New VAT Invoicing rules to apply in Malta

On 30 November 2012 various Legal
Notices were published so as to transpose into Maltese law the new VAT
invoicing rules that have been introduced at EU level by Directive 2010/45
(‘the Invoicing Directive'). The new rules aim to simplify, modernize and
further harmonize how invoices are drawn up throughout the EU.

The changes cover a wide variety of
issues including, but not limited to, the content of invoices, deadlines by
which invoices must be issued, the possibility to issue simplified and summary
invoices and the issuance of electronic invoices. The possibility for
businesses to account for VAT on a cash basis has also been significantly
restricted.

Applicable
rules for invoicing

Although the new EU invoicing rules
enhance harmonisation, Member States are in particular cases still left the
freedom to impose specific invoicing requirements. It therefore remains
important to determine which Member State's rules apply to the issuance of an
invoice in a particular situation.

Invoicing is subject to the
provisions of the Malta VAT Act in cases where:

–  a supply is deemed to be made in
Malta for VAT purposes;

–  a supply, made by a Maltese
supplier, is deemed to take place outside the EU for VAT purposes;

–  a supply is made by a Maltese
supplier to a customer established in another EU Member State, for which that
customer is the person liable for the payment of VAT.

Self-invoicing is subject to the
provisions of the Malta VAT Act in the case where the supply in respect of
which the self-invoice is issued is deemed to be made in Malta for VAT purposes
(see below).

Content of
invoices

Terminology

A person issuing an invoice may be
required to include therein references to indicate a specific circumstance
surrounding the supply (for example to indicate that the customer has to
reverse charge the VAT). The terminology to be used for the purposes thereof
has been altered and new instances in which such references must be made have
been introduced.

Where an invoice is issued by a
Maltese supplier in respect of a supply made to a customer established in
another EU Member State and for which that customer is the person liable for
the payment of VAT, the following details may be omitted from the invoice:

–  the taxable value per rate;

–  the unit price exclusive of VAT
and any discounts or rebates not included in the unit price;

–  the VAT rate applied;

–  the VAT amount payable;

in which case they must be replaced
by an indication of the taxable amount of those goods or services by reference
to the quantity or extent of the goods or services supplied and their nature.

Simplified Invoices

A new feature introduced is that a
simplified invoice (containing fewer details) may be issued where the amount of
the invoice – inclusive of VAT – is not higher than €100 or where the document
serves as a credit note.

Simplified invoices are however not
allowed in respect of cross-border supplies or supplies made by a Maltese
supplier to a customer established in another EU Member State and for which
that customer is the person liable for the payment of VAT.

A simplified invoice must contain at
least the following particulars:

–  the date of issue;

–  a sequential number;

–  the name, address and the VAT
identification number of the supplier;

–  the VAT identification number of
the customer;

–  a description sufficient to
identify the goods and services supplied;

–  the total amount of VAT payable
or the information needed to calculate it;

–  where it serves as a credit
note, a specific and unambiguous reference to the initial invoice and the
specific details which are being amended.

Summary Invoices

A summary invoice may be issued to
detail several supplies of goods or services provided that the VAT on the
supplies mentioned becomes chargeable during the same calendar month.

Deadline
for issuance of invoices

Invoices must be issued by not later
than the 15th day of the month following that in which the chargeable event
takes place (except where any payment on account precedes an intra-Community
supply of goods).

This new rule aims to harmonize the
deadline throughout the EU for all intra-Community supplies of goods and
services for which the customer is the person liable for the payment of VAT, so
as to ensure that suppliers declare the transactions in their Recapitulative
Statements (also known as EC Sales Lists) for the same period as for which
their customers account for VAT on the corresponding acquisition or purchase
through their periodic VAT returns.

Electronic
invoices

Since the use of electronic invoicing
can help businesses reduce costs and be more competitive, current VAT
requirements on electronic invoicing were revised to remove existing burdens
and barriers to uptake. Under the new rules, paper and electronic invoices
(i.e. invoices that have been issued and received in any electronic format) are
placed on the same footing. Electronic invoices however still require
acceptance by the recipient.

Each person issuing an electronic
invoice must ensure the authenticity of the origin, the integrity of the
content and the legibility of the invoice, from issuance until the end of the
period for storage of the invoice, by any business controls which create a
reliable audit trail between an invoice and a supply of goods or services.
Since various electronic-invoicing technologies exist, businesses wishing to
make use of electronic invoicing should be aware of the technologies that can
assist them best in setting up the necessary controls.

Where batches containing several
electronic invoices are sent or made available to the same customer, the
details common to the individual invoices may be mentioned only once where, for
each invoice, all the information is accessible.

Issuance of
self-invoices

Self-invoicing is subject to the
provisions of the Malta VAT Act in the case where the supply in respect of
which the self-invoice is issued is deemed to be made in Malta for VAT purposes
(see below). As mentioned above, such invoice must contain the reference
‘Self-billing'.

A customer may only draw up an
invoice instead of the supplier to the extent that there is prior agreement in
respect thereof with the supplier and further provided that a procedure exists
for the acceptance of each tax invoice by the supplier. The Director General
(VAT) could require that such invoices be issued in the name and on behalf of
the supplier.

Cash basis
of accounting

The possibility for Maltese
businesses to account for VAT on a cash basis has been significantly
restricted. Under the new rules the objective is that only Maltese professional
services providers and retailers, civil, mechanical or electrical engineering
contractors whose annual turnover does not exceed €2,000,000 (exclusive of VAT)
retain the option to account for VAT on a cash basis. That option can however
not be applied in respect of exempt intra-Community supplies or transfers of
goods and services in respect of which VAT is payable by the customer.

Where cash accounting is opted for,
the right to deduct the VAT paid on purchases is now postponed until the time
when the VAT on the relevant supplies has been paid to the supplier[1]. This
new restriction does not only affect the businesses that account for VAT on a
cash basis, but also applies to the right of deduction of the customers of such
businesses in respect of supplies made to them by such persons[2]. Businesses
may thus need to adapt their accounting systems to ensure that they do not
deduct VAT charged to them by persons adopting a cash basis of accounting
before the relevant supply has been paid for.

A tax invoice in respect of a supply
of professional services that is accounted for on a cash basis must be issued by
not later than the 15th day of the month following that in which the payment
for the said supply of services is made.

Miscellaneous

Some other, less significant, changes
have been introduced, such as in relation to:

– Determination of the taxable
amount. Where the factors used to determine the taxable amount are expressed in
a foreign currency, the exchange rate applicable shall be the last selling rate
recorded, at the time the VAT becomes chargeable, applied by commercial banks
in Malta
or the latest exchange rate published by the European Central Bank at that
time. Upon importation of goods into Malta, the relevant exchange rate
must be determined in accordance with the Community provisions governing the
calculation of the value for customs purposes;

– Credit notes. Credit notes drawn
up in accordance with the requirements of the VAT Act qualify as tax invoices;

– Translation of invoices. The
Director General (VAT) may, for certain businesses or certain cases, require
translation into Maltese or English of invoices issued in respect of goods or
services supplied in Malta
and/or invoices received by businesses established in Malta.

– Continuous supplies of goods. Continuous supplies of goods over a
period of more than one calendar month which are dispatched or transported and
supplied VAT exempt to a Member State other than Malta must be regarded as
being completed on expiry of each calendar month until such supplies come to an
end.