Company Incorporation and VAT in Malta: A Simple Guide

When setting up a company in Malta, one of the most important (and sometimes confusing) aspects to navigate is Value Added Tax (VAT). While company incorporation is usually the easier part, figuring out VAT registrations, rates and on-going compliance is often where business owners start to scratch their heads.

VAT affects far more than what appears in your tax return. It influences your pricing model, the way you invoice clients and how way you trade both in Malta and internationally. Getting it right from day one isn’t just good practice, it helps you avoid fines, delays and unnecessary stress down the line.

That’s where this guide comes in. We will break down VAT in Malta step by step, so you can spend less time worrying about paperwork and more time building your business.

What Is VAT and Why Does It Matter?

VAT, regulated under the Value Added Tax Act (Chapter 406 of the Laws of Malta), is a consumption tax applied to goods and services. It’s one of those things every business owner has to deal with sooner or later. Once your business is incorporated, VAT compliance isn’t optional, it’s a legal requirement.

In short, VAT might not be exciting, but getting it wrong can be expensive.

VAT Rates in Malta

• Standard Rate: 18%
  Default rate, applied to most goods and services.
• Reduced Rate: 7%
  Applies to, but not limited to, certain tourism-related services, such as accommodation in hotels and guesthouses.
• Reduced Rate: 5%
  Applies to specific categories including, but not limited to, electricity, certain medical supplies, printed books, and some cultural services.
• Exempt without credit
  Applies to, but not limited to, certain financial services, insurance, healthcare, and education. Businesses offering these services cannot claim input VAT.

When Do You Need to Register for VAT?

Mandatory VAT Registration

Businesses must register for VAT in Malta if they:

• Supply taxable goods or services within Malta.
• Exceed the VAT registration threshold (currently €35,000).
• Supply goods or services outside of Malta

The VAT Registration Process

1. Prepare documentation – Business activity details, sales forecasts, and identification documents of directors/shareholders.
2. Submit application – filed with the Commissioner for Revenue.
3. Obtain a VAT number – once approved, you’ll receive a VAT certificate.
4. Start charging VAT – all invoices must include your VAT number, business details and the correct VAT rate clearly displayed.

👉 Timeline: The process is usually immediate but certain foreign ownership structures can take a few days depending on complexity and documentation.

VAT Compliance Obligations

Once registered, businesses must:

• Charge VAT on invoices at the appropriate rate.
• File quarterly VAT returns depending on the VAT periods issued to the applicant by the VAT department
• Pay VAT collected from clients/customers to the CFR by the filing deadline.
• Maintain proper VAT records (invoices, receipts, ledgers).

Miss a deadline or file incorrectly, and penalties will follow.

Common Mistakes Businesses Make

1. Late VAT Registration or Charging the Wrong VAT Rate
2. Late Filing of VAT Returns
3. Inadequate Record Keeping
4. Mixing Business and Personal Expenses

Practical Example: VAT in Action

• A consulting firm incorporated in Malta provides €20,000 in services in a quarter.
• It must charge 18% VAT: €3,600.
• It also spends €5,000 on office equipment (with €900 VAT).
• VAT payable = €3,600 collected – €900 input VAT = €2,700 payable to CFR.

👉 This is how VAT works: businesses collect VAT, reclaim what they can, and pass the rest on to the tax authorities.

Frequently Asked Questions (FAQ)

Q1: Do all incorporated companies in Malta need to register for VAT?
 No. It depends on turnover and activity type.

Q2: How often do I need to file VAT returns?
By default, VAT returns are filed quarterly. However, in certain cases (such as registration under exempt thresholds), annual returns may apply.

Q3: Can I reclaim VAT on all business expenses?
No. VAT on entertainment, personal items and other blocked items listed in the VAT Act cannot be claimed.

Q4: What happens if I miss a VAT deadline?
 Late filing and payment means penalties and interest with no exceptions.

VAT is a key part of doing business in Malta but it doesn’t have to be a headache. Register on time, apply the correct rate, file quarterly and keep good records, and you’ll stay firmly on the right side of compliance.

If managing VAT feels too burdensome, we at NOUV can help. We simplify VAT compliance for newly incorporated businesses, giving you peace of mind while you focus on growth.

NOUV: Your Business Partner

We provide expert VAT and incorporation support to help your company stay compliant:

• VAT registration (mandatory or voluntary)
• VAT return preparation and submission
• Cross-border VAT planning for EU and non-EU businesses
• Compliance monitoring and advisory
• Integration of VAT into your overall tax strategy

Whether you’re a startup or an international company expanding into Malta, we’ll ensure your VAT obligations are handled correctly from the start.

 🔗 Discover our VAT Services: https://nouv.com/services-category/vat-compliance/
 🌐 Get in touch: https://nouv.com/contact-us/