VAT Returns & Recovery in Malta
Maltese VAT periods last for a quarter, although the VAT Department may allow taxpayers to submit their VAT returns annually in specific situations. The VAT returns must be filed by the 15th day of the second month following the end of the tax period, along with any payment that is due to the Commissioner of VAT.
Businesses registered under Article 11, which are small undertakings, must submit a yearly VAT return.
Read more about VAT recovery and VAT returns in Malta in our comprehensive guide below.
VAT Returns in Malta
By February 15 of the year after the year in which the transactions were conducted, an annual VAT declaration must be completed. This yearly declaration indicates the total VAT taxable transactions filed monthly in the previous year.
To encourage taxable individuals to file their VAT returns online, the VAT Department offers a seven-day extension to those who use the Department’s electronic portal.
Corrective Return
Mistakes can be amended in future VAT returns without any negative repercussions, provided that the following criteria are met:
- The error should not be more than 5% of the total output/input VAT reported in the initial VAT return.
- The correction should be made in a subsequent VAT return that begins no more than six months after the end of the original VAT return where the mistake occurred.
If these conditions are not fulfilled, the errors will need to be rectified by submitting a correction form, which may lead to penalties for inaccurate declaration.
Interests and Penalties
According to the Value Added Tax (Rate of Interest) Regulations, L.N. 52/2014, as amended by the Value Added Tax (Rate of Interest) (Amendment) Regulations, 2019, L.N. 303/2019, any unpaid VAT incurs interest at a rate of 0.33% per month or partial month during which the payment remains outstanding.
A taxable individual who fails to register or submit a VAT return within the stipulated timeframe will be subject to an administrative penalty. The penalty amount will be whichever is higher between:
- 1% of the output tax over the deductions, disregarding any excess credit carried forward from a previous tax period, as reported in the return.
- 20 euros.
These penalties are applicable for every month or partial month between the deadline for submitting the VAT return under the VAT Act and the date of submission to the VAT department. The maximum penalty amount is 250 euros.
Selling in Malta?
VAT Recovery in Malta
In general, a taxable person in Malta may deduct input tax on expenditures associated with its registered operations from the output VAT levied on a supply made by that person. VAT charged on products and services delivered in Malta, VAT paid on items imported into Malta, and any reverse-charged VAT on services given from outside Malta are all examples of input tax.
Individuals registered under Article 10 of the VAT Act that produce taxable or exempt with credit supplies, may claim input tax on expenses that are directly and solely related to their operations.
To claim an input VAT credit, a taxable person must show that the input tax was chargeable on supplies of goods and services, intra-Community acquisitions, or importations of goods that have been, or will be, used by him in the course or furtherance of his economic activity.
A claim for input VAT, for instance, must be accompanied by a tax invoice for the tax of goods or services provided to him, as well as intra-Community purchases made by him. A document of importation identifying the taxable person as the importer in respect of the tax on the importation is a requirement for filing an input VAT claim for importations.
Non-deductible Input Tax
In general, VAT spent on the following supplies is not allowed as a credit:
- Non-business expenditures.
- Vehicle purchase, repair and maintenance, leasing, gasoline, and rental (excluding commercial vehicles).
- Alcohol and cigarettes.
- Business and employee leisure.
- Antiques and works of art.
Download the Maltese VAT Guide
VAT Refunds
VAT refunds for Resident entities
When the input VAT for a tax period surpasses the output VAT for the same period, the resulting surplus credit should be repaid as a refund no later than five months after the deadline to submit the VAT return for that tax period, or from the day the return was submitted, whichever comes later. This excess credit is claimed as a refund on the taxpayer’s regular VAT return by entering a negative amount in the field indicating the net VAT obligation.
In instances where a refund is due, interest is accrued at the statutory rate from the time the refund is due until it is paid. However, if the taxpayer does not provide the necessary information or proof as required by the Commissioner to validate the claim, no interest is owed.
The VAT department of Malta transfers VAT refunds directly into the taxpayers’ bank accounts within the Single Euro Payments Area (SEPA). A letter containing a PIN code and instructions for submitting SEPA information online is dispatched by the Department to those taxpayers who qualify for refunds.
VAT refunds for foreign entities
The rules regarding VAT refunds for taxable entities not based in the refunding Member State and not established in any other Member State are guided by the EU’s 13th Directive. Under these rules, Malta will provide refunds for VAT paid by taxable entities not based within the EU for goods or services supplied by a taxable entity within Malta, under certain conditions.
The applications should cover a period of not less than three consecutive calendar months within one calendar year and not more than one calendar year (for instance, from November 1 to December 31). The submission must include original invoices and an official certificate in a specified format.
Since Malta does not maintain any reciprocal agreements, reimbursements are only possible if a taxable entity based in Malta would be entitled to a corresponding benefit for the VAT or similar tax imposed in the claimant’s country of establishment, according to the regulations of that country.
Last Updated: 28/12/2023
Disclaimer
The information provided by Global VAT Compliance B.V. on this webpage is intended for general informational purposes only. Global VAT Compliance B.V. is not responsible for the accuracy of the information on these pages, and cannot be held liable for claims or losses deriving from the use of this information. If you wish to receive VAT related information please contact our experts at support@gvc.tax
