New VAT measures proposed in Budget Bill 2024

Following the 2024 Budget speech, Bill No. 72 (the ‘Budget Bill’) was published to propose the legislative implementation of the 2024 Budget measures.

We set out hereunder a summary of the key proposed changes to the Value Added Tax Act, Chapter 406 of the Laws of Malta (the ‘VAT Act’), which are expected to come into force as from 1 January 2024:

1. Time limit for certain non-established taxable persons to register for VAT purposes in Malta

Article 10(4) of the VAT Act specifies the time by which a non-established taxable person should register for VAT purposes in Malta i.e. within thirty (30) days from when the first supply for consideration is made.

Pursuant to the Budget Bill, an amendment to this sub-article is being proposed to include a provision which allows a non-established taxable person intending to make use of the One Stop Shop (OSS) special scheme to be relieved from this VAT registration obligation when the said person notifies the Commissioner for Tax and Customs (the ‘Commissioner’) accordingly within ten (10) days from the date of the first relevant supply.

2. Corrections to tax periods covered by an assessment

The Budget Bill is proposing to introduce two new sub-articles to Article 28 of the VAT Act (relating to adjustments to tax returns) with the aim of clarifying the procedure applicable with respect to corrections in relation to tax periods covered by a provisional assessment.

If implemented, a new sub-article (3) will provide that when a provisional assessment is served, the relevant taxable person may not correct any of the VAT returns impacted by the provisional assessment until the said provisional assessment is either confirmed or cancelled by the Commissioner.

Moreover, a new sub-article (4) will provide that any corrections required to be made after an assessment shall be subject to the pre-approval of the Commissioner. In addition, the Bill contemplates that if the Commissioner decides to deny the approval of the correction made, such a decision shall not be questioned in any appeal or in any reference to the Administrative Review Tribunal (the ‘Tribunal’).

3. Clarification on the time limit applicable to appeals against a Tribunal’s decision

It is being proposed to amend Article 47 of the VAT Act to clarify the time limits within which a party may appeal to sentences adjudicated by the Tribunal. Pursuant to this proposed legislative change, the aggrieved party may appeal against that decision (purely on a question of law) within thirty (30) days from the date of the service of the decision appealed from, however by not later than one hundred and eighty-three (183) days from the date of the decision by the Tribunal or, for decisions delivered before 1 January 2024, by not later than 30 June 2024.

4. Record keeping requirements by taxable persons

A proposal has been made to amend Article 48(1) of the VAT Act concerning the maintenance of proper records by taxable persons established in Malta. Pursuant to the Budget Bill, this sub-article is proposed to be broadened to also capture taxable persons which are not registered for VAT purposes in Malta. This change would be particularly relevant for businesses engaged in exempt (without credit) supplies, which would typically not have an obligation to be registered for VAT in Malta but which would, from 1 January 2024, nevertheless be captured by the record-keeping requirements of Maltese VAT law.

5. Explicit VAT anti-abuse provision introduced

For the first time in the history of Maltese VAT, an explicit VAT anti-abuse provision shall be introduced to address situations involving, in particular:

• artificial / fictitious schemes which directly or indirectly result in the accrual of a tax advantage which shall be disregarded; and
• blocking of input tax recovery on supplies which have been the subject of VAT fraud anywhere in the supply chain where the taxpayer knew (or should have known) of this fraud, and this irrespective of whether the taxpayer was actually involved in the fraud.

In such situations, the Commissioner may re-evaluate the declared VAT liability or VAT refund, and may also impose statutory interest and / or administrative penalties in relation thereto.

6. Offences and punishments

Article 76 of the VAT Act lists a number of offences which may trigger liability to a fine of a criminal law nature on the person convicted. With specific reference to the offences mentioned in paragraph (c) of this article, the offender may also be ordered to ensure compliance with the law within a set time limit in order to avoid being liable to the payment of a further fine of €5 for every day that the default continues after the lapse of such time as fixed by the Court.

Pursuant to the Budget Bill, it is being proposed to broaden the list of offences laid out in the above-mentioned paragraph (c) to include reference to failures in furnishing, amongst others, additional returns / statements (such as recapitulative statements) or other information, when required to do so.

To discuss the potential implications of these proposed changes on your business in greater detail, please do not hesitate to contact us.