New VAT penalties come into force

New VAT penalties come into force

New administrative penalties were introduced in the VAT Act through the inclusion of Article 38A, which article has come into force on 4th June 2013.

Anthony Pace

Partner, Head of Tax

KPMG in Malta

gavel on papers

New administrative penalties 

As originally outlined in the Budget Measures Implementation Act, 2013, new administrative penalties were introduced in the VAT Act through the inclusion of Article 38A, which article has come into force on 4th June 2013 by virtue of Legal Notice 259 of 2013. 

Persons registered under Article 10 or 12 of the VAT Act are now subject to an administrative penalty if the VAT due as declared in a VAT return or in a VAT Form 004 is not paid or not fully paid by due date. The administrative penalty is equivalent to the higher of:

- 1% of the difference between the amount declared to be payable in the VAT return or VAT Form 004 and the amount paid; and

- €20;

for every month or part thereof that elapses from the VAT payment due date and the date on which full payment of the tax is made, subject to a maximum of €250 per VAT return/VAT Form 004.


KPMG observations 

Currently administrative penalties apply, amongst others,

- for the late application for VAT registration or other late notifications;

- for the filing of incorrect VAT returns;for the filing of incorrect VAT Forms 004; and

- for the late filing of VAT returns, VAT Forms and recapitulative statements. Worth mentioning is that the VAT Act contains a provision which deems a VAT return as not filed unless it is full and complete in all material respects and the VAT payable is duly paid.

With the new Article 38A, administrative penalties are now enforced when a correctly filed VAT return is not accompanied with full VAT settlement by due date. In the absence of a threshold below which Article 38A does not apply, the application of the new provision could be disproportionate when underpayments of VAT are diminutive, for instance if bank charges are deducted from the proper VAT payment in a wire transfer settlement.

Article 38A imposes an administrative penalty which is additional to the imposition of interest that currently applies on every late payment of VAT at 0.75% per month or part thereof for the period in which the VAT remains unpaid. Criminal penalties can furthermore apply with respect to certain offences.The coming into force of the new administrative penalties came about round the same time that a Bill  has been published with proposed implementing measures aimed to review downwards the above mentioned interest rate and certain penalties to alleviate the burdens on taxpayers who fall back on their VAT payments.

If you would like to know more about this development and how it might affect your business, or indeed to discuss any other VAT matter, please get in touch with Tony Paceor Graziella Demanuele Bianco, your local indirect tax contacts, on



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