10.05.2022
There are many countries around the world that use the Value Added Tax (VAT) system, however each country operates under different frameworks. As a tax applied worldwide, it is regulated differently and at a specific rate in each country.
VAT has grown in popularity and importance, being a good percentage of global taxation. According to Organisation for Economic Co-operation and Development (OECD) data, VAT rates around the world began trending up following the financial crisis. However, VAT fraud has been in the limelight for many year, especially among developing nations. In more developed countries, governments have managed to reduce VAT fraud by introducing digital reporting and compliance requirements.
If you look at VAT systems around the world, the fundamental structure is the same. In the EU, VAT is generally applied to most goods and services. Some goods and services that are of significant value to the public are exempt from this tax. Outside the EU, the VAT framework is quite similar across various nations with some countries have different classes of rates.
In Malta, VAT is regulated by the VAT Act and its subsidiary legislation, Chapter 406 of the Law of Malta, and is in accordance with the EU VAT Directives. The standard VAT rate in Malta 18%. A reduced VAT rate of 5% applies for some supplies of goods and services and licensed letting and use of sporting facilities are subject to a VAT rate of 7%.
Natural persons and legal entities involved in economic activities must apply for a VAT number unless exempt to do so. Depending on the business activity there are three categories of VAT registrations, being Article 10, 11 or 12 and each hold different obligations. We will explore these articles in our next blog post.
In Malta, VAT registration is done through the Commissioner for Revenue who would eventually issue a VAT Certificate holding the VAT number. VAT returns and VAT payments (if applicable) must be submitted on a regular basis and failure so do so will lead to penalties.
For any assistance with VAT registration, VAT returns, VAT investigations and any other VAT related issues in Malta please contact Conrad Meli on cmeli@accountingservices.com.mt and view our web page for a full list of the services we offer on VAT compliance in Malta: https://fairwindsmanagement.net/services/accountancy-services/vat-compliance
