The government has extended the threshold of exemptions from VAT on sales of up to €20,000 from the current €14,000, in line with a commitment announced in the Budget at the end of last year.

Finance Minister Edward Scicluna told a press conference on Tuesday that small businesses falling under this system would not need to charge VAT, but would still need to submit an annual VAT declaration.

The move, he said, was beneficial for small businesses which did not need to charge VAT and then request a refund, with the resultant bureaucratic complications.

The minister explained that this system did not mean that those involved did not pay VAT. They still paid for their inputs - for example somebody who called to paint his neighbour's house still paid VAT on his paint and brushes, while not charging VAT and requesting a refund on that.

Reducing bureaucracy would also benefit government operations, the minister said.
 
See the minister’s explanation in the video above.