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As part of our previous short read we provided an overview of the main VAT changes effective from 1 January 2025. In this article, we provide a more detailed analysis of the changes to the SME scheme in line with the updates to the EU Council Directive 2006/112/EC.
Small Undertakings – special scheme
As of 1 January 2025, a new special scheme for small enterprises will be applicable.
Taxable persons established in an EU Member State, different from the one where the VAT on their supplies is due, can exempt their cross-border supplies from VAT. This exemption is similar to the one available to small businesses established in that Member State for domestic transactions. The amendments to the Value Added Tax Act (VATA) are split in two:
Article 11A – applicable to taxable persons established in Malta
A new Article 11A has been introduced for taxable persons established in Malta who qualify as small undertakings under the Sixth Schedule to the Value Added Tax Act (VATA) and would like to participate in the new scheme for small undertakings. This registration will only become effective from the date notified by the Commissioner to the taxable person.
The registration number assigned under article 11A will be the same as the registration number allocated to the person under article 10 or 11, with the suffix "EX" added to it.
Taxable persons applying for registration under Article 11A qualify as a small enterprise if:
- Their “Union Annual Turnover” in the previous calendar year is below the Union threshold;
- They make supplies in at least one Member State where they are not established and qualify for the small enterprises' exemption;
- The value of supplies in the mentioned Member State does not exceed the exemption threshold there.
An Article 11A registration application must be submitted electronically via the designated portal and must include:
- The name, activity, legal form, and address of the enterprise;
- The Member States where small enterprises' scheme is being sought;
- Turnover from supplies of goods/services in Malta and other Member States during the previous calendar year;
- Turnover from supplies of goods/services in Malta and other Member States for the current year before the date of the application.
A person registered under article 11A must inform the Commissioner electronically of any changes to previously provided information, including:
- Intention to use the exemption in a new Member State;
- Decision to stop applying the special scheme in a Member State where they are not established.
The exemption is applicable once the Commissioner notifies approval.
Persons registered under article 11A must report their turnover every calendar quarter. Such a declaration includes the value of supplies made in Malta and in every other Member State.
Persons registered under article 11A must apply to the Commissioner for an update or cancellation of their registration within 15 working days after they become ineligible for the small enterprises scheme. Similarly, they must apply for cancellation within 15 working days of exceeding their Union annual turnover. The exemption under article 11A ceases to apply on the first day of the next calendar quarter or, if notified in the last month of a quarter, the second month of the next quarter.
Article 11B – applicable to taxable persons established outside of Malta
Starting from 1 January 2025, persons established outside of Malta can make use of the special scheme for small enterprises. This allows them to provide taxable supplies that take place in Malta and qualify for the exemption for small enterprises, without the requirement to register under Article 10 of the VATA to the extent that they are registered under the new Article 11B.
A taxable person established in another Member State is deemed registered under Article 11B once the Commissioner has been duly notified by that Member State. The registration becomes effective only upon the Commissioner’s subsequent notification of approval, which must be communicated to the Member State through designated electronic methods within 15 working days of receiving the requisite information.
The Commissioner can cancel a person's registration if, inter alia, they are found ineligible for the small enterprises scheme and will notify such a position to the Member State of establishment.
How can we help?
If you and your business require further information, our team can assist you in this regard. At PwC, we are a team of professionals ready to provide the support you need.
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