Malta VAT Article 11: what the small-enterprise scheme gives you

What you get

• Your supplies are exempt. Item 16(1) of Part Two of the Fifth Schedule exempts the supply of goods and services by a person registered under Article 11 and entitled to be so registered.
• No VAT to charge and no VAT returns. Instead of returns you file a declaration for a twelve-month period running 1 January to 31 December, due by the fifteenth day of the second month after the period ends, under item 5 of Part One of the Sixth Schedule.
• A number that is not a VAT number. Article 13(3) says a registration number allocated under Article 11 shall not have the MT prefix and shall not be treated for any purpose of the Act as a value added tax identification number. EU customers checking you in VIES will not find a VAT identification.

What you give up

Input tax credit. Article 22 gives the credit to persons registered under Article 10; an Article 11 registration does not carry it. For a business with material purchases, equipment, stock or professional fees, the VAT on those costs becomes a real expense rather than a recoverable one. That is the trade the scheme asks you to make, and it is why a business selling to VAT-registered customers usually registers under Article 10 voluntarily instead.

When the registration effectively starts

The provisos to article 11(2) split the answer. For an applicant not already registered under Article 10, registration takes effect from the first day of the month in which the Commissioner receives the application, or from the date the economic activity commences, whichever is later. For an applicant who is already registered under Article 10, it takes effect only from the first day of the month following receipt of the application, and the Article 10 registration is cancelled on registration under Article 11.

Leaving, voluntarily and involuntarily

1. By choice: apply under article 11(5)(a) at any time; cancellation applies from the first day of the following calendar month.
2. Because you outgrew it: article 11(5)(b) requires an application within fifteen days of no longer qualifying, and cancellation runs from the first day of the calendar month following the date you ceased to qualify.
3. Because you stopped trading: article 11(5)(c) requires an application within fifteen days of the cessation of the economic activity.
4. Because the Commissioner acted: article 11(8) allows cancellation with effect from the date the Commissioner determines you ceased to qualify, followed by immediate registration under Article 10 where you are liable for it.

The twelve-month lock

Item 2 of Part One of the Sixth Schedule stops a person registered under Article 10 from qualifying as a small enterprise at any time during the first whole twelve calendar months from the date of that registration. Sub-item (2) allows the Commissioner to accept a conversion request earlier, but only where the person qualifies as a small enterprise and has claimed no input tax credits during the Article 10 period. Registering under Article 10 to reclaim VAT on start-up costs and then dropping to Article 11 is not a route the Schedule leaves open.

Article 11 does not exempt you from Article 12

Article 11(10) is explicit: a taxable person registered under Article 11 must also register under Article 12 if they make intra-community acquisitions of goods subject to VAT under article 4(b), receive services on which they are liable under article 20, or supply services in another Member State for which the VAT is payable solely by the recipient. Two registrations, running side by side, is a normal outcome for a small Maltese business buying software or advertising from abroad.