The Malta tax authorities have issued Guidelines on 4th January 2021 which will be useful for intermediaries and in some instances, taxpayers, to meet their obligations in reporting certain cross border arrangements starting in January 2021. Reporting has to be done on different dates: with respect to cross-border arrangements where the trigger point for reporting took place between 1 July 2020 and 31 December 2020 the deadline for reporting must take place by no later than Monday 1 February 2021. Reportable cross-border arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020 must be reported by Monday 1 March 2021.
Following a judgement by the ECJ in C-94/19 San Domenico Vetraria SpA v Agenzia delle Entrate, we expect a change in the VAT treatment of certain supplies and the VAT Department’s approach to such supplies.
Scenario A – previously, the secondment of staff or the sharing of human resources between group companies at cost was not considered to be subject to VAT. Following this judgement, we expect that such secondment/sharing of staff carried out for consideration will typically give rise to a supply of services subject to Malta VAT, even when carried out on a pure cost basis (i.e. with no mark-up).
Scenario B – previously, an individual provided to a company to act as director, and the remuneration was not paid directly to the individual director but rather invoiced to the company by the entity providing the individual, was deemed to fall outside the scope of VAT. This will now become taxable. Accordingly, the provision by an entity of an individual to act as director or other officer of another company shall no longer be regarded as a supply falling outside the scope of Malta VAT and shall instead be liable to VAT.
Currently businesses selling goods over the internet fall within the Distance Sales Regime, and this can potentially result in multiple VAT registrations in the different EU Member States. As from 1st July 2021, this will change through the implementation of the OSS (One Stop Shop) to these types of supplies. Here, we are looking at e-commerce website operators established in one Member State from where they are shipping goods to their customers situated in the different EU Member States.
In the case of EU suppliers selling more than Euro 10,000 annually, such sales will be deemed to take place in the member state where the transport of the goods ends. In this case, they can opt for the OSS scheme which would simplify their VAT compliance obligations and pay all the VAT through the OSS Return instead of obtaining VAT Registration Numbers in the various jurisdictions where their customers are established.
In a world where more startups are entering into the e-commerce and dropshipping sectors, the above is expected to facilitate reporting and allow smaller businesses to access new markets.
Get in touch with us for assistance, contact us on email@example.com
Previously, a business or self-employed that is VAT registered under ‘Article 10’ (standard), had to wait for 36 months before shifting to an ‘Article 11’ registration (small undertaking). This can now be made after 24 calendar months, Furthermore, the revised Sixth Schedule of the VAT Act provides for the possibility to request a conversion of registration after 6 months, which may be permitted at the discretion of the Commissioner for Revenue.
Furthermore, we remind you that following the Budget Speech of last October, the sales thresholds are also changing as follows:
- Economic activities consisting principally in the supply of goods: €35,000 (no change)
- Other economic activities: €30,000 (entry threshold)/€24,000 (exit threshold).
The above is expected to leave more businesses with a choice between an exempt status under Article 11 or else registered under Article 10. Naturally, this may have an impact on the person’s ability to claim VAT on expenses. Get in touch with our VAT team on firstname.lastname@example.org and we would be glad to help in VAT registration, change in VAT registration, bookkeeping and VAT returns preparation and submissions. Please also note that VAT returns are no longer being settled in Maltapost or bank branches.