VAT Guide

VAT Registration for Freelancers in Malta

The Tax Compass Team

January 15, 2025

8 min read

What is VAT Registration?

Value Added Tax (VAT) registration is a process that allows businesses and freelancers to collect VAT on their sales and reclaim VAT on their business purchases. In Malta, VAT is administered by Malta Tax and Customs, and registration becomes mandatory once certain thresholds are met.

When Must You Register for VAT?

Mandatory Registration

According to Article 10 of the VAT Act, you must register for VAT in Malta if:

• You make a supply for consideration in Malta (other than an exempt without credit supply) and are not already registered
• Your annual turnover exceeds €35,000 (the domestic threshold)
• You expect your turnover to exceed €35,000 in the next 12 months
• You provide services to other EU countries where the tax is payable solely by the recipient
• You make intra-community acquisitions in Malta worth more than €10,000 annually

Voluntary Registration

Even if your turnover is below €35,000, you can choose to register for VAT voluntarily under Article 10(5). This might be beneficial if you have significant VAT-able business expenses or if your clients prefer working with VAT-registered suppliers.

Small Enterprise Scheme

Under Article 11, taxable persons with a domestic annual turnover not exceeding €35,000 may qualify for the small enterprise scheme, which provides exemption from VAT but also prevents claiming input tax credits.

Benefits of VAT Registration

VAT Rates in Malta

How to Register for VAT

Step 1: Gather Required Documents

• Identity card or passport
• Business registration certificate (if applicable)
• Bank account details
• Proof of business address
• Description of business activities
• Expected annual turnover

Step 2: Submit Application Electronically

According to Article 13, applications for registration must be submitted electronically through the established web portal designated by the Commissioner. The application shall contain all information requested therein.

Step 3: Receive Your VAT Number

Once approved, you'll receive your VAT registration number with the prefix "MT" in accordance with ISO International Standard 3166 - alpha 2. The Commissioner will make electronically available a registration certificate containing the registration number, the article under which registration was made, the effective date, and other relevant particulars.

VAT Compliance Requirements

Tax Returns

According to Article 27, every person registered under Article 10 must furnish the Commissioner 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.

• Q1 (Jan-Mar): Due by 15th May
• Q2 (Apr-Jun): Due by 15th August
• Q3 (Jul-Sep): Due by 15th November
• Q4 (Oct-Dec): Due by 15th February

Tax Periods

Under Article 17, a tax period means a period of three calendar months commencing on the first day immediately following the end of the preceding tax period.

Invoicing Requirements

All VAT-registered businesses must issue proper VAT invoices containing:

• Your VAT registration number
• Customer's VAT number (if applicable)
• Invoice date and sequential number
• Description of goods/services
• Net amount, VAT rate, and VAT amount
• Total amount including VAT

Record Keeping

Under Article 48, you must maintain detailed records of all business transactions, including sales invoices, purchase receipts, and VAT calculations. Records must be kept for at least 6 years and be available for inspection by Malta Tax and Customs.

Common Mistakes to Avoid

Administrative Penalties

The VAT Act provides for various administrative penalties:

• Late registration: Penalties based on percentage of output tax or minimum €20 per month
• Late returns: Penalties from €20-€250 depending on circumstances
• Incorrect returns: 20% penalty, reduced to 10% if corrected voluntarily
• Missing recapitulative statements: €50 per month (max €600)

Deregistration from VAT

Under Article 10(10), you can apply to cancel your VAT registration if:

• You cease to be required or entitled to be registered
• Your annual turnover falls below the threshold
• You cease trading

You must apply for cancellation within 15 days from when you cease to be required or entitled to be registered. Note that deregistration may require you to account for VAT on any remaining stock or assets.

Conclusion

VAT registration is a significant step for freelancers in Malta, bringing both opportunities and responsibilities. While it requires careful compliance and record-keeping, the benefits often outweigh the administrative burden, especially for growing businesses. Consider consulting with a tax professional to ensure you make the right decision for your specific situation.