Understanding the Maltese VAT System: What Small Businesses Need to Know

Running a small business in Malta comes with many responsibilities — and one of the most important is understanding how Value Added Tax (VAT) works. Whether you’re a self-employed freelancer or managing a growing company, getting VAT right is crucial for staying compliant and avoiding penalties.

In this article, we’ll break down the Maltese VAT system in simple terms and explain what every small business owner should know.

1. What Is VAT in Malta?

VAT (Value Added Tax) is a tax on goods and services collected at each stage of the supply chain — from production to sale. In Malta, VAT is administered by the Commissioner for Revenue (CFR).

When you sell a product or service that’s subject to VAT, you charge your customer VAT, collect it on behalf of the government, and then pass it on to the CFR through your VAT return.

2. VAT Registration: Who Needs to Register?

Not every business in Malta must register for VAT. The rules depend on your annual turnover and type of activity.

Here’s a quick overview:

• Article 10 Registration (Standard) – For businesses whose annual turnover exceeds €30,000 (for goods) or €20,000 (for services). You charge VAT on your sales and can claim VAT back on your expenses.

• Article 11 Registration (Small Undertakings) – For small businesses below the threshold above. You don’t charge VAT, but you also can’t reclaim VAT on your purchases.

• Article 12 Registration (Intra-EU) – For businesses involved in intra-community trade (buying/selling within the EU).

If you expect to exceed the threshold, it’s best to register early to avoid fines and interest on undeclared VAT.

3. VAT Rates in Malta

Malta applies different VAT rates depending on the type of goods or services you provide:

VAT Rate	Description	Examples
18% (Standard Rate)	Applies to most goods and services	Consultancy, retail, repairs
7% (Reduced Rate)	Mainly for certain accommodation and tourism services	Hotel stays, holiday accommodation
5% (Reduced Rate)	Applies to selected items	Electricity, certain medical items, books
0% (Zero Rate)	Exports and international transport	Exported goods, intra-community supplies

Some services (like education and healthcare) are exempt from VAT altogether.

4. How to File VAT Returns

Once registered, you’re required to submit VAT returns — usually every three months.

Your VAT return includes:

• VAT you charged on sales (output VAT)

• VAT you paid on business purchases (input VAT)

You then pay (or reclaim) the difference.

VAT returns are submitted online through the CFR’s VAT e-Services portal.

Missing a filing deadline or payment can lead to penalties, so it’s worth setting reminders or working with an accountant to stay on track.

5. VAT Invoicing Requirements

Every VAT-registered business must issue proper VAT invoices that include:

• Your business name, address, and VAT number

• The customer’s details (if applicable)

• Invoice number and date

• Description of goods/services supplied

• Amount before VAT, VAT rate, and total amount

• The phrase “VAT-exempt” if applicable

Having clear and compliant invoices not only helps your clients but also protects you in case of an audit.

6. Common VAT Mistakes to Avoid

Even experienced business owners can make VAT errors. Some of the most common include:

• Missing registration when crossing the threshold

• Charging the wrong VAT rate

• Forgetting to include EU transactions in VAT returns

• Not keeping records for at least six years (a legal requirement in Malta)

Keeping accurate digital records and reviewing your VAT position regularly helps you avoid these pitfalls.

7. How an Accountant Can Help

VAT can be complex — especially when your business grows, trades with the EU, or provides services in multiple sectors. A qualified accountant can:

• Handle VAT registration and filings

• Review your invoices and ensure compliance

• Identify VAT savings opportunities

• Communicate with the CFR on your behalf

This frees up your time so you can focus on running your business.

✅ Final Thoughts

Understanding the Maltese VAT system is key to keeping your small business compliant and efficient. Whether you’re just starting out or expanding, taking VAT seriously will help you avoid unnecessary costs and build a stronger financial foundation.

If you’re unsure about your VAT obligations or need help registering, filing, or reviewing your VAT returns, our team at MCP Accountancy is here to help.📞 Get in touch today to book a consultation and make sure your VAT is in order.