VAT on death

John Williams writes:
Earlier this year my wife passed away. After the funeral I sought to recover the VAT that I paid on the funeral expenses. I sent the VAT receipts to the Department of Finance, including my income tax details and the documents required to claim back VAT to the amount of Lm57. However, I was told that, as a foreigner, I am not entitled to claim back VAT.

Why are two standards being applied? I have owned a property in Malta and Gozo for 26 years and have lived 24 of those years in Gozo and have paid all my taxes.

I would be pleased if you were to intervene and give me your views on this matter.

As I understand it, the reader wants to avail himself of the possibility to reclaim VAT on funeral expenses.

I am informed that the Ministry of Finance does indeed offer a grant "on expenses connected with a funeral". As I understand it, this is not a VAT refund as such but a grant which is more akin to a social grant, linked to VAT paid on funeral expenses, up to a maximum of Lm75. The grant is administered by the Ministry of Finance. Application forms can be downloaded from the ministry's website at www.mfin.gov.mt.

The reader claims that the ministry rejected his application on the sole grounds that he is not a Maltese national.

The question is, therefore, whether the reader, who appears to be an EU citizen but not a Maltese national, is entitled to this grant like the rest of us.

I have looked into this matter and it appears that it is indeed the prerogative of the Ministry of Finance to ascertain whether an application for this grant should be approved or not. And it also appears that the ministry only grants this benefit to Maltese citizens.

There is therefore a clear difference in treatment between Maltese and other EU citizens in the granting of this benefit. The point is whether this difference in treatment is allowable under EU law.

In principle, it is not illegal to reserve social benefits for nationals only. In other words, if a national government decides to grant a social benefit, it is not necessarily bound to grant it across the board to everyone residing in Malta or coming to reside in Malta. The same applies, of course, in other EU countries.

There has always been a strong reluctance on the part of EU countries to open up social benefits to all EU citizens because of the fear that this would create a "pull factor" attracting people to "flood" into those countries that offer the highest benefits. So, for instance, if you are unemployed, you cannot just go to the EU country which pays the highest unemployment benefits. It is not as simple as that.

However, this does not mean that EU citizens residing in other EU countries have no entitlements. On the contrary, if the person in question has settled in that country and established a link with it, notably by working there and by paying taxes there, then s/he would normally become entitled to social benefits as well.

This is particularly the case with social benefits that are contributory in nature, that is, to which one has contributed through the payment of taxes. But increasingly for other benefits as well which are social in nature but not necessarily part of the traditional social assistance benefits.

This is where the European Court of Justice comes in. The court has, on different occasions, ruled on the extent to which EU citizens residing in another EU country are entitled to social benefits, even those to which they have not necessarily contributed.

In recent years, the court has been prepared to accept that if an EU citizen has established a genuine link with the country of residence, then that person would be entitled to social benefits there. Indeed, as of late, the court has been quite open in this respect, notably on the types of benefits, much to the consternation of national governments that fear the burden that may result on their budget.

So in this case, if the reader is indeed a resident here who has been paying taxes - and it appears that this is the case - I would say that he is indeed entitled to this grant on funeral expenses. This means that this benefit cannot be reserved for Maltese citizens alone. Doing so in the case of EU citizens who have established a genuine link in Malta would be discriminatory and illegal under EU law.

Readers wanting their questions to be answered in this column can send an e-mail, identifying themselves, to contact@simonbusuttil.eu or through www.simonbusuttil.eu