Following the Budget Speech by the Minister of Finance on 30 November 2023, Bill No. 72 was published, which includes provisions to implement some Budget Measures for 2024 and other administrative changes
The Bill (subject to possible further amendments) is expected to be enacted in the first quarter of 2024. The salient measures proposed in this Bill are highlighted below.
Amendments to the VAT Act
Codification of general anti-abuse rules in the Maltese VAT Act
The Bill introduces a general anti-abuse provision (GAAR) which largely codifies the VAT anti-abuse principles established through jurisprudence of the Court of Justice of the EU (‘CJEU’).
The GAAR provides that firstly any artificial or fictitious scheme which directly or indirectly results in the accrual of a tax advantage where the essential aim of that scheme is for a person to obtain said advantage the grant of which would be contrary to the purpose of the provisions of the VAT Act, shall be disregarded in such a manner as to redefine the scheme so as to re-establish the situation that would have prevailed in the absence of such scheme. For this purpose, a “scheme” includes any transaction or sequence of transactions, disposition, agreement, arrangement, trust, covenant, transfer of assets, structure, alienation of property, irrespectively of the date on which such scheme was made, entered into or set up.
Secondly, following CJEU jurisprudence, the GAAR provides that no amount shall be treated as deductible input VAT if that input VAT represents tax chargeable on goods or services having been the subject of VAT fraud committed upstream or downstream in the chain of supply when the person claiming the deduction knew or should have known of such fraud, irrespective of whether that person actively participated in that fraud.
When the Commissioner for Tax and Customs has reason to believe that the GAAR applies, he may make an assessment determining the tax liability or the entitlement to any input tax credit, refund or set-off of the said person.
Income tax deductibility of interests levied in terms of the VAT Act
If the Bill is enacted as proposed, Article 74 of the VATA will be deleted. Therefore, for income tax purposes, deductibility would need to be determined in terms of the Income Tax Act and the Income Tax Management Act.
Broader access to books, records and documents in the course of an investigation
Pursuant to the proposed amendments to Article 53, the Commissioner would have the power to inspect and require electronic access to books, records or documents including those contained in any computerised system. Moreover, without prejudice to the provisions relating to the duty of professional secrecy the Bill widens the power of the Commissioner to request information on taxpayers from third parties which may have information on the taxpayer.
Other VAT amendments
(i) Clarification on the filing of Correction Forms after a provisional assessment has been issued.
The Bill also clarifies that a taxpayer is unable to file a Correction Form after a provisional assessment has been issued until such time as the assessment is made or the provisional assessment is cancelled by the Commissioner.
Moreover, Commissioner’s approval would be required when a Correction Form is filed after an assessment has been made.
(ii) Appeals to the Court of Appeal following decisions of the Tribunal
Article 47 of the VAT Act currently provides that a person who feels aggrieved by the decision of the Tribunal has 30 days to file an Appeal which 30 days start to run from the date on which the decision appealed from is notified to him. With the proposed changes, the 30 days would start to run from the date of the service of the decision appealed from, and in all cases but not later than one hundred and eighty-three (183) days from the date of the decision by the Tribunal. A transitional period is expected to apply up to 30th June 2024 for those appeals which have not yet been served and in respect of which the 183-day period has elapsed.
Record-keeping requirements for taxable persons not registered for VAT
All taxable persons, including those who are not required to become registered for VAT would need to keep full and proper records of all transactions carried out in the course or furtherance of the economic activity.
Amendments to the Social Security Act
The amendments to the Social Security Act (the Act) proposed within the Bill are as follows:
- The confirmation that as from 1 January 2024 the commuted part of a pension, where the specific conditions are met, shall still not be taken into account when calculating an individual’s contributory pension in terms of the Act;
- A mother who commences insurable employment after the birth of a child shall be entitled to credited contributions in accordance with the provisions of the Act;
- An increase in the number of sickness days an individual may avail himself of, subject to approval and specific conditions being met, if he undergoes major surgical operation or suffers a severe injury or is afflicted by some serious disease;
- Individuals suffering from mental health conditions may avail themselves of increases in pensions, as the case may be, in accordance with the Act, always subject to specific conditions being met;
- An increase in the pension bonus paid to individuals who are not entitled to a contributory pension depending on the number of contributions made;
- An increase in the one-time bonus payable upon the birth or adoption of a child. Amounts vary depending on whether it is the first birth/adoption or subsequent births/adoptions;
- An inter-professional panel to be appointed to evaluate claims for severe disability assistance and disability assistance in accordance with the Act; and
- A change in the mechanism currently used to calculate the rate of sickness assistance.