Malta VAT changes effective from 2011

Place of supply of servicesTransposition of the relevant provisions on Council Directive 2008/8/EC of 12th February 2008 into Maltese legislation with effect from 01 January 2011.

These provisions relate to the place of supply of goods or services being the second phase of the implementation of major changes to this area of VAT being introduced in stages in line with the EU directive. The major change has been introduced with effect from 01 January 2010 with the modification of the general rule for the place of supply of services. In the case of supplies between taxable persons (business to business transactions) the general rule now states that the place of supply of goods and services is the place where the customer is established unless the transaction falls under one of the few exceptions. The rule in the case of supplies to non-taxable persons (business to customer transactions) has remained unchanged and hence is the place where the supplier is established although a few exceptions also apply.

One of these exceptions refers to services relating to artistic, sporting, scientific, educational, entertainment and similar events. Until 31 December 2010, in both business-to-business and business-to-customer transactions, such services were taxable where these were physically carried out.

As from 01 January 2011 the situation with respect to such services has been simplified in business-to-business transactions which are now taxed under the general rule i.e. where the customer is established with one exception relating specifically to services relating to the admission to artistic, sporting, scientific, educational, entertainment and similar events, in which case such services are taxable where those events actually take place.

In the case of business-to-customer transactions the situation remains unchanged with respect to all such services, with these remaining an exception to the general rule and taxable where those events actually take place.

Goods transported from a third territoryTransposition of the relevant provisions on Council Directive 2009/69/EC of 25th June 2009 into Maltese legislation with effect from 01 January 2011.

This relates to the importation of goods into Malta from a third territory where the supply by the importer qualifies for exemption as an intra-community supply. The exemption will however only apply if at the time of importation the Comptroller of Customs has been supplied with:

  1. the importer’s VAT registration number under Article 10;
  2. The VAT number of the person to whom the goods are supplied in the other member state or his own VAT registration number in such other member state where the transport of goods ends;
  3. the evidence that the imported goods were intended to be transported from Malta to another member state.

The Comptroller of Customs may also request additional documentation and security in this respect.

EnergyFurther amendments to the Maltese VAT Act have been passed with effect from 01 January 2011 following the transposition of the relevant provisions on Council Directive 2009/162/EU of 22nd December 2009 into Maltese legislation with effect from 01 January 2011.

These primarily include modification to the relevant articles in the Act relating to energy, the supply of gas and electricity with particular reference to the place of supply rules and exemptions. Such modifications take into consideration the fact that gas imported by vessels is to be treated no differently than that imported through pipelines and therefore qualifies for the same exemption. The directive also extends the special scheme determining the place of supply of gas and electricity to apply also to cross-border supplies of gas and also all services relating to the supply of access to all natural gas and electricity systems and heating and cooling networks. The same place of supply rules for natural gas and electricity also now apply to heating and cooling energy.

Input tax on private use of business assetsAnother modification under the same directive relates to the regulation of the partial deduction of input tax when there is an element of private use of business assets. The deduction allowed will be proportionate to the business use of such assets. It is also however expressly stated that where such assets fall to be immovable property or capital goods then the necessary adjustments with respect to the recovery of input tax will need to be made according to separate specific provisions in view of the durability of such assets and the mixed use of such assets being commonplace. Subsidiary legislation, namely Adjustments Relating to Input Tax on Capital Goods Regulations, enforced in 2004 regulates such matters. Under such regulations input tax claimed on such assets will need to be adjusted for if private use is made of such goods within the first five years in the case of capital goods and within the first twenty years in the case of immovable property.

Exemption from Registration RegulationsAlso with effect from 01 January 2011 an exemption from registration for Value Added Tax has been introduced in Maltese legislation. This exemption releases any taxable person whose turnover falls below the annual threshold for the relevant period from the obligation to register with the VAT Department and from issuing fiscal invoices to customers. The threshold is of Eur7000, with the relevant period running between January to December of the particular year. Should the threshold be exceeded then the taxable person is obliged to apply for registration under Article 10 (general registration) or Article 11 (as an exempt person) within 30 days from when such threshold is exceeded.

Consequent to the introduction of such exemption the VAT Department will take steps to deregister all persons currently registered as exempt and whose turnover during the relevant period does not exceed this threshold.