Complete guide – VAT on Accommodation and Short-Lets in Malta

Malta, a popular tourist destination in the heart of the Mediterranean, attracts millions of visitors each year. Whether you own a hotel, guesthouse, bed and breakfast, or offer short lets, understanding the VAT on accommodation is crucial for compliance and managing your business finances.

What is VAT on Accommodation in Malta?

Value Added Tax (VAT) is a consumption tax applied to goods and services across the European Union, including Malta. For accommodation providers, VAT applies to the sale of overnight stays and related services.

In Malta, the VAT rate on accommodation services is 7%. This reduced rate applies to hotels, bed and breakfasts, guesthouses, short lets, and other short-term accommodation businesses. Ancillary services such as food and beverages provided as part of the stay may be taxed at a different rate.

Licensing Requirements for Accommodation Providers

Before commencing operations, all accommodation establishments in Malta must secure a license from the Malta Tourism Authority (MTA). This mandate applies to various types of accommodations, including:

• Hotels
• Guesthouses
• Bed and Breakfasts
• Hostels
• Boutique Hotels
• Tourist Villages
• Serviced Apartments
• Short Lets
• Other similar establishments as defined by the MTA

The licensing process is designed to ensure that accommodation providers adhere to established standards, thereby maintaining the quality and reputation of Malta’s tourism sector. The application involves several steps, including:

1. Tourism Policy Compliance Certificate: This certificate confirms that the proposed development aligns with national tourism policies.
2. Design Standards Compliance Certificate: This certificate verifies that the establishment meets specific design and operational standards set by the MTA.
3. License Application: Upon obtaining the above certificates, applicants can proceed to apply for the operating license.

Detailed information and application forms are available on the MTA’s official website. By securing the necessary licenses, accommodation providers not only comply with legal obligations but also contribute to upholding the high standards expected within Malta’s tourism industry.

VAT Registration for Accommodation Providers

In Malta, the Value Added Tax (VAT) registration obligations vary depending on the legal structure of the business and its annual turnover:

• Self-Employed Individuals (Sole Proprietors): If you operate as a sole proprietor offering accommodation services, including short lets, and your annual turnover exceeds €30,000, you are required to register for VAT under Article 10 of the Maltese VAT Act. This standard registration mandates charging VAT on your services and allows for input VAT deductions. For those with an annual turnover below this threshold, there is an option to register under Article 11, designated for small undertakings. Businesses registered under Article 11 do not charge VAT on their supplies but are also restricted from claiming input VAT credits.
• Limited Liability Companies (LTDs): Companies incorporated as limited liability entities in Malta are obligated to register for VAT under Article 10, irrespective of their annual turnover. This means that even if an LTD’s revenue is below the €30,000 threshold, it must still charge VAT on its services and is entitled to claim input VAT deductions.

It’s important to note that while Article 11 registration offers a simplified VAT framework for small undertakings, it is primarily intended for self-employed individuals or entities with limited economic activity. LTDs, due to their corporate structure, are required to adhere to the standard VAT registration under Article 10.

For detailed information on VAT registration types and obligations, you can refer to the official guidelines provided by the Maltese Commissioner for Revenue.

By ensuring the correct VAT registration, accommodation providers in Malta can maintain compliance with local tax laws and optimize their financial operations effectively.

Eco Tax on Accommodation in Malta

In addition to VAT, Malta imposes an Eco Contribution on tourist accommodation. This environmental tax applies to guests aged 18 and over and is designed to support sustainable tourism initiatives.

The current rate for eco tax is €0.50 per person per night, capped at a maximum of €5 per stay. Accommodation providers, including those offering short lets, are responsible for collecting this tax from guests and paying it to the government.

VAT Compliance and Reporting

To comply with Maltese VAT regulations, accommodation businesses must:

1. Issue VAT Invoices: Provide VAT-compliant invoices to guests, clearly indicating the VAT amount.
2. File VAT Returns: Submit periodic VAT returns (quarterly or annually) detailing your taxable revenue and VAT collected.
3. Keep Accurate Records: Maintain comprehensive records of all transactions for a minimum of six years.

Failure to comply with VAT and eco tax obligations can result in penalties and interest charges.

Claiming Input VAT

Registered accommodation providers can claim input VAT on business-related expenses such as:

• Utilities and maintenance costs
• Furniture and fixtures
• Cleaning services
• Marketing and advertising

This helps reduce the overall VAT liability and improve cash flow management.

Equitas Advisory boasts extensive experience supporting small businesses and entrepreneurs across multiple industries, ensuring that each client receives personalized attention and expertise. We understand that every business has unique needs, which is why our fees are specifically tailored to fit the individual circumstances of our clients. Whether you’re a small business or a large corporation, Equitas Advisory delivers reliable and cost-effective solutions designed to support your entrepreneurial journey and your financial success. We are just 1 message away.

_{The sole practitioner at Equitas Advisory is a member of the Malta Institute of Accountants and the Association of Chartered Certified Accountants and is authorised to practice the profession of Accountancy in Malta in line with the Accountancy Profession Act. Cap.281. by the Malta Accountancy Board – Warrant number 121176.}