CORPORATE TAXATION

All entities, including Partnerships, Companies or individuals must register with the VAT office to comply with the local Value Added Tax legislation of 1998.

If you are already vat registered

Even though you may already be VAT registered it is important that you verify whether you need to register again for the purpose of any new business venture.

If the new business activity is in addition to other business activities carried out under an existing VAT number, the same number should be used for the new activity. However, the registered person must inform the Department of VAT in writing about the nature of the new business activity. If the new business activity will be carried out under a new Limited Liability Company, then a new registration is required.

Vat compliance

Individuals or entities that are VAT registered have to regularly send in a VAT Return that would include the total sales, purchases and VAT credit or payable amounts. This declaration would normally have to be sent in every 3 months unless otherwise indicated by the VAT office. The VAT Return can be submitted electronically through the VAT Online Services via Personal Services / Assigned or Delegated Services.

If Maltese entrepreneurs wish to claim VAT refund they may do so by filling in the VAT Return. Sole traders who employ more than 10 employees and companies must submit the VAT refund online through VAT Online Services via Personal Services / Assigned or Delegated Services respectively.

EU businesses wishing to claim MT VAT may apply for the VAT refund (8th Directive) by means of the web portal of their Member State. A thorough explanation is given in the APPLYING FOR A VAT REFUND (8TH Directive) section below.

Non EU businesses claiming MT VAT may apply for the VAT refund (13th Directive) by following this link.

For further information on VAT refund click here.

For further details on VAT reporting click here to view the Guide to Submitting a VAT Return.

What is VAT taxable and what is exempt?

In Malta there are 3 different rates of VAT, as well as a group of products and services that are exempt, as shown in the table below:

- 18% - Standard Rate

- 7% - Accommodation in Hotels and other licensed premises for tourists as specified in terms of the Malta Travel and Tourism Act

- 5% - The supply of electricity, certain confectionery, medical accessories, printed matter, items for the exclusive use of the disabled, domestic care services, minor repairs of bicycles, shoes, leather goods, clothing and household linen, admission to Museums, art exhibitions, concerts and theatres and the importation of works of art, collector’s items and antiques.

- 0% - Exports, intra-community supplies, local and international transport, supply and repair of commercial aircraft and vessels, duty free supplies, food, pharmaceuticals, investment gold, goods under a customs duty suspension regime, and the supply of goods on board cruise liners

- Exempt - Immovable property, non-commercial rent, services by non profit making organisations, insurance, banking and investment services, sports, religious and cultural activities, lotteries and public postal services, health, welfare, education, public broadcasting and the supply of water by a public authority, letting of space for artistic and cultural activities.

What kind of books and records do you need to keep and for how long?

You need to keep the following records and documents:

- Copies of fiscal receipts issued

- Fiscal Cash Register (FCR) readings

- All Customs import/export documentation

- Purchases and Sales Invoices

- Debit and Credit Notes

- Cash Books and Petty Cash Books

- Day Purchases and Sales Ledger

- Value Added Tax account and Annual VAT account

- Bank account connected with the business

- Any other records and documents relevant to your economic activity

- You are obliged to retain these records and documents for six years as the Department may request them for inspection.

However in cases where the provisions for partial attribution on capital goods and on immovable property applies, the six years shall start to run from the end of the five year period or twenty years period as the case may be.

Applyng for a VAT refound (8TH DIRECTIVE) 

Taxable persons who incur VAT in connection with their business activities in a Member State in which they do not make supplies of goods or services are entitled to deduct the VAT charged in that Member State. This "deduction" is by means of a refund of VAT from the Member State in which the VAT was paid. 

Online services related to the VAT Refund can be found here. 

Any objections to the decision taken by the Commissioner for Revenue may be appealed through a legal professional online.

The services for the legal professionals can be accessed here.

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Tax registration

Any business which is resident in Malta, or which is not resident in Malta but carries on any activity in Malta, is required to register for a tax registration number with the Commissioner for Revenue. Some small businesses can be registered as VAT exempt. These still need to register, but neither charge nor claim back VAT. The myGov.mt website provides many services including an E-Vat online service, for which you must first register.

Tax Compliance

Tax returns are filed annually either within 9 months of the company's year end or by the 31 March - whichever is earlier. They can be submitted directly to Commissioner for Revenue or filed electronically, for which you will receive a 'real time' receipt. The Commissioner for Revenue website provides detailed guides on rights and obligations related to income tax returns. Further details may be viewed on the Tax Compliance Unit website.

How to complete your corporate tax return?

The CFR Services Online provides a service for corporate taxpayers to submit their Tax Returns online. Every company applying for this service is provided with its own personalised tax return. The personalised e-Return incorporates, besides other details, the names of directors and shareholders according to the Registrar of Companies, the income tax payments for the year and a specific key unique to the company and may only be used for electronic filing.

The e-Return includes a number of verification checks that indicate to the Tax Practitioner any possible mistakes in calculations and legislative or accounting principles that may result in additional taxes for the taxpayer.

One of the main advantages of e-Return is that its completion may be carried out offline, thus reducing the connection costs of filling out this multiple page document and need not be done at one go. Click here for a guide on how to submit your corporate tax return online.

Provisional tax

Companies are required to pay provisional tax during the year in which income is earned. Such tax is held on account until a self-assessment is determined by the company. The final balance of tax must be paid by the same deadline applicable to the submission of the tax return. Payments can be made online through the Commissioner for Revenue website or through internet banking. Companies also have to deduct tax and national insurance contributions from their employees' salaries.

Excise Duties

Operators trading in excise goods and services (alcohol, tobacco and oil products) on which duty is suspended or unpaid require authorisation by the Customs Division.

Taxation System

Income tax in Malta is covered by the Income Tax Acts, which comprises the Income Tax Act and the Income Tax Management Act.

The Income Tax Act covers the obligations of income tax, the calculation of chargeable income and the tax thereon; It contains provisions on allowable deductions and available exemptions.

The Income Tax Management Act regulates the administration of Income Tax. It provides the administrative framework for the filing of tax returns, issue of assessments and procedure of appeal.

The withholding of the income tax from the employee's wage may be carried out by the employer and reported using the services offered online by the Commissioner for Revenue.

Direct taxes

Under Malta's tax system, the total income from all sources, including capital gains, is aggregated. Exemptions and allowances are deducted and the final income is taxed according to the rates applicable. Companies are taxed at a flat rate of 35%, certain types of investment income is taxed at source at 15% and transfers of immovable property in Malta at 12% of the transfer value.

A company's reserves are allocated to 5 tax accounts, namely the:

• Final Tax Account (FTA)
• Immovable Property Account (IPA)
• Maltese Taxed Account (MTA)
• Foreign Income Account (FIA)
• Untaxed Account (UTA)

Indirect Taxes

VALUE ADDED TAX is levied under a self-assessment system - those registered establishing their own VAT liability, transferring the net amount due or claiming a net tax refund. VAT is charged by the person providing the goods or service at the time the transaction is taking place. The rate of tax is regulated by Art 19 and the Eighth Schedule of the VAT Act at either 18%, 7%, 5% or 0%. VAT is regulated by the Value Added Tax Act.

EXCISE DUTIES are governed by the Excise Duty Act. The category of goods and services considered as excisable are alcohol and alcoholic beverages, manufactured tobacco, energy products and mobile telephony services. The rates of duties applicable to such goods and services can be found in the Schedules attached to the Excise Duty Act.

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