VAT first came out in 1995 and on 1 May 2004, the Maltese system was fully adapted and harmonized with EU legislation.
VAT is payable on the import of goods, intracommunity transactions, sale of goods and supply of services in exchange for a fee.
The standard VAT rate in Malta is 18%, 5% for certain goods (electricity, medicines, services and cultural goods, etc.) and 7% for the hotel and restaurant industry.
VAT is overseen by the Commissioner of VAT, whose powers and jurisdictions include providing information to the Controller of Customs and to the Commissioner for Revenue, performing inspections, accessing properties, performing assessments and applying penalties. Appeals to any decisions made by this authority can be made to the Administrative Revenue Tribunal in terms of tax matters and the decisions of this Tribunal can be sent to the Court of Appeal, but only with respect to matters of law.
Registration for VAT purposes
Unlike other countries, registration for VAT purposes is not obligatory, nor does it automatically ensue from establishing the entity. Nevertheless, registration for VAT purposes shall be obligatory for any entity registered in Malta that undertakes an operation subject to taxation; registration must take place within a period of 30 days from the date of such an operation.
Any entity that is not registered in Malta must also fulfil this obligation if it performs any supply subject to taxation in Malta and, as such, shall be obliged to make the respective payment.
VAT registration involves the obligation to keep VAT accounts, make VAT payments and entitlement to receive VAT reimbursements.
In principle, VAT returns must be submitted on a quarterly basis, along with their respective payments. Under certain circumstances returns may be annual (exempt entities and small businesses) or monthly (activities that generate the right to receive regular reimbursements).
Submission of VAT returns and respective payments must take place within a period of 6 weeks after the end of the respective period. Delay in VAT payment shall be subject 0.54% per month in penalty interest.
In addition to regular accounting records, the taxpayer must also keep updated VAT accounting records listing the total tax, input and output for each period, with reference to the accounting entries for each transaction.