Increasing number of foreigner entrepreneurs are locating their e-commerce operations in Malta
http://www.entrepreneurs-and-co.com/articles/63/1/Increasing-number-of-foreigner-entrepreneurs-are-locating-their-e-commerce-operations-in-Malta/Page1.html
Didier Delmer
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By Didier Delmer
Published on 19/10/2007
VAT was introduced for the first time in Malta in 1995. Since then this turnover tax has gone through different phases. However with Malta’s accession to the European Union (EU) on May 1, 2004, VAT policy has finally been harmonized with the EU’s 6th Council Directive and has become one of the major revenue earners for the government. The most active e-commerce sector...
Internet Law : VAT and e-commerce in Europe and Malta
Malta is an independent nation, having split from the UK in 1964. Maltese company law derives chiefly from civil or 'Roman' law, rather than common law. Malta has now joined the EU, although as late as the spring of 2002, with EU accession negotiations almost completed, the opposition labour party was still hankering after a life as the 'Switzerland of the Mediterranean'. Eventually, Malta was invited to join the EU in December, 2002, along with Cyprus and 8 Eastern European ex-Soviet states.
A referendum in March, 2003 approved Malta's entry into the EU, and after the government was returned to power in April of that year, it signed the EU accession treaty in Athens. The Maltese Parliament ratified the accession treaty in July, 2003. Malta's economic policy encourages information technology operations, and the territory has invested heavily in state-of-the-art telecommunications.
The Maltese VAT Department is headed by the Director General and Commissioner of VAT and is responsible for the administration and enforcement of VAT legislation throughout the Maltese islands.
The Maltese VAT standard rate is 18%, and there is also a reduced rate of 5% on some products and services. However, through a derogation obtained during accession negotiations with the EU, Malta has retained a temporary exempt with credit status on food for human consumption (excluding food served in the course of catering), pharmaceutical products, inland passenger transport, international passenger transport and domestic inter-island sea passenger transport. It also retained a temporary exempt without credit status on the supply of water by public authorities and the supply of buildings and building land.
In the view of Celia Falzon, Project Manager for E-Commerce, 'Given the current embryonic stage of development of this type of activity in Malta, we see ourselves acting more as a catalyst in this sector, rather than as a traditional regulator.'
She added, 'We will be disseminating information, offering guidance and also help with regards to the legal implications of dealing and trading with foreign customers or merchants. We will also work to keep the public informed of their own rights when it comes to transacting electronically.'
In February, 2004, the latest e-Europe Progress Report revealed that Malta was significantly ahead of most EU accession countries in terms of Internet access and utilisation of e-commerce. According to the report, 49% of Maltese homes were connected to the Internet
On the business front, the study found that 73% of Maltese firms had a website, also the highest proportion amongst the accession states. Of these, 20% had received orders online, while a third of the respondents reported that e-commerce generated over 1% of their revenues.
What are VAT obligations on the part of traders in Malta ?
All traders must be identified for VAT purposes in Malta if they carry out transactions that are subject to VAT in Malta, for which they have the right to deduct input VAT and on which they are liable for VAT in Malta in accordance with the Maltese VAT Act.
A foreign trader who does not have a business establishment in Malta, but must be registered for VAT purposes in Malta, can choose either to deal with his VAT obligations himself or appoint an agent or a tax representative to act on his behalf. In both cases, registration must be requested at the VAT Department.
What is the maximum limit of sale to a person not registered for VAT in Malta ?
Any business established in another EU member state that sells goods, and is responsible for their delivery, to persons not registered for VAT in Malta, must register for VAT in Malta if the value of those sales exceeds the equivalent in MTL of Euro 35,000 in a calendar year.
A distance seller whose activity is below the threshold of Euro 35,000 can also opt to make Malta the place of supply, in which case he must register in Malta.
To what does the reverse-charge procedure apply ?
The reverse-charge procedure is applicable to supplies of services connected with immovable property or related to cultural, artistic, sporting, educational, entertainment and similar activities carried out by foreign taxable persons in Malta, irrespective of the domicile of the recipient. With regard to certain other services, e.g. work on/evaluation of movable tangible property, advertising services and intellectual services, the procedure only applies if the recipient is domiciled in Malta.
What are the advantages of doing an e-commerce venture in Malta ?
Malta provides the opportunity to move offshore while staying onshore. There are a number of the reasons why an increasing number of foreigner entrepreneurs are locating their e-commerce operations in Malta ...
Tax advantages :
Tax-efficient rules governing International Trading Companies (ICT), a network of double taxation agreements.
Other advantages :
A sound legal and financial system, a sound ICT infrastructure, legislation on e-commerce, strong regulatory bodies, lower than average labour and overhead costs; a graduate working force skilled in languages and IT, low-cost business accommodation, good telecommunications, low transaction costs, an excellent banking centre with the presence of major international banks, excellent access by sea and the Malta International Airport, Freeport allowing for warehousing, processing and marketing of products for onward shipping in a tax-free and customs duty-free environment.
A referendum in March, 2003 approved Malta's entry into the EU, and after the government was returned to power in April of that year, it signed the EU accession treaty in Athens. The Maltese Parliament ratified the accession treaty in July, 2003. Malta's economic policy encourages information technology operations, and the territory has invested heavily in state-of-the-art telecommunications.
The Maltese VAT Department is headed by the Director General and Commissioner of VAT and is responsible for the administration and enforcement of VAT legislation throughout the Maltese islands.
The Maltese VAT standard rate is 18%, and there is also a reduced rate of 5% on some products and services. However, through a derogation obtained during accession negotiations with the EU, Malta has retained a temporary exempt with credit status on food for human consumption (excluding food served in the course of catering), pharmaceutical products, inland passenger transport, international passenger transport and domestic inter-island sea passenger transport. It also retained a temporary exempt without credit status on the supply of water by public authorities and the supply of buildings and building land.
In the view of Celia Falzon, Project Manager for E-Commerce, 'Given the current embryonic stage of development of this type of activity in Malta, we see ourselves acting more as a catalyst in this sector, rather than as a traditional regulator.'
She added, 'We will be disseminating information, offering guidance and also help with regards to the legal implications of dealing and trading with foreign customers or merchants. We will also work to keep the public informed of their own rights when it comes to transacting electronically.'
In February, 2004, the latest e-Europe Progress Report revealed that Malta was significantly ahead of most EU accession countries in terms of Internet access and utilisation of e-commerce. According to the report, 49% of Maltese homes were connected to the Internet
On the business front, the study found that 73% of Maltese firms had a website, also the highest proportion amongst the accession states. Of these, 20% had received orders online, while a third of the respondents reported that e-commerce generated over 1% of their revenues.
What are VAT obligations on the part of traders in Malta ?
All traders must be identified for VAT purposes in Malta if they carry out transactions that are subject to VAT in Malta, for which they have the right to deduct input VAT and on which they are liable for VAT in Malta in accordance with the Maltese VAT Act.
A foreign trader who does not have a business establishment in Malta, but must be registered for VAT purposes in Malta, can choose either to deal with his VAT obligations himself or appoint an agent or a tax representative to act on his behalf. In both cases, registration must be requested at the VAT Department.
What is the maximum limit of sale to a person not registered for VAT in Malta ?
Any business established in another EU member state that sells goods, and is responsible for their delivery, to persons not registered for VAT in Malta, must register for VAT in Malta if the value of those sales exceeds the equivalent in MTL of Euro 35,000 in a calendar year.
A distance seller whose activity is below the threshold of Euro 35,000 can also opt to make Malta the place of supply, in which case he must register in Malta. To what does the reverse-charge procedure apply ?
The reverse-charge procedure is applicable to supplies of services connected with immovable property or related to cultural, artistic, sporting, educational, entertainment and similar activities carried out by foreign taxable persons in Malta, irrespective of the domicile of the recipient. With regard to certain other services, e.g. work on/evaluation of movable tangible property, advertising services and intellectual services, the procedure only applies if the recipient is domiciled in Malta.
What are the advantages of doing an e-commerce venture in Malta ?
Malta provides the opportunity to move offshore while staying onshore. There are a number of the reasons why an increasing number of foreigner entrepreneurs are locating their e-commerce operations in Malta ...
Tax advantages :
Tax-efficient rules governing International Trading Companies (ICT), a network of double taxation agreements.
Other advantages :
A sound legal and financial system, a sound ICT infrastructure, legislation on e-commerce, strong regulatory bodies, lower than average labour and overhead costs; a graduate working force skilled in languages and IT, low-cost business accommodation, good telecommunications, low transaction costs, an excellent banking centre with the presence of major international banks, excellent access by sea and the Malta International Airport, Freeport allowing for warehousing, processing and marketing of products for onward shipping in a tax-free and customs duty-free environment.