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If you’re running a Malta-based trading company and dealing with international customers, you might be wondering: Do I need to charge 18% VAT on my invoices, or not? It’s a common question that many of our new clients have, and we’re happy to help clarify!
Let’s break it down in a simple way.
First, What’s VAT?
VAT (Value Added Tax) is a tax added to goods and services in Malta, currently set at 18%. Businesses registered for VAT must charge it on certain transactions- but not all!
Now, let’s get to the good stuff: when you should (and shouldn’t) add VAT to your invoices.
When You MUST Add 18% VAT
- Selling to Customers in Malta
- If your client is based in Malta, VAT applies. Simple! However, to be eligible for a tax refund, one of the key conditions is that you must sell your products or services outside of Malta. If your business operates within the local market, the standard corporate tax rate applies.
- Selling to Private Individuals in the EU (B2C)
- If you sell to individuals (not businesses) in other EU countries, you generally need to charge Malta’s 18% VAT – unless you’ve registered for VAT in their country under the EU distance selling rules.
- Providing Services in Malta (back to point 1)
- If your services are used and enjoyed in Malta, VAT must be charged, even if your customer is abroad. This applies to things like event organization, hotel stays, and certain digital services.
When You Do NOT Need to Charge VAT
- Selling Goods or Services to VAT-Registered Businesses in the EU (B2B)
- If your customer is a VAT-registered business in another EU country, you can apply the reverse charge mechanism, meaning 0% VAT rate is added. Make sure to include your customer’s valid VAT number on the invoice! This is known as Intra-Community 0% supply, Reverse Charge whereas recipient is liable for VAT. The VAT is payable under reverse charge by invoice recipient.
- Buying Goods or Services from VAT-Registered Businesses in the EU (B2B)
- If you purchase goods or services from a VAT-registered business in another EU country, the reverse charge mechanism applies. This means your supplier will apply a 0% VAT rate on invoices issued to your Malta company, referencing its Malta VAT number.
- Providing Services to Non-EU Customers
- If your client is outside the EU and the service doesn’t relate to property or events in Malta, no VAT is required.
Key Takeaways
- Malta & EU B2C? Charge VAT.
- EU B2B with VAT number? 0% VAT rate, reverse charge applies.
- Non-EU customer? No VAT.
- Exporting goods outside the EU? No VAT.
- Providing services in Malta? VAT applies!
- Selling goods in Malta? VAT applies!
Keeping track of VAT rules can be tricky, but once you get the hang of it, it’s pretty straightforward. If in doubt, check with 1st Step, your trusted advisor, and stay on the safe side. We offer a comprehensive range of accounting services, including the preparation and submission of VAT declarations in Malta. Ensuring your VAT compliance is our priority. Happy invoicing!
Click here to view the March newsletter
