Certain VAT Budget Measures

Certain VAT Budget Measures

Four legal notices were published this month to give effect to a number of measures announced by the Minister of Finance in his Budget Speech for 2015.

Anthony Pace

Partner, Head of Tax

KPMG in Malta

open book

L.N. 64 of 2015 - 5% VAT rate on digital books


With effect from 1st January 2015, the reduced 5% VAT rate applicable to books and certain printed matter has been extended to audio books, books and similar printed matter supplied on all physical means of support including, but not limited to, CDs, DVDs, SD Cards and USBs. Books which qualify as ‘electronically supplied services’ such as e-books downloaded from the internet do not qualify for the 5% reduced rate and remain VAT taxable at 18% in Malta. 

According to Minister’s Budget Speech, the aim of the reduced rate on digital books is to ensure fair treatment between different means of disseminating content and to encourage the spread of digital means of education. The exclusion of e-books and other content which qualifies as electronically supplied services from the reduced rate is in line with the EU VAT Directive and with the judgments issued on 5th March 2015 (Cases C-479/13 and C-502/13) which confirmed that the reduced rates that have been applied by France and Luxembourg on e-books in the past years were incompatible with the EU VAT Directive. 


L.N. 65 of 2015 – Changes to fiscal receipting provisions


L.N. 65 of 2015 introduces an amendment to the definition of a ‘fiscal receipt’ in the Thirteenth Schedule to the VAT Act to include receipts issued in a manner as may be approved by the Commissioner in addition to the other methods of issuing receipts. The other methods that have been in place for the past years were through forms supplied by or approved in writing by the Commissioner such as through fiscal receipt books issued by the VAT Department, through fiscal cash registers or through fiscal taxi meters. Fiscal receipts issued through an audited point of sale systems were also accepted and such receipts now fall more squarely within the definition of fiscal receipts. Other amendments to the Thirteenth Schedule were made to align the provisions therein with the amended definition. 

We believe that the changes to the fiscal receipts’ definition is one of the measures announced by the Minister of Finance in his 2015 Budget Speech in which he announced that there will be a development and clarification of the rules regarding receipts. With the aim to curtail tax evasion and abuse, the Minister announced that the Revenue officers will be trained in IT so that they can carry out audits on point of sale systems used in commercial outlets and guidelines are expected to be published to help businesses determine which cash registers and printers are in conformity with the fiscal requirements.A new proviso has also been introduced that has the effect of exonerating retailers from issuing fiscal receipts by means of cash registers when the retailers are involved in the delivery of pre-ordered goods. It is understood that retailers who deliver goods to their customers need not issue a cash register receipt. The obligation to issue a fiscal receipt in another form, such as through the fiscal receipts booklet, however remains.Furthermore, the legal notice acquits from the obligation to issue fiscal receipts persons, supplying telecommunication, broadcasting and electronically supplied services to non-business customers when they opt to avail themselves of the Mini One Stop Shop. This acquittal eases the VAT compliance burdens of both Maltese suppliers of such services and foreign suppliers who provide their services to customers established in Malta. In essence, the new legal notice is an endorsement of the notice that was issued on 19th September 2014 in the Government gazette.


L.N. 66 and 67 of 2015 – VAT obligations of small undertakings


The VAT registration exemption threshold of €7,000 was abolished by L.N. 67 of 2015 with effect from 1st January 2015. Consequently, VAT registration has been made mandatory for any person who carries out an economic activity (which may be a part-time activity), irrespective of the yearly turnover, unless such person’s income is generated from exempt without credit supplies. By 30th June 2015, persons effected by such change are now required to register or to re-activate their VAT registration number that had been de-activated after the Exemption from Registration Regulations were published in 2010. Such Regulations have now been revoked by the said L.N. 67. 

With this amendment, such persons whose yearly turnover is within the brackets in the tables hereunder are required to register under Article 11 of the VAT Act unless they opt to register under Article 10 or unless they provide certain cross-border supplies. 

Turnover Thresholds 

Economic activities consisting principally in the supply of goods
Economic activities consisting principally in the supply of services with a relatively low value added: €24,000
Other economic activities    €14,000 

An Article 10 registration is the standard type of registration through which VAT-registrants are required to charge VAT on their taxable supplies made in Malta and have a right of input VAT recovery. On the other hand, Article 11 VAT-registrants do not charge VAT on their output supplies and do not recover input VAT on their expenses.The VAT compliance obligations of Article 11 VAT-registrants are generally less onerous than those of Article 10. Nevertheless;

  • they are still required to issue fiscal receipts to support their sales; and
  • they are required to complete a declaration on the prescribed form on an annual basis or as may be determined by the Commissioner.

The abolishment of the €7,000 threshold could also have an effect on Article 12 VAT-registrants, typically engaged in exempt without credit supplies, who may have minor taxable/exempt with credit supplies falling within the above mentioned thresholds

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