With regards to the small traders’ registration threshold, Maltese established taxable persons may opt for a simpler method commonly known as ‘Exempt Persons’.
Essentially, even though they are required to be registered for VAT purposes they will have no obligation to charge it (or a right to claim it back against expenses) subject to their sales not exceeding a yearly turnover threshold. As the threshold for exempt persons was increased with effect from July 1, 2018, this has had further business implications.
In another development, following consultations with the EU VAT Committee, VAT Grouping was introduced in Malta.
Such an optional type of VAT Registration mainly entails that a group of companies which were previously registered separately for VAT purposes as taxable persons may now qualify to be registered and treated as a single taxable person.
It is a change that impacts the VAT treatment of the transactions entered into by such group companies.
This may create a number of opportunities wherein certain VAT leakages may be reduced/eliminated.
However, one needs to keep an eye also on certain negative implications, particularly the right of refund of certain companies which may be negatively impacted/compromised.
Moreover, to date the VAT Grouping option is only available to certain groups operating in regulated sectors. In addition, specific conditions need to be satisfied prior to the Maltese VAT Department accepting such a VAT Group application.
The VAT Grouping option is only available to certain groups operating in regulated sectors
Late last year the Maltese VAT Department issued guidelines with respect to the VAT treatment of cryptocurrencies and other Distributed Ledger Technology (DLT) Assets, focusing on the nature and use of the said assets rather than the terms attributed to such assets.
Rather than introducing new VAT rules, the guidelines explain how the existing ones can be applied to such DLT assets, thereby providing interested parties with further clarifications on their reporting requirements.
In yet another recent development, following the outcome of ECJ Case C-164/16 as well as discussions which the EU authorities had with a number of Member States including Malta, there have been a number of changes in the VAT treatment of leases and the application of the use and enjoyment concept. Although the VAT treatment of such leases will still depend upon the transfer of ownership, each case will have to be dealt with on its own merits.
With a view to simplifying the VAT treatment and reducing compliance costs for E-commerce, the EU will be effecting major changes in its VATtreatment. It will mainly affect distance sales via the internet/online market places both within the EU and also from third countries).
The introduction will take place on January 1, 2021 with some minor changes already kicking in as from January 1, 2019.
The latter will relate to place of supply, invoicing rules, client’s country of establishment and the application of the Mini One Stop Shop (MOSS) mechanism. Other developments in this area include the reduction of the VAT rate on a wider range of electronic products.
Recently the Maltese VAT Department also embarked on an exercise to shift as much as possible all operations online. This mainly entails the shift from manual to online filing of all VAT forms including VAT returns with certain exceptions. Also effective from this year, new rules regulating the VAT treatment of vouchers were introduced at EU level with the main element being the difference between Single- and Multi-Purpose Vouchers.
Saviour Bezzina is a warranted accountant with over 10 years working in taxation, specialising in VAT. He joined EY in 2006 and currently works as a senior manager. Over the years he has provided VAT consultancy services to a vast range of local and international clients, and is well recognised as a leading specialist in the field.
For more information on the above and other recent and upcoming interesting VAT developments, join EY Malta’s CPE Accredited training event on Relevant VAT Developments on May 23, 2019 from 2.45pm to 6.15pm at EY’s Connect Centre, Msida. Kindly send an email to events@mt.ey.com to confirm your attendance.
Admission fee for this session is €59 (incl. VAT).