VAT & Dropshipping in Malta

It is legally possible to structure dropshipping in such a way that the seller is not liable to charge Maltese VAT in specific cross-border cases. Below we present the legal basis and the practical implications for businesses operating in Malta.

Many online retailers ask: “Do I need to apply Maltese VAT if the products are shipped directly from a supplier outside the EU to a customer in Malta?” The answer lies both in the EU VAT Directive and in Maltese VAT legislation.

EU legal basis

Within the European Union, the place of supply determines where VAT is due. When goods are shipped directly from a third country (e.g. China) to a customer in Malta and the transport begins outside the EU, the place of supply is not in Malta.

Article 32 of Directive 2006/112/EC (VAT Directive):
“When goods are dispatched or transported by or on behalf of the supplier, the place of supply shall be deemed to be the place where the goods are located when the dispatch or transport to the customer begins.”

Maltese legislation

Maltese law mirrors this principle in the Value Added Tax Act (Chapter 406 of the Laws of Malta).

Article 13(1)(a), VAT Act (Cap. 406):
“A supply of goods dispatched or transported by the supplier, the acquirer, or by a third person shall be deemed to take place in the place where the goods are located at the time when dispatch or transport of the goods to the acquirer begins.”

Interpretation: if the transport starts in a third country, the supply is not considered to take place in Malta → the seller does not have to charge Maltese VAT.

Practical application for dropshippers

For Maltese businesses, this means that sales with direct shipment from third countries can be structured without Maltese VAT. The use of the IOSS scheme can simplify administrative handling but does not change the fundamental place of supply rule. Mistakes in invoicing, e-commerce platform setup, or documentation may result in reassessments by the Commissioner for Revenue.

Our expertise

The rule may look simple, but correct application requires in-depth knowledge of Maltese tax administration, customs procedures, and e-commerce systems. Our international team of VAT and e-commerce experts supports dropshippers in setting up legally secure and fully compliant structures.

Conclusion

Dropshipping in Malta can be legally structured so that the seller is not subject to Maltese VAT, provided that the place of supply rules are correctly applied and documented. Professional guidance is strongly advised to avoid legal and financial risks.

Contact

Would you like to ensure that your dropshipping structure for the Maltese market is fully compliant? Contact Ecom VAT Experts for specialised advice.