Amendments to the ECO Contribution Act – The “Tourist” tax

Eco-contribution is chargeable at the rate of €0.50 per person per night, subject to a maximum of €5 per person per visit.

Applicable as of 20th June 2016, Eco-contribution is chargeable with respect to accommodation, whether provided for a consideration or otherwise, in any premises which, for the purpose of providing the said accommodation, requires to be licensed in virtue of the Malta Travel and Tourism Services Act (MTTSA). This eco-contribution is also chargeable by host families providing accommodation services however such host families may delegate the role to collect the contribution to language schools. 

 Implications of the above:

  • Persons providing accommodation to a “tourist”, for which purpose a license has been granted in terms of the MTTSA:
  1. Must charge and collect VAT at the rate of 7%;
  2. Must make Eco-contributions at the rate of €0.50 per person (over 18 years) per night, subject to a maximum of €5 per person per visit; and
  3. Are chargeable to income tax.
  • Such persons must now also apply for Eco registration and fulfil the necessary compliance requirements;
  • Where such persons are registered for VAT purposes in terms of article 10 of the VAT Act, they now have to submit quarterly returns for both VAT and Eco-contribution purposes;
  • Such persons must now also maintain the appropriate records for ECO tax purposes - in particular, they must maintain appropriate documentary evidence confirming that accommodation was provided to persons who had not yet reached the age of 18 years, in cases where Eco-contribution was not charged for this reason;
  • Such persons must now also satisfy requests for information/disclosures issued by the ECO Unit, if and when requested; and
  • Such persons must now decide whether they are in a position to adjust prices (upwards) to cater for this Eco-contribution or whether their current profit margin shall be reduced accordingly.

Providers of accommodation to tourists who are already registered in terms of the MTTSA are going to be automatically registered for Eco-contribution purposes. Others would need to take the necessary steps to file an application in this respect. It is important to note that, if persons carrying out the applicable supplies do not receive an Eco-contribution certificate, they should not assume that they are not required to register and should take the necessary steps to register themselves.

In recognition of the fact that accommodation providers may face difficulties in collecting from pre-booked customers in the initial months, following the implementation of this environmental contribution, a 15% credit will be provided against amounts payable for the first 5 months.

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Eco-contribution tax update

Subsequent to the publishing of the Eco-contribution tax, a number of tourism operators filed a request for a warrant of prohibitory injunction against the government of Malta in order to stall the entry into force of the discussed ECO Contribution Tax.

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