Malta VAT Guide for Businesses
€ 0 for digital goods
WEBSITE:Ministry for Finance
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No matter where you live or where your online business is based — if you have customers in Malta, you gotta follow Maltese VAT rules. That’s what this guide is for! This guide includes everything you need to know about VAT in Malta, from Ramla Bay to St George's Bay.
First let’s confirm what you’re trying to sell in Malta. Are you selling digital products?
A digital product is any product that’s stored, delivered, and used in an electronic format. These are goods or services that the customer receives via email, by downloading them from the Internet, or through logging into a website.
The European Commission has four criteria that will determine whether something is a digital product. Ready?
- It is not a physical, tangible good.
- It’s essentially based on IT. The offering could not exist without technology.
- It’s provided via the Internet or an electronic network.
- It’s fully automated or involves minimal human intervention.
You’re probably consuming and using digital products all day long, whether or not you realize it. Here are some common ones on the market today:
- E-books, images, movies, and videos, whether buying a copy from Shopify or using a service like Netflix. In tax language, these products are in a category usually called, “Audio, visual, or audio-visual products.”
- Downloadable and streaming music, whether buying an MP3 or using a service like SoundCloud or Spotify. Of course, these products also fall in the audio category.
- Cloud-based software and as-a-Service products, such as Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS).
- Websites, site hosting services, and internet service providers.
- Online ads and affiliate marketing. Income from these services can be considered taxable under digital tax policies.
Heads up: you might also hear digital goods referred to as “digital services,” “e-goods”, or “e-services.” All of these terms refer to the same thing.
Not sure if what you sell is considered a “digital product?” Check out our explanation of what a digital product is exactly.
EU VAT for digital products
Value-Added Tax is the consumption tax throughout the European Union, levied on almost everything sold in the EU. That’s probably not news to you! But there are specific rules around digital products, which you must follow closely to stay tax compliant. Luckily EU digital taxes come down to one main factor: it doesn’t matter where you are, it matters where your customers are. Your customer’s location determines what VAT you charge.
So if you sell digital products to a customer in Malta, you must charge the VAT rate. Simple, right?
It’s simple in theory. But in practice, EU VAT has a bit more complexity. Each EU member has their own rate, so you must know the accurate local VAT rate for each of the 28 countries. Plus, you don’t need to add VAT to every sale. We’ll go into more detail about the differences between B2C and B2B sales in the section titled, “How to collect VAT in Malta.”
To learn more, check out the Ultimate Guide to EU VAT digital taxes.
Registering for EU VAT
The first rule of selling to customers in Malta, or anywhere in the EU for that matter, is that you must be registered with an EU VAT number. The good news is that VAT registration is pretty simple!
This VAT number registers you in the EU tax system as a legal business. The number tracks your business through the system: the taxes you pay, the tax credits you receive, plus the tax you charge from customers.
If you’re a European business, we assume you’ve already registered for VAT in your home country. The next step is to register with the One-Stop Shop (OSS), so that you can easily sell your digital products in any other EU member state - including Malta!
If your business is outside of Europe, you need to register with an OSS in order to get a VAT number and “set up shop” in the EU.
The One-Stop Shop is an EU-wide tax system that allows you to consolidate all of your EU VAT in one single tax return, even if your customers live in multiple different countries. Brilliant, right? Each member state has an OSS, which you can access online. When you register for a certain OSS, that member state becomes the homebase for all your tax operations in the EU.
If you’re a non-EU business, you can register with OSS in Malta or any other EU member.
How to register for VAT OSS in Malta
If you’re determined to make Malta your member state of identification, then you can sign up at the Maltese Tax Agency.
Note: You do not need a fiscal representative to handle your taxes in Malta or anywhere else in the EU. That is, you aren’t required to have one. Some tentative foreign business owners may hire a tax representative for peace of mind. Taxes can be an intimidating and confusing topic, especially in a foreign language! Makes absolute sense.
But because the EU VAT OSS portals are all available online, and many are offered in English, it’s definitely possible for you to handle these foreign taxes on your own. It’s just up to you!
Collecting VAT in Malta
Essentially, you collect VAT by adding it to the total of every sale. When the customer pays you for your product — voila! You’ve officially collected EU VAT.
But here there’s a catch that we mentioned earlier: usually you do charge VAT, but sometimes you don’t. Sometimes it’s on the customer to handle VAT. This depends on whether your customer has a valid VAT number as a registered business.
Are you registered for VAT with the OSS?
If so, then you always charge and collect VAT on every sale in Malta. All of your “domestic” sales get 18% VAT added to the total. That’s pretty simple.
If not — if you’re VAT-registered in any other EU country — then you only collect taxes on B2C sales.
Whenever you sell to a customer who doesn’t provide a VAT number, you add the tax. If your customer is a fellow business, and they’ve provided a valid VAT number, then adding and collecting tax isn’t necessary! For cross-border B2B sales like this, the reverse-charge mechanism kicks in, and the customer will handle VAT for you.
If that’s confusing, you can reduce EU VAT charges down to this rule. If one side of the equation is “yes,” the other side is “no.” Here’s a shorthand guide:
- No VAT number? Yes to adding tax.
- Yes to VAT number? No tax.
VAT invoices in Malta
VAT invoices are the EU’s version of tax receipts. They’re the official record of how much tax you charged and collected, and therefore the official proof of how much tax you owe the government. Kind of a big deal.
Given all that significance, you won’t be surprised to learn there are some rules and stipulations around how to create a VAT invoice and what to do with it.
In order to comply with VAT laws, Maltese invoices must include the following information:
- Your business name and address
- Your business VAT number
- Invoice date
- Invoice sequencing number
- Description of the goods or services
- Rate of VAT applied to each item
- Total amount including VAT
Maltese VAT invoices must be issued within six months after you delivered the product or service. Then you need to store these invoices electronically for ten years. Yes, that sounds excessive, but you must keep them on file in case any authority wants to verify your tax history.
The easiest solution for the VAT invoice would be to use a tax software that automatically generates and sends all invoices (as soon as the sale is complete), and also stores them in the cloud for you. Quaderno does just that, but we won’t go on about it here. :)
Filing VAT returns
EU VAT returns are due quarterly. At the end of each quarter, you have 20 days to file and pay whatever you owe.
- 20 April , for the first quarter ending 31 March
- 20 July , for the second quarter ending 30 June
- 20 October , for the third quarter ending 30 September
- 20 January , for the fourth quarter ending 31 December
This is when the One-Stop Shop scheme really comes in handy! Whether you registered for VAT in Malta directly, or in Ireland, or in Estonia — you file all of your EU taxes, all at once, with that single country’s OSS.
Gather all of your records of VAT invoices. Then go to the online OSS portal of the country where you registered and follow their directions. If you registered in Malta, you can go directly to VAT declaration page of the OSS.
Note: if you made any sales in a different currency (i.e. – in the British Pound, but your OSS uses the Euro), you’ll need to convert those amounts to the official currency of your OSS. Use the European Central Bank’s official exchange rates to make sure your conversions are compliant.
Based on the information you enter, the OSS website will automatically calculate how much VAT you owe. Then you’ll receive instructions on how to complete the one-time payment!
To learn more about VAT returns, take a look at our list of nine common VAT-filing mistakes and how to avoid them.
- The Ultimate Guide to EU VAT digital taxes
- What you must know about VAT if you have customers in Europe
- How to get a VAT number as a non-EU business
- Nine VAT-filing mistakes and how to avoid them
- What’s a digital product, anyway?
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