Value Added Tax (VAT)
Malta as a Member State of the EU has a value added tax (VAT) system modelled on the EU VAT Directive. VAT is generally imposed on every importation, intra-community acquisition and supply of goods and services that takes place in Malta for a consideration by a taxable person acting in the course or furtherance of its business. Malta has the second lowest standard VAT rate within EU of 18%. However, certain goods and services have a reduced rate. Reduced rates apply at 7% on the provision of tourist accommodations such as hotel, guest house or premises duly licenced for the purpose of that accommodation, and at 5% on certain supplies including medical accessories, electricity, certain Items for the exclusive use of the disabled, confectionery and other edible items, 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 and admission to museums, art exhibitions, concerts and theatres. There is also an extensive list of exempt with and without credit supplies.
Every taxable person performing an economic activity in Malta is required to register for VAT purposes as long as the requirements set by law are met. There are 3 types of registration for VAT purposes, depending on the supply of goods and services and certain thresholds. Input VAT is recovered through the VAT return by means of a credit against output VAT and any excess credit shall be refunded.
Taxable persons not established in Malta but in another Member State of the EU, can also claim a refund through the procedures of the 8th EU Directive while taxable persons established outside EU and not registered for VAT in Malta can claim a refund under the 13th EU Directive.