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Malta has recently announced important changes to its VAT legislation, reinforcing its commitment to aligning with European Union initiatives aimed at reducing administrative burdens for small businesses. Effective from 1 January 2025, the Maltese VAT was updated through the introduction of Articles 11A and 11B, following the provisions of EU Directive (EU) 2020/285. These legislative developments build upon the existing framework set out in Article 11 of the VAT Act, which will continue to apply to small businesses operating solely within Malta with an annual turnover not exceeding €35,000. The new Articles 11A and 11B specifically address businesses engaged in cross-border transactions within the European Union and are designed to facilitate easier access to VAT exemptions, promoting growth and trade opportunities across the single market. In this respect, the 6th Schedule to the VAT Act has been completely revamped.
Article 11A introduces a special exemption scheme for businesses established in Malta that supply goods or services across EU borders. Under this provision, Maltese businesses whose total turnover across the European Union does not exceed €100,000 can benefit from VAT exemption on their cross-border supplies. In addition, these businesses must comply with the individual turnover thresholds set by each Member State where they operate. This new regime allows qualifying businesses to continue trading across the EU without the administrative burden of registering for VAT in multiple jurisdictions, provided they respect the stipulated thresholds.
Article 11B expands the scope of the exemption to include EU-established businesses that are not based in Malta. Under this framework, a business established in another EU Member State may qualify for the VAT exemption when making supplies of goods or services within Malta. To be eligible, the business must ensure that its total turnover across the EU remains below €100,000 and that its turnover in Malta does not exceed €35,000. This measure ensures that small foreign businesses trading into Malta can enjoy similar benefits as Maltese-established businesses, promoting a level playing field and encouraging greater economic collaboration across Member States.
The primary objective of introducing Articles 11A and 11B is to ease VAT compliance obligations for small businesses engaging in EU-wide trade. By reducing the need for VAT registrations across multiple jurisdictions and limiting administrative formalities, the new framework aims to foster a more dynamic and accessible internal market for micro-enterprises and small enterprises.
From a broader perspective, these changes are part of the EU's wider strategy to support the growth of small businesses, which are recognised as crucial drivers of innovation, job creation, and economic resilience. Malta's proactive transposition of Directive (EU) 2020/285 demonstrates its ongoing commitment to creating a business-friendly environment that accommodates the needs of small and growing businesses, both domestic and foreign.
Moreover, businesses will need to ensure diligent monitoring of their turnover figures across all EU Member States, including Malta, to remain eligible for the exemptions. Internal record-keeping and awareness of local thresholds will be critical to maintaining compliance and avoiding inadvertent VAT liabilities.
Businesses that anticipate qualifying under Article 11A and 11B should begin reviewing their turnover figures and operational structures. It may also be advisable for businesses to seek professional guidance to ensure they fully understand the scope of the exemptions, their obligations under the revised framework, and any administrative steps necessary to benefit from the new regime.
Stakeholders are encouraged to stay informed and adapt their processes accordingly to fully leverage the opportunities presented by these legislative updates.
