VAT Grouping in Malta

In the budget speech for 2018, the Minister of Finance has announced that for the first time, Malta will introduce rules which will permit two or more persons to be treated as a single person for VAT purposes.  Such persons, while legally independent from each other, would be closely linked to one another by financial, […]

Written By ACT Team

On November 16, 2017
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In the budget speech for 2018, the Minister of Finance has announced that for the first time, Malta will introduce rules which will permit two or more persons to be treated as a single person for VAT purposes.  Such persons, while legally independent from each other, would be closely linked to one another by financial, economic and organizational links.  In the said Budget speech, it was announced that this possibility will for the time being be available only to entities engaged in the financial services and gaming sectors.  The aim of this is to encourage sustainable growth in such important sectors of the Maltese economy.

This is referred to as VAT Grouping, which is provided for in Article 11 of the EU VAT Directive.  This provides the possibility for EU Member States to opt to treat certain persons registered for vat purposes as a single tax payer for vat purposes.  A number of EU member states have introduced vat grouping in their legislation in one form of another in the past years.  The advantages of vat grouping include:

1. Simplification of the compliance burden for tax payers, since only one consolidated vat return will be submitted for the whole group

2. Simplification of the administrative processes for the vat authorities for the same reason referred to above

3. Cash flow advantages for the tax payers as input vat incurred by one member of the group can be set off against the vat due by other members

4. VAT grouping provides additional financial security to the vat authorities because all members of the group may be held jointly and severally liable for the payment of  the vat due by the group

5. Charges between members of the same group will be out of scope of the vat legislation.  This would be particularly beneficial for members of the group which makes  exempt without credit supplies, which would otherwise not be entitled to claim refunds of vat.

The proposed legislation has not yet been published and we are therefore looking forward to have the legislation in place.  This should provide important benefits to entities engaged in the financial services and gaming sectors.

We will of course keep you updated once the legislation is published.

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on [email protected].