VAT treatment in relation to pricing and the point when a transaction becomes reportable continues to be an area where uncertainty can arise in practice. Questions around when VAT becomes due, particularly in the context of advance payments, are not always addressed consistently.
Recent amendments to the Maltese VAT Act have now added further clarifications. These clarifications look to mitigate any ambiguity in pricing and contractual terms, and that the timing of VAT rests with the supplier. These changes also impact advance payments. Even where services are priced by reference to an hourly or daily rate, the amount quoted may be treated as VAT-inclusive unless it clearly falls within one of the stated exceptions.
These changes have been introduced as part of the Budget Measures Implementation Act (2026) and are already effective.
The default – every quoted price includes VAT
Under the amended provision, where a VAT-registered person (or a person required to be registered) indicates the price or consideration payable for goods or services to be supplied, such price is deemed to be inclusive of any tax chargeable under the VAT Act.
Therefore, a supplier is no longer able to quote a price without VAT and then later “add VAT on top”. Now, because of these changes, if a figure is displayed, quoted, or advertised without qualification, the law presumes VAT is already inside it. In other words, if VAT is not factored into any quoted price, the law also confirms that such VAT is to be backed out of the gross figure, and the margin absorbs the hit.
There are only two exceptions when a supplier can quote a price without VAT, and each requires the supplier to state plainly and upfront that VAT is excluded. These exceptions are when:
A vague reference tucked into the small print of terms and conditions will not satisfy the law’s “specifically and unequivocally” test.
Why prepayments are part of the same story
A common misconception is that deposits and advance payments do not carry VAT.
Under Maltese VAT law, VAT is generally chargeable at the earlier of a chargeable event taking place of a payment being received. Therefore, when an upfront payment is received, even if the goods have not been delivered or the service rendered, the supplier must account for the VAT in the period of receipt and issue a fiscal receipt or tax invoice for the prepayment.
Read together with the new VAT-inclusive pricing rule, the consequence is sharp: if the agreed price is now deemed to be VAT-inclusive, every deposit drawn against it is itself VAT-inclusive. A slice of that deposit belongs to the Commissioner from day one and the supplier's actual income from the deposit is reduced by the VAT element therein.
Worked example
A Maltese contractor verbally agrees a job with a private client for €50,000, with no mention of VAT. The client pays a €20,000 deposit on signing, with the balance due on completion six months later.
Because the quoted price is silent on VAT, it is now deemed to be inclusive. The underlying values are €42,373 (Net) + €7,627 (VAT at 18%).
The €20,000 deposit is likewise VAT-inclusive – and therefore only the net of €16,949 is income for the Maltese contractor. The contractor must also remit the VAT of €3,051 to the Commissioner in the VAT period of receipt.
Had the contractor instead quoted “€50,000 plus VAT” to a client with a valid VAT number, the position would have been very different. As things stand however, of the €50,000 agreed for the job, €7,627 of this is now VAT that must be passed on to the Commissioner.
Action points
As a result of these changes, it may be advisable to:
Review every customer-facing price, websites, brochures, quotes, tenders, and confirm whether these need to be amended to include VAT.
Where prices are exclusive of VAT, state it clearly and prominently, and capture the customer’s VAT number where relevant.
Revisit long-term and fixed-price contracts where legacy “plus VAT if applicable” wording may no longer hold.
Align deposit and milestone-payment processes with the prepayment rule, so the cash-flow and VAT-reporting impact is understood before money changes hands.
Did you know?
New gaming Tax regulations take effect starting October 2026
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