Bad debt relief - Malta VAT Dept. Guidelines

Deloitte Malta Tax Alert

Insightful information on taxation relating to the Maltese jurisdiction, prepared by Deloitte Malta professionals.

Bad debt relief claims

Persons registered for VAT in Malta under Article 10 of the VAT Act (standard registration) who have made supplies of goods or services to a customer for which they have not been paid may be able to claim relief from VAT on bad debts which they have incurred.

The local tax authorities have published guidelines with respect to the conditions which would need to be met by such persons to successfully make such claim. The guidelines also set out the applicable administrative procedure and how the relief, once granted, should be exercised in practice.

The guidelines are available through the VAT Department’s website.

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A claim for deduction by way of bad debt relief shall only be accepted provided that, amongst others, the following conditions are met:

  • The supply in respect of which relief is claimed has been made directly to the customer liable to pay for the supply, or to a third party through the customer;
  • A final court judgement has been delivered showing that the debt can never be recovered;
  • The debt was not paid, sold or factored under a legal assignment;
  • VAT in connection with the claim was accounted for and duly paid to the VAT Department;
  • All VAT returns and payments due at the date of the claim were submitted;
  • The debt was written off in the claimant’s day-to-day VAT accounts and transferred to a separate bad debt account.

The claim must reach the local tax authorities by not later than 12 months from the date of delivery of the final court judgement showing the non-recoverability of the debt.

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How can Deloitte help?

We can help you recover VAT on bad debts in the following ways:

  • Review individual scenarios and provide advice on whether bad debt relief is possible;
  • Provide guidance on which sales VAT may be recovered;
  • Determine the amount of VAT which is recoverable and prepare and submit the relief claim;
  • Review the supporting documents which should be submitted with the claim to ensure they fulfil the required conditions;
  • Deal with the local tax authorities if required.

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