The year 2025 marked a pivotal moment for VAT reform in Malta, introducing transformative measures aimed at simplifying compliance, embracing digitalisation, and creating a more cohesive framework for small enterprises and cross-border trade. These reforms represent a significant step forward, aligning Malta’s VAT system with evolving EU legislative priorities while addressing the practical needs of businesses. From the implementation of the SME Directive to the modernisation of virtual event taxation, the introduction of zero-rated essential goods, and the initial steps under VAT in the Digital Age (ViDA), these changes have far-reaching implications across industries.

This article provides an overview of the most impactful VAT developments introduced in 2025, including Act 9 of 2025, Bill 155, updated registration rules, exemptions, and digital reporting requirements. A clear understanding of these changes is essential for businesses, finance teams, and VAT advisors seeking to adapt to the evolving landscape and prepare for the broader EU digitalisation agenda as we move into 2026.

VAT Article 11 – A reimagined framework for small enterprises

Malta has implemented the SME Directive (Council Directive (EU) 2020/285) through Act XXXVIII of 2024 and accompanying Legal Notices, resulting in a comprehensive restructuring of the small enterprise VAT regime. Effective 1 January 2025, Article 11 has been divided into three distinct components:

  • Article 11: For Maltese small enterprises operating locally.
  • Article 11A: For Maltese enterprises conducting business in other EU Member States.
  • Article 11B: For EU enterprises supplying goods or services in Malta.

The Sixth Schedule now consolidates all small enterprise provisions into a single, structured framework, enhancing clarity and accessibility.

Under the revised Article 11, a unified annual turnover threshold of €35,000 replaces the previous dual thresholds, simplifying eligibility criteria. Turnover calculations now include related party transactions and certain exempt supplies, while excluding capital asset disposals. Registration processes have been streamlined, with retrospective registrations no longer permitted. Businesses can now switch from Article 10 to Article 11 within 12 months under clearer rules, and VAT periods align with the calendar year, with filing exclusively electronic. Additionally, Article 11 registrants receiving reverse charge services or providing taxable services in other Member States must hold an Article 12 registration.

Article 11A – Simplifying cross-border compliance for Maltese small enterprises

Article 11A introduces a practical solution for Maltese micro-enterprises engaging in cross-border trade within the EU. This regime allows eligible businesses to supply goods or services in other Member States without the administrative burden of multiple VAT registrations.

To qualify, enterprises must meet two thresholds:

  1. Total Union-wide turnover must not exceed €100,000.
  2. Domestic turnover must remain below the €35,000 national threshold.

Eligible businesses can report cross-border transactions through a simplified mechanism while remaining VAT-exempt for local activities. Applications are submitted electronically, and approved enterprises must file quarterly returns. This framework reduces compliance complexity, enabling small businesses to explore cross-border opportunities with confidence.

Article 11B – Extending Malta’s small enterprise regime to EU businesses

Article 11B mirrors Article 11A, offering EU-based small enterprises access to Malta’s simplified VAT regime for their Maltese activities. This measure supports cross-border trade by reducing VAT barriers for micro-enterprises.

To qualify, EU enterprises must meet the same turnover thresholds as Article 11A and have no fixed establishment in Malta. Once registered, these businesses benefit from simplified invoicing and record-keeping obligations, allowing them to maintain a limited presence in Malta without incurring disproportionate compliance costs.

Virtual Events – Updated place of supply rules

Legal Notice 344 of 2024 introduces significant changes to the VAT treatment of virtual events. From 1 January 2025, the place of supply for admission to virtual events shifts to the customer’s location, ensuring taxation reflects the consumer’s jurisdiction. This reform applies to both B2B and B2C transactions and includes admission fees and ancillary services.

These changes align Malta’s VAT rules with EU directives, providing greater clarity for businesses operating in the digital economy.

Digital transformation of VAT EXO applications

From 10 February 2025, the process for obtaining a VAT EXO number has transitioned fully online. This digital workflow enhances transparency and efficiency, with strict timeframes for application vetting and approval. Businesses must ensure compliance by submitting all required documentation, including certificates from software suppliers and auditors.

Zero-rated supplies of essential products

Legal Notice 355 of 2024 introduces a zero rate for specific essential products, including female sanitary items and medical products used in cancer care. This aligns Malta’s VAT treatment with EU Directive 2006/112/EC, ensuring consistency and eliminating overlap with reduced-rate categories.

VAT exemption for passenger transport services

Legal Notice 88 of 2025 exempts specific passenger transport services, including scheduled bus routes and inter-island sea transport. These updates align VAT exemptions with regulatory provisions, reducing uncertainty for operators.

Act 9 of 2025 – Enhancing VAT administration

Act 9 of 2025 introduces measures to improve administrative clarity, including:

  • Prohibiting retrospective Article 11 registrations.
  • Clarifying registration timing for businesses transitioning between VAT regimes.
  • Modernising compliance references and aligning terminology with EU VAT law.

These updates provide businesses with greater certainty and predictability in VAT administration.

VAT in the Digital Age (ViDA)

ViDA represents a landmark EU initiative to modernise VAT systems. Between 2025 and 2028, Malta will adopt real-time digital reporting, mandatory e-invoicing, and a single VAT registration model. These changes aim to simplify cross-border trade, enhance transparency, and reduce fraud.

For businesses, ViDA underscores the importance of investing in digital systems and processes to ensure compliance with upcoming requirements.

Conclusion

The VAT reforms of 2025 mark a significant step toward a more modern, efficient, and digitally integrated tax system. By simplifying compliance for small enterprises, aligning with EU standards, and embracing digitalisation, Malta is creating a VAT framework that supports business growth and cross-border trade. As we look ahead, businesses must embed compliance into their operations and prepare for further changes under ViDA to remain competitive in an evolving tax landscape.
 

Article written by RSM Malta Tax Team