from 100% on the percentage of lease in EU waters. We can also assist with registration for EORI numbers in Malta.

Eligibility criteria to benefit from the Maltese VAT treatment

In order to qualify for the VAT on yacht leasing, a company must respect the following criteria:

• the boat must be in Malta at the beginning of the lease agreement,

• one of the parties concluding the lease agreement must be a Maltese company,

• the lessee must obtain approval and confirmation from the Commission of VAT with respect to the applicable rate,

• the lessee must pay an initial contribution worth 50% of the value of the yacht,

• the lease installments must be paid on a monthly basis for 36 months at most,

• the lessor must make a profit from leasing the boat worth more than the boat’s value.

For assistance with the VAT registration procedure, please contact our Maltese law firm.