VAT: Recent Updates

On the 22nd May 2018, two new legal notices concerning VAT matters were published, to enact regulations announced by the Minister for Finance in the 2018 Budget.

VAT Grouping

The salient points of the legal notice entitled “Value Added Tax (Registration as a Single Taxable Person) Regulations, 2018”, transposing Article 11 of Council Directive 2006/112/EC, are the following:

  • The regulations shall come into force on 1st June 2018;
  • A VAT Group can be formed by two or more persons established in Malta if the following conditions are satisfied:
  1. at least one of the applicants requires to be a taxable person who is licensed or recognised under regulations governing specific sectors, mainly the financial, insurance and gaming industries;
  2. each of the members is bound to each other by financial, economic and organisational links;
  3. applicants need to have all VAT returns/notices of payments and income tax returns submitted and any amounts due settled, prior to joining a VAT group.
  • Financial links shall be deemed to exist where any two or more of the following are, directly or indirectly, held as to more than 90% by the same person or persons:
  1. the voting rights or equivalent interests;
  2. the entitlement to profits available for distribution; or
  3. the entitlement to surplus assets available for distribution on a winding up.
  • Organisational links would be satisfied if applicants have a shared management structure
  • Applicants would be deemed to meet the economic links criteria if:
  1. the economic activity of the members is of the same nature or within the same industry; or
  2. the economic activities of the members are interdependent/complementary; or
  3. one member of the group carries out activities for the benefit of other members within the VAT Group.
  • A person can only be a member of one VAT group registered in Malta at a given time;
  • In the process of the VAT group registration, the individual VAT registration of the applicants will be cancelled;
  • Once registered, the VAT group will be allocated a single VAT number. The Application for registration of the VAT group or for the admission of a person as a member of an existing VAT Group shall be made electronically;
  • The members shall nominate a Group Reporting Entity (GRE), whereby any supply made by/to the VAT group shall be treated as a supply made by/to the GRE. Each member of the VAT Group shall be jointly and severally liable for the payment of tax, administrative penalties and interest payable by the VAT Group;
  • Any supply of goods and/or services made between members of the same group are to be disregarded for VAT purposes unless the Commissioner deems otherwise in order to prevent abuse;
  • A VAT group may be dissolved and have its registration cancelled at any time after the lapse of 24 full calendar months from the effective registration date and cannot be subsequently re-established with the same members until the lapse of another 24 full calendar months from the effective cancellation date.

Amendments to the thresholds for Small Undertakings

A legal notice entitled “Value Added Tax Act (Amendment of Sixth Schedule) Regulations, 2018”, has also been issued, implementing the changes announced in the last Budget Speech, to amend the applicable thresholds for a business to qualify as a small undertaking.

The revised thresholds are as follows:


Entry Threshold 

Exit Threshold

Economic activities consisting principally in the supply of goods

€ 35,000

€ 28,000

Economic activities consisting principally in the supply of services with a relatively low value added

€ 24,000

€ 19,000

Other economic activities

€ 20,000

(14,000 up to 30 June 2018)

€ 17,000

(12,000 up to 30 June 2018)

The aforementioned changes shall come into effect on the 1 July 2018 and shall (unless renewed), cease to apply on the 31st December 2020. This is in-line with the Vat Action Plan as adopted by the European Commission, in that this measure should result in reduced VAT obligations and thus a reduction in the administrative burden and costs for small enterprises.

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