Your Tax Obligations

Tax Registration

Any business resident in Malta or carrying out an activity in Malta is required to register for a tax registration number with the  Inland Revenue Department (IRD)

Foreigners are also required to complete the Expatriates Registration form (https://ird.gov.mt/downloads/other/expatriates_form_editable.pdf), which must be submitted to the IRD together with a copy of an official identification document.

The following cases do not require registration:

• EU Nationals in possession of a Social Security Number
• Third Country National in possession of a work permit
• Persons who are purchasing or selling property in Malta and who are not registered taxpayers can obtain their TIN from a secure online registration system accessed by the Notary.
• Maltese self-employed.

Foreigners providing services on a temporary basis are required to register depending on the frequency of visits to Malta to conduct business and whether the income arising in Malta renders the person taxable in Malta.

A business activity that employs persons requires a PE number (https://ird.gov.mt/downloads/fss/pe_registration_comp.pdf), obtained from the IRD on submission of registration of employer documentation accompanies with official identification.

Corporate Taxation System

The Income Tax Act (http://justiceservices.gov.mt/DownloadDocument.aspx?app=lom&itemid=8658&l=1) and the Income Tax Management Act (http://justiceservices.gov.mt/DownloadDocument.aspx?app=lom&itemid=8658&l=1) comprise Malta’s income tax framework. The Income Tax Act covers one’s income tax obligations, the methods of calculation of chargeable income and the tax thereon, as well as allowable tax deductions and exemptions. The Income Tax Management Act regulations the administration of Income Tax by providing the administrative framework for the filing of tax returns.

Direct Taxes

Under Malta’s tax regime, 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 applicable tax rate.

• Companies are taxed at a standard 35% tax rate.
• Certain types of investment income is taxed at sources at 15%.
• Transfers of immovable property in Malta at 12% of the property’s value.

A company’s reserves are allocated to 5 tax accounts:

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

Provisional Tax

Companies are required to pay provisional tax during the year in which income is earned. Such tax payments are held on account until a self-assessment is completed. The final balance must be paid by the same deadline applicable to the submission of the tax return.

Indirect Taxes

An indirect tax is a tax collected by an intermediary (business) from the person bearing the ultimate burden of the tax (consumer). In Malta there are two types of indirect taxes namely Value Added Tax (VAT) and Excise Duties.

Value Added Tax (VAT)

All business entities and individuals are required to register with the VAT office and comply with the VAT legislation of 1998. (http://vat.gov.mt/en/Online-Services/Pages/Online-Registration.aspx)

Following registration of a business, one must request a new VAT number.  Applicants require official identification documentation and a copy of the Memorandum and Article of Association in the case of registration of a company or partnership. The VAT department also require a business plan, the business’ start date and planned turnover.

VAT is charged under a self-assessment system, as regulated by the Value Added Tax Act. (http://justiceservices.gov.mt/DownloadDocument.aspx?app=lom&itemid=8872&l=1)  VAT is charged by the person providing the goods or services contemporaneously with the transactions. VAT rates are regulated by Article 19 of the Eighth Schedule of the VAT Act. The standard VAT rate is 18% but certain groups of products are taxable at 7%, 5% or 0%.

Supplies that are taxable at 7% are:

• Accommodation in a hotel or guest house
• Accommodation in any premises, where for the purpose of that accommodation, it is required that the premises be licensed in terms of the Malta Travel & Tourism Act.

Supplies that are taxable at 5% are:

• Supply of electricity
• Confectionery and other edible items
• Medical Accessories
• Printed Matters
• Certain Items for the exclusive use of the disabled
• Minor repairing of bicycles, shoes and leather goods, clothing and household linen (including mending and alteration)
• Domestic care services such as home help and care of the young, elderly, sick or disabled
• Admission to museums, art exhibitions, concerts and theatres.

The following supplies are rated at 0% (i.e. Exempt with credit, where no VAT is charged on the value of the supply but the registered person is entitled to claim back input VAT incurred in the provision of that supply)

• Food for human consumption
• Pharmaceutical products
• International passenger transport
• Exports
• Intra-community supplies of goods

Following registration of a business, one must request a new VAT number. Applicants require official identification documentarian and a copy of the Memorandum and Article of Association in the case of registration of a company or partnership. The VAT department also require a business plan, the business’ start date and planned turnover.

An SME or individual whose turnover is below the established entry threshold, according to the type of business activity, may register under Article 11 of the VAT Act to be exempted from charging VAT when supplying taxable goods or taxable services. A person registered under Article 11 may not claim deduction of any input VAT incurred in his economic activity. Once registered under Article 11, an entity remains so as long as the turnover does not exceed the entry threshold shown below.

A registered SME must furnish the Commissioner of Inland Revenue with a tax return for every tax period by not later than the 15th day of the second month following the month during which that tax period ends.

Any incorrect declaration in a tax return may be corrected by means of an adjustment in a subsequent tax return.

The electronic process for VAT Deceleration takes approximately 15 minutes to complete.

Failure to furnish a tax return for a tax period within the time defined timeframe shall be liable to an administrative penalty in an amount equivalent to the higher of:

• 1% of the excess of the output tac over the deductions (disregarding any excess credit brought forward from a previous period)
• € 20 for every month that elapses from the date by which the tax return should have been furnished.

If embarking on a new business activity in addition to the original business activity, the same VAT number should be used however the VAT Department must be informed in writing about the nature of the new activity. If the new business activity is carried out under a new limited liability company established to carry out such activity, a new registration number is required.

Excise Duties

Excise Duties are regulated by the Excise Duty Act

Tax Compliance

Tax returns are filed annually within 9 months of the company’s year-end or by 31st March – whichever is earlier through electronic submission. (https://ird.gov.mt/)  The IRD website provides guides on the rights and obligations related to income tax returns. Further details may be viewed on the Tax Compliance Unit website. (https://mfin.gov.mt/en/tcu-home/Pages/default.aspx)

Completing a Corporate tax Return

IRD provides an online submission service for corporate tax returns. Every company may obtain a personalised tax e-return upon registration. The personalise e-return incorporates names of directors and shareholders, income tax payments for the year and a specific key unique to the company.

The e-return include numerous verification checks that flag any potential mistakes in calculations and legislative or accounting principles to the tax practitioner. The completion of the e-return may be done offline. A guide is also available. (https://ird.gov.mt/downloads/irsol/guide_companyreturn.pdf)

Intrastat

Instrastat is the system used to collect information on the trade in goods between countries of the European Union and replaced customs declarations. The information in respect of arrivals and dispatches must be submitted to the VAT Department on the appropriate forms.

Arrivals must be reported on form VAT/AS/101/2004. (https://nso.gov.mt/en/nso/Intrastat/Documents/Arrivals.pdf)

 Dispatches must be reported on form VAT/DS/102/2004. (https://nso.gov.mt/en/nso/Intrastat/Documents/Dispatches.pdf)

VAT registered entities are ultimately responsible for ensuring that ALL arrivals or dispatches of goods is duly recorded for Intrastat purposes. Declarations are accepted both on a consignment basis and up to 10 working days after the reference months.

Arrivals of goods requiring authorisation for entry into the country for security, sanitary or health reasons are required to obtain such authorisation and provide required documentation prior to the entry of the goods into Malta.

Source: Business First