Malta’s tax authority faces a VAT gap of 24.2% in 2023, more than double the EU average of 9.5%, highlighting significant revenue shortfalls and compliance challenges for businesses and the state alike.
This stands in stark contrast to the improvements in compliance being seen in personal taxation.
The Malta Tax and Customs Administration (MTCA) has described the figure as a pressing concern, with corporate tax compliance also lagging; only 63% of returns were filed for 2023, falling to 57% for 2024, while on-time filings remain at 44%.
In an opinion piece published today, Commissioner for Tax and Customs Mr Joseph Caruana explains how as a response, the MTCA will be accelerating Digital Real-Time Reporting (DRR) and e-invoicing, capturing transaction data as it occurs to reduce reliance on retrospective audits, cut errors, and enhance transparency.
“Features such as pre-filled fields, automated alerts, and integrated reconciliation are expected to make compliance simpler for companies.”
The initiative also anticipates the EU’s VAT in the Digital Age (ViDA) mandate, which requires real-time digital reporting by 2030. By gradually phasing in the system, Malta hopes to give businesses time to adapt while gaining a head start in regional digital tax administration.
According to Commissioner Caruana, this overhaul is part of a broader strategy to transform Malta’s tax system from reactive enforcement to proactive, transparent governance.
A Proactive Approach To Lead Change In Taxation
This is a period of significant change for businesses, public administration, and the relationship between taxpayers and the State. This is why this is also a time for the Malta Tax and Customs Administration (MTCA) to not only respond to change, but to lead it.
Malta’s economy has shown resilience in recent years, weathering global shocks while maintaining public finances. Yet structural challenges remain, including a persistent VAT gap.
At an estimated 24.2% in 2023, Malta’s VAT gap is more than double the EU average of 9.5%, reflecting real revenue foregone, pressures on the tax base, and strains on fairness and public trust.
The MTCA continues to face a backlog of tax arrears and recurring difficulties in tax collection, audit resolution, and enforcement prioritisation. Meanwhile, businesses, particularly SMEs, face increasing demands: compliance complexity, evolving digital reporting requirements, audit risk, and the need to manage cost and risk in uncertain times.
To address these challenges, the MTCA has adopted a transformative strategy built on three pillars: Awareness and Education; Compliance and Enforcement; and Efficiency and Effectiveness. Central to this is Digital Real-Time Reporting (DRR) and e-invoicing, which represent more than a technical upgrade, they mark a paradigm shift in tax administration.
By collecting transaction data as it occurs, real-time reporting closes the temporal gap between business activity and the tax authority’s visibility. This reduces reliance on retrospective audits, enabling a shift from reactive to proactive enforcement. It also offers taxpayers greater transparency through pre-filled fields, alerts, reconciliation tools, and consistent records.
The initiative aligns with the EU’s VAT in the Digital Age (ViDA) Package, which mandates e-invoicing and digital real-time reporting by 2030.
The MTCA is proactively rolling out these systems gradually, allowing businesses to adapt and positioning Malta as a regional leader in digital tax administration.
Improving voluntary compliance remains a priority, yet corporate tax compliance in Malta has consistently lagged. Many companies file late, under-declare, or fail to file, creating fiscal gaps and an uneven playing field. Compliance rates for corporate tax returns stood at 63% for 2023 and 57% for 2024, with on-time filing at just 44% for both years.
Current systems are largely retrospective and manual, detecting issues long after the fact. Real-time reporting changes this by embedding invoicing and reporting directly into existing business systems, reducing friction, eliminating delays, and increasing transparency.
Integrated validations, automatic prompts, and seamless processes mean fewer errors, stronger enforcement, and more professional support.
This will not be an easy journey. It will require adaptation, flexibility, and iteration. But it is not a journey the tax administration can, or should, take alone. It requires active collaboration with accounting professionals, software developers, SMEs, auditors, and the broader business community.
Together with the industry’s professionals, the MTCA can ensure that Malta doesn’t just “keep pace” but sets the pace. We can build a tax system that matches the agility, transparency, and trust of our economy.
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