GLOBAL INDIRECT TAX Malta Country VAT/GST Essentials kpmg.com TAX
b Malta: Country VAT/GST Essentials
Malta: Country VAT/GST Essentials Contents Scope and Rates 2 What supplies are liable to VAT? 2 What is the standard rate of VAT? 2 Are there any reduced rates, zero rates, or exemptions? 2 Registration 3 Who is required to register for Maltese VAT? 3 Are there penalties for not registering or late registration? 4 Are there any simplifications that could avoid the need for an overseas company to register for VAT? 4 VAT Grouping 5 Is VAT grouping possible? 5 Can an overseas company be included in a VAT group? 5 Returns 6 How frequently are VAT returns submitted? 6 Are there any other returns that need to be submitted? 6 VAT Recovery 7 Can I recover VAT if I am not registered? 7 Does your country apply reciprocity rules for reclaims submitted by non-established businesses? 7 Are there any items that you cannot recover VAT on? 7 Invoices 9 What do I have to show on a tax invoice? 9 Can I issue invoices electronically? 10 Is it possible to operate self-billing? 10 Transfers of Business 11 Is there a relief from VAT for the sale of a business as a going concern? 11 Options to Tax 11 Are there any options to tax transactions? 11 Head Office and Branch Transactions 12 How are transactions between head office and branch treated? 12 Bad Debt 12 Am I able to claim relief for bad debts? 12 Anti-Avoidance 13 Is there a general anti-avoidance provision under VAT law? 13 Penalty Regime 13 What is the penalty and interest regime like? 13 International Supplies of Goods and Services 8 How are exports of goods and services treated? 8 How are goods dealt with on importation? 9 How are services which are brought in from abroad treated for VAT purposes? 9 All information reflected in this document was obtained/summarized from KPMG in Malta as of October 2011.
2 Malta: Country VAT/GST Essentials Scope and Rates What supplies are liable to VAT? Value added tax (VAT) is due on any supply of goods or services made in Malta, where it is a taxable supply made by a taxable person in the course or furtherance of a business carried on by said person. Supply is not restricted to the provision of goods and services by way of sale, but can equally apply to other forms of transaction, including the leasing or hire of goods, the grant, assignment or surrender of a right, or even an agreement not to do something. It does not include anything done otherwise than for a consideration. However, certain actions carried out for no consideration are deemed to be supplies; for example, giving business gifts and the private use of business assets. What is the standard rate of VAT? The standard rate of VAT is 18 percent. Are there any reduced rates, zero rates, or exemptions? Yes. There is a reduced rate of 7 percent applicable to the letting of, or the provision of accommodation in, premises which for the purpose of the provision of that accommodation are required to be licensed by the Malta Tourism Authority (MTA). Furthermore, there is a reduced rate of 5 percent applicable to the following goods and services: electricity confectionery and other edible items medical accessories printed matter items for the exclusive use of the disabled certain works of art, collectors items, and antiques minor repairing of bicycles, shoes and leather goods, and clothing and household linen domestic care services and care of young, elderly, sick or disabled persons admission to museums, art exhibitions, concerts and theatres.
Malta: Country VAT/GST Essentials 3 Registration There is a considerable list of exempt with credit (that is to say, zero rated) supplies, including: exports and like transactions international goods traffic intra-community supplies international transport and ancillary services supplies of certain qualifying vessels and aircraft, the chartering thereof and certain services provided thereto investment gold food pharmaceutical goods local scheduled transport supplies of goods on board cruise liners. The list of exempt without credit supplies includes: immovable property, with certain exceptions, including: accommodation for which an MTA license is required parking areas the leasing of property by a limited liability company to a Maltese VAT registered person for the purposes of the lessee s economic activity. insurance services credit, banking and other services cultural and religious services lotteries and gambling services public postal services health and welfare services education public broadcasting water by a public authority. Who is required to register for Maltese VAT? Maltese Entities If your business makes taxable supplies in Malta in excess of the small undertakings threshold of EUR12,000 to EUR28,000 per year, it will be required to register and account for Maltese VAT. If you trade below the threshold but your turnover is in excess of EUR7,000 per annum, you are still required to register for VAT but you may opt out of the VAT system (whereby you will not charge VAT and you will not be entitled to claim any input VAT back). If your turnover does not exceed EUR7,000 per annum, you are not required to register at all (in which case you will not charge VAT and you will not be entitled to claim any input VAT back), although you may optionally register for VAT and thus opt into the VAT system. If your business makes exempt without credit supplies only, then it cannot register for VAT. If your business has an establishment in Malta and makes supplies outside Malta, which would be taxable or exempt with credit if made in Malta, then you may elect to register for Maltese VAT.
4 Malta: Country VAT/GST Essentials Non-Maltese Entities The registration rules that apply to Maltese entities also apply to non-maltese entities making taxable supplies in Malta. To deal with its VAT affairs, an overseas business may appoint a VAT representative with joint and several liability to the tax authorities. If your business is not registered for VAT in Malta but sells and delivers goods from another EU Member State to customers in Malta who are not VAT registered (distance sales), where the value of those sales exceeds a threshold of EUR35,000 per year your business is required to register and account for VAT in Malta. If your business is established outside the EU and you supply telecommunication or electronically supplied services to non-taxable customers established in the EU and the effective use and enjoyment of those services takes place in Malta, then the place of supply is Malta. You will then have to register for Maltese VAT. If, however, you supply the same services to customers in other EU Member States you can opt to register for VAT in one Member State rather than all of them. In this case, you still have to account for VAT on supplies you make at the rate prevailing in the Member State of your customer but you only have to deal with one Member State for filing and payment purposes. Are there penalties for not registering or late registration? There are penalties for failing to register for VAT promptly, which increase with time. These penalties are calculated as a multiple of the net tax for the period commencing when your business should have applied to be registered. The net tax is the output tax that should have been charged less the input tax that your business would have been entitled to recover. A penalty may be waived/mitigated where it can be shown that there is a reasonable excuse for the late registration. Are there any simplifications that could avoid the need for an overseas company to register for VAT? If your business makes supplies of goods or services in Malta in excess of the small undertakings threshold, then you are required to register and account for Maltese VAT. However, it is possible to avoid registering and accounting for Maltese VAT when making certain supplies. In the following examples the obligation to account for the VAT due can be shifted to your customer provided that your customer is registered for Maltese VAT. You may access the VAT registration form on the Maltese VAT Department s website: http://www.vat.gov.mt
Malta: Country VAT/GST Essentials 5 VAT Grouping Triangulation If your business is an intermediate supplier to a Maltese buyer of goods which you purchase from a business in a EU Member State other than your own and are delivered from there to Malta, VAT due can be accounted for by the Maltese customer (see section Invoices). Is VAT grouping possible? No, it is not possible. Can an overseas company be included in a VAT group? Not applicable. Call-Off/Consignment Stock The call-off stock simplification is not applicable in Malta except on a case-by-case basis upon application to the local VAT office. Fixed Assets The sale of fixed assets is not included in the calculation of turnover for the purpose of the small undertakings threshold. Supply and Install If your business supplies goods and installs or assembles them in Malta, your customer can account for any VAT due, in effect, as an acquisition. You must be registered for VAT in another EU Member State, and not otherwise required to be registered in Malta. In addition, the goods must be shipped from within the EU (see section Invoices). Reverse Charge Services These services are covered in more detail in chapter International Supplies of Goods and Services. Bear in mind that these provisions are subject to particular requirements and so you should check carefully whether you comply with them.
6 Malta: Country VAT/GST Essentials Returns How frequently are VAT returns submitted? Most registered businesses are required to submit VAT returns on a quarterly basis. However if your business supplies predominantly/only zero-rated goods and services, you may seek to opt to submit monthly VAT returns. Failure to furnish VAT returns and settle any outstanding VAT payments on time may result in additional tax and interest. For example, one late VAT return and VAT payment will give rise to a 1.75 percent monthly penalty of the tax due. To mitigate additional tax, a business must show a reasonable excuse for the default. Are there any other returns that need to be submitted? Intrastat Supplementary Declarations VAT registered businesses with a value of dispatches or arrivals to or from other EU Member States that exceeds a threshold of EUR700 per calendar year must complete supplementary declarations each month. The Intrastat penalty regime is a criminal one and could result in proceedings in Court, although the authorities normally prefer to compound any proceedings. This involves the offer of an administrative fine in lieu of Court proceedings. Access the forms VAT/AS/101/2004 Supplementary Declaration Arrivals and VAT/DS/102/2004 Supplementary Declaration Dispatches on the Maltese National Statistics Office Web site: http://www.nso.gov.mt/site/page. aspx?pageid=198 EC Sales List (Recapitulative Statements) If your business supplies goods which are shipped from Malta to VAT registered businesses in other EU Member States and you wish to zero rate the supply (see section International Supplies of Goods and Services), you are required to complete Recapitulative Statements. Recapitulative Statements are also required in the case of supplies of services (other than services that are exempted from the tax in the Member State where the transaction is taxable, and for which the recipient is liable to pay the tax) provided to taxable persons and non-taxable legal persons identified for VAT purposes. Recapitulative Statements are completed on a monthly basis where they include goods, and on a calendar quarter basis in relation to services only. However, it is also possible to opt for quarterly Recapitulative Statements in relation to goods where the quarterly value of intra-eu supplies of goods does not exceed EUR50,000.
Malta: Country VAT/GST Essentials 7 VAT Recovery Can I recover VAT if I am not registered? Yes. If you are established in another EU Member State, then you should make a claim in terms of EU Directive 2008/9/EC through the electronic portal maintained by your Member State of establishment. If you are a non-eu business, you should recover the VAT under the 13th Directive procedure. Under both of these provisions, there are strict time limits for making claims. Does your country apply reciprocity rules for reclaims submitted by non-established businesses? No. Are there any items that you cannot recover VAT on? Yes. There are certain items that you cannot recover VAT on. For example: Non-business (including private) activities: where VAT relates to both business and non-business activities, an apportionment is required. Motor cars (excluding certain commercial vehicles): with certain exceptions, you cannot recover VAT on the purchase of a motor car; similarly you cannot recover VAT on any lease charges. Business entertainment: VAT is not recoverable on business entertainment costs including staff entertainment and subsistence costs. Purchases falling within the Tour Operators Margin Scheme. The VAT on goods and services which fall under this scheme cannot be reclaimed. Goods sold under one of the margin schemes for second hand goods. There are a number of schemes which provide for VAT to be accounted for on the goods sales margin, but do not allow VAT recovery on the purchase of those goods.
8 Malta: Country VAT/GST Essentials International Supplies of Goods and Services How are exports of goods and services treated? Goods If you sell goods to a customer who is registered for VAT in another EU Member State and the sale involves the removal of those goods from Malta (either by you or your customer) to that Member State, then no VAT is chargeable as this is a zero-rated intra-community supply. You must obtain your customer s VAT identification number and quote it on your invoice. You should also obtain evidence of the removal of the goods from Malta. If you sell goods to a customer who is not registered for VAT in another EU Member State, you will have to charge Maltese VAT. If your sales exceed a certain threshold for that Member State, you may have to register in that Member State under what is known as the Distance Selling scheme. If you export goods to a customer (business or private) outside of the EU then you do not charge VAT but, as for intra-community sales, you should make sure that in all cases you keep proof of dispatch/delivery to support your zero rating. Services If you supply services to a business customer established outside Malta (whether in another EU Member State or outside of the EU), no VAT is generally chargeable in Malta. In the case of customers established in another EU Member State, you must obtain your customer s VAT identification number and quote it on your invoice. You will also need the customer s VAT identification number for the purposes of the Recapitulative Statement. Furthermore, certain services do not attract VAT in Malta when provided to a non-business customer outside of the EU: transfers and assignments of copyrights, patents, licenses, trademarks, and similar rights advertising services services of consultants, engineers, consultancy bureaus, lawyers, accountants and other similar services, as well as data processing and the supply of information obligations to refrain from pursuing or exercising, in whole or in part, a business activity or a right referred to in this list banking, financial, and insurance transactions including reinsurance the supply of staff the hiring out of movable tangible property with the exception of all forms of transport telecommunications radio and television broadcasting services electronically supplied services the provision of access to a natural gas system situated within EU territory or to any network connected to such a system, to the electricity system or to heating or cooling networks, or the transmission or distribution through these systems or networks, and the provision of other services directly linked thereto.
Malta: Country VAT/GST Essentials 9 Invoices How are goods dealt with on importation? When goods are imported into Malta from outside the EU, import VAT and customs duty may be due. This has to be paid or secured before the goods will be released from customs control. How are services which are brought in from abroad treated for VAT purposes? If you buy in services from outside Malta, you will generally be required to apply the reverse charge. This is intended to take away any VAT advantage of buying those services from outside Malta. Under the reverse charge, you are required to account for a notional amount of VAT as output tax on your VAT return covering the period in which you made the payment and you recover this VAT as input tax on the same return. If you are able to recover all of your VAT, the reverse charge has no cost effect and is a VAT compliance matter only. However, if you are partly exempt, there is likely to be a VAT cost depending on the level of recovery allowed under your partial exemption method. What do I have to show on a tax invoice? If you have to issue a tax invoice, it should contain the following data: the date of issue a sequential number based on one or more series, which uniquely identifies the invoice the name and address of the supplier and the VAT identification number under which he/she made the supply the name and address of the person to whom the supply is made and the VAT identification number under which he/she acquired the goods or services supplied to him/ her A description sufficient to identify the quantity and nature of the goods, or the extent and nature of the services supplied the date on which the supply was made or completed, or the date on which a payment on account of the supply was made, insofar as that date can be determined and differs from the date of issue of the invoice the taxable value per rate or exemption, the unit price exclusive of tax and any discounts or rebates if they are not included in the unit price the amount of tax chargeable, if any, at each rate so chargeable the total amount of tax chargeable, if any the amount of VAT due expressed in Euros.
10 Malta: Country VAT/GST Essentials Where appropriate, the following legends must be visible: where the invoice is for the intra-community supply of a new means of transport, a description to identify it as such. Where no VAT is chargeable, an invoice shall contain a brief reference to the provision in the law under which no VAT is chargeable, distinguishing between: supplies made outside Malta exempt with credit supplies exempt without credit supplies. Where the vendor is an intermediate supplier in relation to a triangular transaction and wishes to take advantage of the simplification measure to avoid registering for Maltese VAT, then the invoice should bear the legend VAT: TRIANGULATION SIMPLIFICATION INVOICE - Article 20(2)(a) of the Value Added Tax Act / Article 141 of Council Directive 2006/112/EC Can I issue invoices electronically? Yes, subject to acceptance of your customer and provided that the authenticity of the origin and the integrity of the contents are guaranteed as may be provided for by national legislation with regard to the use of electronic signatures, or as may be required and approved by the VAT authorities. Is it possible to operate self-billing? Yes. Subject to the Maltese VAT Department s approval, when a taxable supply is made to a person and no tax invoice is issued for that supply, that person may issue an invoice to himself/herself. When an invoice refers to a supply to which a margin scheme applies, it shall contain an indication to this effect by the inclusion of the words Margin Scheme and a reference to the relevant scheme. It is pertinent to note that, irrespective of the above, if a tax invoice complies fully with the invoicing requirements set out in Council Directive 2006/112/EC, it will be deemed to constitute a valid tax invoice for Maltese VAT purposes.
Malta: Country VAT/GST Essentials 11 Transfers of Business Is there a relief from VAT for the sale of a business as a going concern? Yes. If you sell your business as a going concern then VAT may not be due. Options to Tax Are there any options to tax transactions? If you produce investment gold or transform any gold into investment gold, then you have a right of option for taxation of supplies of investment gold to another taxable person which would otherwise be exempt with credit.
12 Malta: Country VAT/GST Essentials Head Office and Branch Transactions How are transactions between head office and branch treated? If a head office makes a charge to its branch or vice-versa in respect of services that is not treated as a supply for Maltese VAT purposes. A transfer of goods to/from another Member State would be treated, respectively, as a deemed (exempt) intra-community supply/deemed (taxable) intra- Community acquisition. Bad Debt Am I able to claim relief for bad debts? If you are able to prove that a debtor balance will not be recoverable and the output tax on the sale thereto has already been paid or is payable, then you may claim the corresponding bad debt relief. If the bad debt in respect of which a deduction has been allowed is subsequently recovered, it will be treated as a taxable supply taking place upon recovery.
Malta: Country VAT/GST Essentials 13 Anti-Avoidance Is there a general anti-avoidance provision under VAT law? No anti-avoidance provisions are expressly included in the Maltese VAT Act and subsidiary legislation. Penalty Regime What is the penalty and interest regime like? There are a number of penalties that apply in Malta for compliance failures. Late registration and late VAT return penalties have already been addressed above. If you make an error on a VAT return which understates your liability or overstates your entitlement to a VAT credit, a wrong declaration penalty of 20 percent of the error may apply. If, however, you voluntarily disclose the error to the VAT Department, the penalty will be reduced to 10 percent. If you have a reasonable excuse, then the penalty could also be waived. Interest would invariably apply to an error unless there is no overall loss of revenue.
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