Changes to VAT Rules for Small Undertakings in Malta

Introduction

As of January 1, 2025, Malta has introduced significant changes to its VAT rules for small undertakings through Act XXXVIII of 2024 and several legal notices. These amendments aim to streamline VAT obligations, align with EU directives, and ensure compliance with updated financial thresholds.

Key Legislative Changes

The primary legislative updates include:

• Act XXXVIII of 2024 amending the VAT Act.
• Legal Notices 345-353 of 2024 modifying various schedules within the VAT framework.

New VAT Exemption Threshold

• The VAT exemption threshold for small undertakings is now set at €35,000.
• This threshold applies uniformly to service providers and goods suppliers.
• Businesses exceeding this threshold during a calendar year must register under Article 10

Definition of Domestic Annual Turnover

The calculation of domestic annual turnover includes:

1. The value of taxable supplies of goods and services made in Malta.
2. The value of transactions exempt with credit under specific conditions.
3. The value of certain immovable property, financial, and insurance transactions when not considered ancillary.
4. The turnover of related persons, where applicable.

Turnover of Related Persons

• If an entity registered under Article 11 is controlled by another entity or individual (more than 10% ownership), the turnover of related entities is aggregated.
• In the case of partnerships, the turnover of all partners is combined to determine VAT registration requirements.

Impact on Exempt Transactions

• Previously excluded turnover from exempt without credit transactions, such as long-term residential property rentals, is now included in the turnover calculation.
• Entities engaged in these transactions may need to reassess their VAT status

New Article 11A and 11B Registrations

• Article 11A: Allows Maltese small enterprises with an annual Union turnover not exceeding €100,000 to apply for VAT exemption in other EU Member States where they supply goods or services, provided they meet the respective Member State’s small enterprise exemption criteria.
• Article 11B: Permits small enterprises established in other EU Member States to benefit from VAT exemption for supplies made within Malta, without the need for Article 10 registration, as long as they are registered under Article 11B.

Obligations for Small Enterprises

• Entities registered under Article 11 must issue fiscal receipts for both B2B and B2C transactions.
• The deadline for submitting the annual declaration remains 15th February, with potential extensions.
• Businesses with a turnover below €7,000 may opt out of filing an annual declaration

New Compliance Measures

• Tax in Danger: Under revised rules, where there is a risk of tax evasion or loss of VAT revenue, the Commissioner may designate certain transactions as “tax in danger.” In such cases, the recipient of the supply must self-account for VAT, ensuring that VAT liability is properly settled. The Commissioner has the authority to determine when such measures are necessary to safeguard tax revenue.

• Monitoring Turnover: Businesses must actively monitor their turnover throughout the year and register under Article 10 immediately upon exceeding the threshold.

Conclusion: These VAT changes are designed to enhance transparency and reduce administrative burdens for small businesses while ensuring compliance with EU VAT regulations. Businesses should assess their turnover, review their VAT obligations, and seek professional guidance where necessary.

How Can NCMB Assist SMEs

Navigating VAT regulations can be complex, and our company is here to support SMEs in adapting to these new changes. We offer:

• VAT Registration & Compliance: Assisting businesses with Article 11, 11A, 11B, and Article 10 registrations, ensuring compliance with the updated VAT framework.
• Turnover Monitoring & Advisory: Helping SMEs track their turnover to avoid unintentional threshold breaches and unnecessary penalties.
• Tax Advisory Services: Providing expert guidance on how VAT changes affect your business operations and offering solutions tailored to your needs.
• Fiscal Receipt & Reporting Assistance: Ensuring that businesses meet their obligations for issuing fiscal receipts and filing annual declarations.
• Cross-Border VAT Compliance: Supporting businesses that supply goods and services across the EU in navigating the complexities of VAT exemptions and registration requirements.

Our team of VAT specialists is dedicated to ensuring your business remains compliant while optimizing your VAT obligations. Contact us today to discuss how we can assist you in managing these regulatory changes effectively.