Maltese companies paying remote contractors abroad: VAT, status and records

A Valletta software company has 20 staff on the island and nine contractors elsewhere: in Sofia, Belgrade, Manila, Lagos and Lisbon. Malta's job market is tight, so contractors fill gaps in engineering and design. The finance manager pays them monthly, and every payment raises the same three questions.

VAT: the reverse charge

When a Maltese company buys services from a contractor abroad, VAT usually shifts to it under the reverse charge. The contractor's invoice should carry no Maltese VAT. The company accounts for the VAT in its return and, if entitled to full recovery, deducts it in the same return. EU contractors show their VAT number where they have one.

Status

Malta, like most countries, distinguishes self-employment from employment by the facts. A contractor who works full time for one company, follows its schedule and sits in its team looks like an employee. The contractor's own country may reach the same conclusion and expect social contributions.

Contracts that set deliverables, contractors who use their own equipment and set their own hours, and freedom to work for other clients are the usual safeguards.

Records

For each payment keep:

1. The signed agreement.
2. The invoice, with the contractor's name, address, service, date and amount.
3. Proof of payment showing the amount, currency and rate used.

The Commissioner for Revenue can ask for all three to support the deduction.

Currency

Contractors in Sofia and Lisbon receive euros by SEPA. Elsewhere:

• Serbia: dinars to a local account avoid conversion by the contractor's bank.
• Philippines: pesos to a bank account or e-wallet.
• Nigeria: naira to a local account, or dollars where the contractor prefers and local rules allow.

A euro SWIFT transfer forces the contractor's bank to convert, often with a receiving fee. Local currency on a local rail lands the invoiced amount.

Paying into Malta: the local rail

Source: European Payments Council: SEPA Instant Credit Transfer. Checked when this guide was last updated; the scheme's own page has the current figures.

Where Rivet fits

A Rivet business account pays contractors in 120+ countries, on local rails where available, from euro, dollar and other balances. Bulk payouts send the month's invoices together, each payment shows its rate before you confirm, and from the Growth plan a second approver can be required. Rivet is not a bank; regulated partner institutions hold the funds.

See also how to pay international contractors.