Malta’s VAT system complies with the EU VAT Directive as a member of the EU. In general, VAT is levied on all intra-EU purchases of products made in Malta as well as on all supplies of goods and services made in Malta for payment in the course or advancement of a taxable person’s business. Malta’s normal VAT rate of 18% is the second-lowest in the EU. Tariff cuts of 7% are in effect for the supply of lodging for tourists and at 5% on specific commodities, including as electricity, confectionery, medical equipment, products for the sole use of the disabled, books, some works of artwork, antiques, and collector’s products, as well as domestic care services and entry to cultural events.
Numerous supplies are exempt from VAT, with and without credit, representing a substantial list. Typically, businesses with a taxable turnover exceeding certain thresholds, those receiving taxable services from outside Malta or intra-EU acquisitions exceeding €10,000 annually, and those engaged in intra-EU supplies of goods and services are required to register for VAT and report such supplies in recapitulative statements.
Businesses qualifying for Maltese input VAT credits may opt to register for VAT even though they are not required to. The recovery of input VAT by a credit against output VAT is made possible through the submission of VAT returns, and excess credits are refundable. The methods established in the 13th VAT Directive or EU Directive 2008/9/EC allow non-Maltese firms to recoup Maltese VAT.
When firms are transferred as a continuing concern, exemption from VAT could be possible.
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VAT in Malta
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