Malta VAT Grouping regulations

VAT Grouping

Malta VAT Grouping regulations

GCS Malta is a team of professional Accountants, Tax and Legal Advisors who can assist you with your business growth. Part of our service is to advise our current and potential clientele of any news that may concern them and/or their business. On the 22nd of May 2018, the new regulations implementing VAT Grouping in Malta were published as Legal Notice 162 of 2018.

What is VAT Grouping?

It is a tool available to the various EU Member States, used to prevent the cascading of irrecoverable VAT on charges made between members of the VAT Group. One of the benefits of this tool is that suppliers between group members are disregarded for VAT, enabling operators to outsource internally without incurring irrecoverable VAT.

Eligibility criteria

Two or more persons, defined as legal persons, which are established in Malta for VAT purposes are eligible to apply to the Commissioner for Revenue to be registered as a single taxable person, subject to the fulfilment of the following:

–    One of the applicants must be a taxable person licensed or recognised by the Malta Financial Services Authority or Malta Gaming Authority.

–    Each applicant must be found to each of the others by financial links, economic links and organisational links.

–    A financial link shall be deemed to exist where the same person holds, directly or indirectly, more than 90% of any two or more of the following: a) voting rights/equivalent interests, b) entitlement to profits available for distribution, c) entitlement to surplus assets available for distribution on a winding up/equivalent event.

–    An organisational link shall be deemed to exist where the applicants have a shared management structure, wholly or in part.

–    An economic link shall be deemed to exist where:

a)    The activity of each of the applicants is of the same nature or falls within the same industry

b)    The activities of the applicants are complementary or interdependent

c)    One member of the VAT Group carries out activities which are wholly or substantially to the benefit of any one or more of the other members

–    At the time of the application, the applicants must be up to date with their VAT and income tax filings and must have settled all related dues.

People forming part of a VAT Group are not eligible to enter another VAT Group, people bound to each other by financial links, organisational links and economic links may only form part of the same VAT Group.

Principal effects

A single VAT identification number is allocated to a VAT Group, whereby any pre-existing individual VAT identification numbers are de-activated. The members of the VAT Group are expected to nominate a Group Reporting Entity to act as representative and to exercise all rights and discharge all obligations of the VAT Group. This notwithstanding each member of the VAT Group shall be jointly and severally liable for the payment of VAT due and payable by the Group Reporting Entity.

Members can outsource functions within the VAT Group without having added VAT cashflow implications as well as potentially irrecoverable VAT costs. Overseas entities having establishments in Malta are also eligible to join a VAT Group. Moreover, the Group Reporting Entity should carry out any supplies made outside the VAT Group. The VAT classification of these supplies impacts the input VAT recoverability position of the Group Reporting Entity and hence of the VAT Group as a whole.

GCS Malta highly recommends groups having operations in the financial services, insurance and gaming sectors to assess their eligibility to apply for VAT Grouping as well as potential VAT benefits. Our team of professionals will be able to help you with such an assessment. For further information on how GCS Malta can assist you, send us an email on [email protected]

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