MALTA Law and Practice Contributed by: Andrew J Zammit, James Bartolo and Nicholas Scerri, GVZH Advocates
1. Digital Economy 1.1 Key Challenges
and services, including Software as a Service (SaaS). A reduced rate of 5% applies to specific categories, such as certain medical accessories and publications. Challenges Companies Face in Managing Tax Compliance in Malta Malta follows EU VAT rules, requiring digital service providers to charge VAT based on the customer’s location rather than the seller’s. This means companies must determine whether they need to register for VAT in multiple EU states or use the One-Stop Shop (OSS) system for simpli - fied reporting. VAT returns must be filed quarterly, while large taxpayers may be required to file monthly. Com - panies must also submit Intrastat declarations for EU trade and EC Sales Lists for cross-border digital services. Foreign companies operating in Malta via remote services, cloud computing, or AI-driven plat - forms may trigger Permanent Establishment (PE) status, requiring them to register for corporate tax even if they don’t have a physical office. 1.3 Taxation of Digital Advertising In Malta, digital advertising revenues are sub - ject to the country’s standard corporate tax rate of 35%. This applies to profits generated from digital advertising activities, including those conducted through online platforms and social media. Additionally, if digital advertising ser - vices are provided to consumers within Malta, they may be subject to the standard VAT rate of 18%. For business-to-business (B2B) trans - actions, the reverse charge mechanism often applies, where the VAT responsibility shifts to the recipient. To ensure compliance with Malta’s tax laws related to digital advertising, companies should implement best industry practices such
On 23 November 2022, Malta published its national strategy for 2022–2027 (dubbed “Digi - tal Malta”) with the aim of positioning Malta as leader in digital transformation built around a vision of establishing digital as the key driving force for transformation. The national strategy underpinned various sectorial digital policies currently in place in Malta including Digital Innovation; eCommerce; and Cyber Security. In accordance with the European Commission’s Digital Economy and Society Index (DESI) report 2022, Malta ranks sixth out of 27 EU member states. The DESI report also states that since 2019, all Maltese households are reached by Very High Capacity Networks offering speeds of up to 1Gbps. Malta also records good scores on human capital, especially because of the high numbers of ICT graduates (6.6% of graduates in Malta, versus 4.2% in the EU) and performs slightly higher than the EU average in terms of ICT specialists (4.8% versus 4.6% in the EU). The large majority (77.9% versus 69.1% in the EU) of Maltese SMEs in Malta have at least a basic level of digital intensity and perform par - ticularly well in the use of technologies such as big data and cloud solutions, which are used by 30% and 47.5% of enterprises in the country respectively. Malta has also focused on tech - nologies such as blockchain and artificial intel - ligence. An improvement in the uptake of e-gov - ernment services was also reported, with the share of e-government users reaching 82.97%
versus 74.2% in the EU in 2022. 1.2 Digital Economy Taxation
In Malta, the taxation of digital services and goods aligns with the European Union’s Value Added Tax (VAT) framework. The standard VAT rate is 18%, applicable to most digital products
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