VAT 2010 – 2015

LN 132 and 133 published on 24 April 2009 announced the amendments to the VAT Act (Chapter 406 of the Laws of Malta) which will come into force on 1 January 2010, 1 January 2011, 1 January 2013 and 1 January 2015. These changes implement the EU "VAT Package" adopted in February 2008 which announced changes to the place of supply of services rules, additional compliance requirements and revised procedures for recovering VAT incurred in Member States other than a business's home state. The proposed changes to the ‘place of supply' rules are relevant in the context of cross-border provision of services, and their primary scope is to ensure a level playing field for businesses which supply services within the EU.

General Rule: Distinction between B2B and B2C supplies

The new general rule shifts the place of supply of business-to-business ("B2B") services from the country of establishment of the supplier to the country of establishment of the customer, requiring the customer to self-account for VAT in his country of establishment (reverse charge). The current basic place of supply rule will remain the same for business-to-customer ("B2C") supplies of services, which services will be taxable in the country where the supplier is located.

Exceptions for specific services

Exceptions to the general rules will continue to apply to certain categories of services, such as services connected with immovable property and educational, sporting and cultural services. Certain services, such as services consisting of work on movable property, will remain taxable where physically carried out when provided B2C (exception to the general rule), but will be taxable where the customer is established in the case of B2B services. The new rules also clarify the VAT treatment of restaurant and catering services, another exception to the general rules.

Telecommunications, broadcasting and electronically supplied services

With effect from 2015, the place of supply of these services B2C will, in all cases, be the country of establishment of the customer. B2C suppliers of such services would be required to charge VAT in the country of establishment of the customer, however suppliers may opt to have only one EU VAT registration and to report the VAT due in each Member State through that single registration ("One-stop-shop" arrangement).

New reporting obligations

With effect from 1 January 2010, new registration and reporting requirements will be introduced for businesses supplying and receiving services in a cross-border context. The new reporting obligations complement the revised exchange of information arrangements between the EC Member States which will allow the Member States to monitor the cross-border provision of services.

Refund of Malta VAT paid by businesses established in another EU Member State – New Procedure

Legal Notice 357 of 2009 published on 15 December 2009 announced the changes to the application procedure for refunds of Malta VAT paid by businesses established in other EU Member States, effective 1 January 2010. The application for a refund is to be submitted in electronic format to the VAT authorities of the applicant's Member State of establishment, through the electronic portal set up by that Member State. This new procedure applies to refund applications submitted after 31 December 2009. Eligibility of the applicant for a refund of Malta VAT will depend on the said applicant's eligibility in terms of the rules in force in the Member State of establishment. Furthermore, restrictions to the recovery of VAT on certain purchases in terms of the rules in the Malta VAT Act for blocked inputs (including entertainment, alcohol and motor vehicles) continue to apply.

EU VAT Refund Claim

Persons registered under article 10 who are eligible for a refund of VAT paid in another EU Member State may submit an application for a refund through the Malta VAT Department's electronic portal.

Change to the Tax Point rules

Legal Notice 71 of 2010 announced the amendments to the VAT ‘Tax Point' rules in the Fourth Schedule to the Malta VAT Act. The changes impact supplies of goods or services which are made on an ongoing basis over a period of time (continuous supplies) and essentially provide that if no statement of account is raised or payment made, the goods/services shall be considered to be supplied at intervals of one year. In the case of continuous supplies of services from suppliers outside Malta to a business customer in Malta (where the customer must reverse charge Malta VAT), unless the tax point is otherwise triggered, the services shall be regarded as being completed on the expiry of each calendar year until the supply of such services comes to an end.

Information from Deloitte.