Malta: Draft legislation implementing certain VAT measures in 2024 budget

Bill No. 72 of 2023

Bill No. 72 of 2023

Draft legislation (Bill No. 72 of 2023), which is expected to be enacted in the first quarter of 2024, would implement certain value added tax (VAT) measures that were included in the 2024 budget. Read TaxNewsFlash

Codification of general anti-abuse rules

The bill would introduce a general anti-abuse provision (GAAR) that largely codifies the VAT anti-abuse principles established through jurisprudence of the Court of Justice of the European Union (CJEU).

The GAAR would provide 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.

Income tax deductibility of interests levied in terms of VAT Act

Article 74 of the VAT Act would 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

Under proposed amendments to Article 53 of the VAT Act, the Commissioner would have the power to inspect and require electronic access to books, records or documents including those contained in any computerized system. Moreover, without prejudice to the provisions relating to the duty of professional secrecy, the bill would widen the power of the Commissioner to request information on taxpayers from third parties which may have information on the taxpayer.

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.

Other VAT amendments

The bill would also clarify 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.

Article 47 of the VAT Act currently provides that the 30-day period in which to appeal a decision of the tribunal starts to run from the date on which the decision appealed from is notified. Under the proposed changes, the 30 days would start to run from the date of the service of the decision appealed from, but not later than 183 days from the date of the decision by the Tribunal. A transitional period is expected to apply until 30 June 2024 for those appeals that have not yet been served and in respect of which the 183-day period has elapsed.

Read an December 2023 report prepared by the KPMG member firm in Malta



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