CFR VAT

FAQs related to the Office of the Commissioner for Revenue

VAT.

The information provided in the answers should serve only as guidance and does not have any legal force. For online live FAQs updates refer here

• VAT FAQs

WHO IS LIABLE TO REGISTER FOR VAT?

If you are a person performing an economic activity, whatever the result or scope of that activity, then you are considered as a taxable person. Under normal circumstances, you are required to register for VAT under article 10. If your annual turnover does not exceed the established threshold (see below) then you may opt to register under article 11 as an exempt person.

WHAT IS AN ECONOMIC ACTIVITY?

An economic activity means an activity carried on by a person, who is not an employee (see article 5(5) for the definition of employee), and consisting of any one or more of the following:

• any trade, business, profession or vocation and the provision of any personal services;
• the exploitation of tangible or intangible property for the purpose of obtaining income there from on a continuing basis;
• the provision by a club, association or organisation of the facilities or advantages available to its members for a subscription or other consideration;
• the admission of persons to any premises for a consideration.

The activities of a public authority assuming functions assigned to it by law shall not be deemed to be an economic activity except as and to the extent provided in the First Schedule of the VAT Act and except where such treatment as non-taxable persons would lead to significant distortions in competition.

UNDER WHAT REGISTRATION TYPE SHOULD YOU REGISTER?

There are three types of Registrations for VAT as follows: (a) If you are supplying goods or services and your annual turnover exceeds the established exempt threshold below, you have to register for VAT under article 10, by which you would be liable to charge VAT on your taxable supplies and you could claim back the VAT you incur in the course of your taxable activity under certain conditions.

A person registered under article 10 would

• have a VAT number with the prefix MT
• have to issue fiscal receipts or tax invoices, as the case may be, on all supplies made by him
• normally submit a VAT return for a tax period of three months by the not later than 6 weeks after the end of the tax period, or as directed by the Commissioner.

(b) If you are supplying goods or services and your annual turnover does not exceed the established entry threshold (see below), you may register for VAT as exempt under article 11. You will not charge VAT on your supplies and will not be able to claim back the VAT you incur in the course of your economic activity. However, you may instead opt to register for VAT under article 10 to charge VAT and claim a deduction of the VAT incurred in the normal way. If you decide to opt for the latter option, then you are required to remain under article 10 for a minimum of thirty-six months. It is only after that period that you would be able to register under article 11 and provided that the exit threshold is not exceeded.

A person registered under article 11 would

• have an identification number without the MT prefix
• have to issue fiscal receipts or tax invoices, as the case may be, on all supplies made by him
• submit a declaration (simplified tax return) at the end of each calendar year which must be submitted by the 15th March of the following year.

(c) If you are a non-taxable legal person or a taxable person not registered under article 10, and you make intra-community acquisitions of goods in Malta the value of which exceed €10,000 since the start of the year, then you are liable to register for VAT under article 12 and pay VAT in Malta each time you make such intra-community acquisitions.

If you are registered under article 11 as an exempt taxable person and you intend to make Intra-Community Acquisitions and pay VAT thereon in Malta, then you need to register also under Article 12 to obtain a valid identification number for this purpose and qualify for such an arrangement.

WHAT ARE THE ENTRY AND EXIT THRESHOLDS?

The entry threshold is the amount of turnover per annum under which a person could opt to register as an exempt person under article 11 (see above). This threshold depends on whether you are supplying goods, services with high value added, or services with low value added. The exit threshold is applied in the case where a person who is registered under article 10 would change his registration to article 11 (exempt).

Services with low value added are those services where the value of the service includes goods which are incorporated in the value of that service, e.g. an electrician or catering services. Other services are services usually with high value added where the value of the service has a very high content of value added, i.e. the value of the goods incorporated with the supply are minimal, e.g. services of an accountant or a lawyer.

The different thresholds are as follows:

Where a person registered under article 11 provides both goods and services, the applicable threshold shall be determined in accordance with the principal nature of the supply, taking account of the total value of all the supplies.

The turnover of a business is the total value of sales, excluding:

• Exempt without credit supplies
• The transfer of a business as a going concern
• The sale of fixed assets
• Supplies made to the business and deemed to be made by that business under the reverse charge provisions

The thresholds for each economic activity pertaining to the same category are assigned by the Department and apply across the board for that category.

WHAT DOCUMENTS DO I NEED TO REGISTER FOR VAT?

A Copy of the I.D Card/Passport of the applicant or in the case of a Limited Liability Company, of the authorised representative vested with the legal representation must be presented at the time of registration. In the case of a limited liability company or a registered partnership, a copy of the Memorandum and Articles of Association should be produced.

HOW LONG DOES THE PROCESS FOR VAT DECLARATION/RETURN TAKE TO COMPLETE ONLINE?

The electronic process for VAT Declaration / Return takes approximately 15 minutes to complete.

HOW LONG DOES IT TAKE FOR THE VAT DEPARTMENT TO COMPLETE YOUR VAT DECLARATION / RETURN SUBMISSION?

The process of vetting and processing of the submission takes a maximum period of 90 working days. IF A REFUND DUE TO YOU IS NOT PAID TO YOU IN TIME THEN YOU WILL BE PAID INTEREST OF 0.54% PER MONTH.

HOW LONG DOES THE PROCESS FOR THE VAT REFUND (8^TH DIRECTIVE) TAKE TO COMPLETE ONLINE?

The electronic process for VAT Refund (8th Directive) takes approximately 20 minutes to complete.

HOW LONG DOES IT TAKE FOR THE VAT DEPARTMENT TO COMPLETE YOUR VAT REFUND (8^TH DIRECTIVE) SUBMISSION

The process of vetting and processing of the submission takes a maximum period of 4 months. IF A REFUND DUE TO YOU IS NOT PAID TO YOU IN TIME THEN YOU WILL BE PAID INTEREST OF 0.54% PER MONTH.

WHEN IS A REGISTERED PERSON OBLIGED TO INFORM THE VAT DEPARTMENT OF HIS CHANGE OF STATUS FROM AN AXEMPT TO NON-EXEMPT CLASSIFICATION?

If you are operating below the threshold and you have opted to be classified as an exempt person, you are duty bound to inform the Department that you no longer qualify to be classified as exempt as soon as it becomes evident that you will exceed the applicable threshold.

This can be arrived at by calculating the annual turnover for the previous twelve months at the end of each calendar quarter. When it results that the applicable threshold is exceeded, you should inform the Department within thirty days of occurrence, and VAT has to be collected immediately after the lapse of this period.

I AM ADDING ANOTHER ACTIVITY WITH THE ONE I ALREADY HAD. DO I HAVE TO APPLY FOR REGISTRATION AGAIN?

If the new business activity is in addition to other business activities that you carried out under a VAT number, the same number should be used for the new activity. However you must inform the Department in writing about the nature of the new business activity.

If the new business activity were carried out under a new limited liability company set up to carry out such activity, a new registration number would be required.

I HAVE OPENED A NEW BRANCH OF MY BUSINESS IN DIFFERENT LOCALITY. CAN I USE THE SAME VAT NUMBER OR DO I HAVE TO APPLY FOR REGISTRATION AGAIN?

No, you will not have to register again. You will use the same VAT number but you need to advise the Department about this event, giving all pertinent details such as the Name and address of the new branch, the increase of the number of employees and the estimated increase of the turnover of your business.

I INTEND TO RETIRE FROM DOING BUSINESS. CAN I PASS ON THE BUSINESS TO MY SON OR SELL THE BUSINESS TO SOMEBODY ELSE TOGETHER WITH THE VAT REGISTRATION NUMBER?

If you are a sole trader then you are required to de-register your business while a new application for VAT registration shall be drawn up by your son or any person who takes over your business, unless that person is already registered for VAT.

However, if the business is a limited liability Company, then the transfer has to be carried out through the Malta Financial Services Authority (MFSA), and the VAT Department must be advised as to the change in the Directors and Shareholders of the Company, by means of a certified copy of the memorandums supplied by the same MFSA.

WHAT SHALL I DO IF I NEED TO DE-REGISTER FROM VAT?

In order to de-register from VAT you are required to call at the Customer Care Unit of the Department to complete the appropriate form. An application for de-registration cannot be processed unless you have all VAT returns and payments up to date, and any pending matters settled with the Department.

It is pertinent to point out that if you are registered as non-exempt (under article 10) you shall be deemed to have supplied to yourself all remaining business assets belonging to your business, immediately before the cancellation of your registration. In this regard you must therefore account for the VAT due thereon in your last VAT return.

I HAVE APPLIED FOR DE-REGISTRATION BUT TO DATE I AM STILL RECEIVING VAT FORMS AND MONTHLY BALANCE STATEMENTS. WHAT SHOULD I DO?  

For de-registration to be effected you must first settle all pending issues with the Department. If you continue to receive VAT forms and monthly balance statements after having applied for de-registration, you should call at the Customer Care Section of the Department during office hours to enquire about your situation. Department officials will guide you accordingly.

Once all pending issues have been settled, including the payment of any outstanding amounts due to the Department, action for de-registration will be finalised.

I WAS DE-REGISTERED FROM VAT BUT NOW I INTEND TO RE-START THE SAME ACTIVITY. WHAT SHOULD I DO?

In order to re-activate your old VAT registration number you should inform the Department in writing stating your request. The VAT registration number and your Identity Card Number should be included with your letter.

WHAT IS INPUT AND OUTPUT TAX?

Input tax is the VAT that is paid by the business operator for goods and services he receives in the course of his economic activity. Output tax is the VAT that is charged by the business operator when he himself supplies goods or services to his customers.

WHAT IS TAXABLE AND WHAT IS EXEMPT?

In Malta, goods and services are generally taxable at a standard VAT rate of 18%.

However, certain goods and services have a reduced rate of 7% or 5% or 0%.

Supplies that are taxable at 7% are:

• Accommodation in a hotel or guest house
• Accommodation in any premises, where for the purpose of that accommodation, it is required that the premises be licensed in terms of the Malta Travel & Tourism Act.

Supplies that are taxable at 5% are:

• Supply of electricity
• Confectionery and other edible items
• Medical Accessories
• Printed Matters
• Certain Items for the exclusive use of the disabled
• Minor repairing of bicycles, shoes and leather goods, clothing and household linen (including mending and alteration)
• Domestic care services such as home help and care of the young, elderly, sick or disabled
• Admission to museums, art exhibitions, concerts and theatres.

The following supplies are rated at 0% (i.e. Exempt with credit, where no VAT is charged on the value of the supply but the registered person is entitled to claim back input VAT incurred in the provision of that supply)

• Food for human consumption
• Pharmaceutical products
• Scheduled bus service (tal-linja)
• Domestic inter-island sea passenger transport
• International passenger transport
• Exports
• Intra-community supplies of goods

(Please note that this information does not replace the provisions of VAT legislation. This list is not exhaustive and reference to VAT legislation would be appropriate)

The following supplies are exempt without credit, where no VAT is charged on the value of the supply but the supplier is not entitled to claim back input VAT incurred in the provision of that supply. In this case the supplier is not required to register with the Department.

• Supply of water by a Public Authority
• Supply of buildings and building land
• Supply of Health and Welfare services
• Supply of insurance and financial services
• Letting of immovable property is exempt without credit except in the following situations:

o   Letting for the purposes of accommodation in any hotel or guest house or similar establishment or in any holiday camp or camping site (at 7%)

o   Letting of accommodation in holiday flats required to be licensed in virtue of the Malta Travel and Tourism Act (at 7%)

o   The letting of immovable property by a limited liability company to a registered person for the economic activity of that registered person (at 18%)

(Please note that this information does not replace the provisions of VAT legislation. This list is not exhaustive and reference to VAT legislation would be appropriate)

WHAT HAPPENS WHEN AN ACTIVITY CHANGES FROM TAXABLE OR EXEMPT WITH CREDIT TO EXEMPT WITHOUT CREDIT? 

Where the nature of the use of property on which input VAT had been claimed has changed from a taxable or exempt with credit operation to an exempt without credit one part of that input VAT claimed is to be refunded back to the Department through an adjustment in the VAT return. Such adjustment should be made within twenty years for immovable property and within five years for any other property.

For example: if a hotel (taxable activity) is changed to an old people's home (exempt without credit), some of the input VAT that was claimed will have to be refunded to the Department. As regards immovable property this should be worked out as a proportion for a twenty year period, i.e. if the change in economic activity occurs after ten years, half of the original input VAT claimed is to be refunded.

IF SERVICES ARE DEEMED TO BE MADE OUTSIDE MALTA SHOULD THEY BE ACCOUNTED FOR IN THE VAT RETURN?

In order to determine whether input tax incurred on supplies made outside Malta may be claimed back or not, one must establish whether they would, had they been made in Malta, be treated as taxable supplies or exempt with credit supplies.

In the affirmative, the value of these supplies is to be included in the VAT return as exempt with credit supplies.

If no right to claim back input tax exists, their value is to be included in the VAT return as exempt without credit supplies.

WHAT ITEMS AND SERVICES QUALIFY FOR CREDIT/REFUND OF INPUT VAT?

Persons who are registered with the Department under article 10 (i.e. they have not opted to be classified as exempt persons) are entitled to claim back so much of the input tax as is attributable to taxable supplies, exempt with credit supplies and supplies made outside Malta which, had these been made in Malta, would have been classified as taxable supplies or exempt with credit supplies.

Where the economic activity of a registered person consists in a mixture of taxable/exempt with credit supplies and exempt without credit supplies, input VAT would have to be apportioned by using either the direct method of attribution or the partial attribution method.

Where the above methods do not give a fair and reasonable result, the Commissioner is empowered to decide on the percentage of attribution.

However, under the provisions of legislation, certain input VAT incurred on certain supplies is blocked and cannot be claimed back even when incurred on expenses relating to the economic activity.

ON WHICH ITEMS IS INPUT VAT BLOCKED AND THEREFORE CANNOT BE CLAIMED?

Persons who provide exempt without credit supplies (e.g. insurance companies and education and health and welfare services), and persons who are classified as exempt persons cannot claim back input VAT incurred on purchases relating to their business.

No input VAT can be claimed on the following supplies even when such supplies are purchased in connection with the economic activity of a registered person, namely input VAT incurred on:

• Tobacco or tobacco products, unless purchased for resale
• Alcoholic beverages, unless purchased for resale
• Works of art and antiques, i.e. paintings, drawings and pastels executed by hand, other than hand-painted or hand-decorated manufactured articles; original engravings, prints and lithographs; original sculptures and statuary, in any material; antiques of an age exceeding one hundred years; collections and collectors' pieces of zoological, botanical, mineralogical, anatomical, historical, archaeological, palaeontological and ethnographic interest, unless purchased for resale
• Motor vehicles, vessels or aircraft, excluding vessels and aircraft acquired for the purpose of being provided under a charter or hire agreement, unless purchased for resale or unless acquired and used for the purpose of the carriage of goods or passengers for a consideration.
• Goods and services for the purpose of repairing, maintaining and keeping motor vehicles, vessels or aircraft and fuel used therein.
• Car leasing by a lessee, including VAT incurred on fuel
• The supply of any goods and services used in the provision of receptions, entertainment or hospitality except where that supply is made in the normal course of an economic activity
• The supply of goods and services used in the provision by a person to his employees of transport or entertainment, except where the transport is provided on vehicles with a seating capacity of not less than seven.

I AM A RETAILER. AM I ENTITLED TO A REFUND OF VAT I PAID ON COMMERCIAL VEHICLES AND FUEL?

Yes, provided that the vehicle is a commercial vehicle and it is used in the furtherance of your economic activity. The Department may however, after verifying and assessing such factors as the ratio of "business" use to "private" use; the extent of your declared turnover vis-a-vis the capital expense in purchasing the vehicle and the need for the purchase of the vehicle in relation to your type of economic activity etc., adjust your claim for input VAT as it deems necessary.

The VAT law considers as commercial vehicles, motor vehicles designed mainly for the carriage of goods with seating accommodation normally adjacent to the driver and which are not normally suitable for the carriage of passengers, or with seating accommodation for nine persons or more.

ARE DOCTORS, ACCOUNTANTS AND OTHER PROFESSIONALS ENTITLED TO A REFUND OF VAT PAID ON VEHICLES AND FUEL?

The supply of medical services is classified as exempt without credit and therefore doctors do not charge VAT and are not allowed any credit on input tax they incur.

Accountants and other professionals are not entitled to claim back VAT paid on the purchase of a vehicle and that paid on fuel.

WHAT IS THE DIFFERENCE BETWEEN A TAX INVIOCE AND A FISCAL RECEIPT?

A tax invoice must be issued when a person registered under Article 10 makes a supply to another registered person.

A fiscal receipt must be issued when a registered person makes a supply to a non-registered person.

Tax Invoices

A tax invoice issued by a registered person who is not classified as an exempt person should contain the following information:

• the date of issue;
• a sequential number, based on one or more series, which uniquely identifies the invoice;
• the name and address of the supplier and the VAT identification number under which he made the supply;
• the name and address of the person to whom the supply is made and the VAT identification number under which the customer acquired the goods or services supplied to him;
• the quantity and nature of the goods supplied or the extent and nature of the services rendered;
• the date on which the supply was made or completed or the date on which a payment on account of the supply was made insofar as that date can be determined and differs from the date of issue of the invoice;
• the taxable value per rate or exemption, the unit price exclusive of tax and any discounts or rebates if they are not included in the unit price;
• the VAT rate applied;
• the VAT amount payable, except where a special arrangement is applied;
• where the person liable for payment of VAT is a tax representative in another Member State, the VAT identification number of that tax representative, together with his full name and address;
• where the VAT becomes chargeable at the time when the payment is received, the mention "Cash accounting";
• where the customer receiving a supply issues the invoice instead of the supplier, the mention "Self-billing";
• where a tax invoice refers to supplies on which no tax is chargeable, it shall indicate a brief reference to the relevant provisions of the VAT Act, or the appropriate provisions of Council Directive 2006/112/EC, or any other indication on the grounds of which no tax is chargeable;
• where the customer is liable for the payment of the VAT, the mention "Reverse charge";
• where the margin scheme for travel agents is applied, the mention "Margin scheme - Travel agents";
• where one of the special arrangements applicable to second-hand goods, works of art, collectors' items and antiques is applied, the mention "Margin scheme - Second-hand goods"; "Margin scheme - Works of art" or "Margin scheme - Collector's items and antiques" respectively;
• in an invoice for the intra-Community supply of a new means of transport the description of the goods supplied shall contain the particulars referred to in the definition of "new means of transport" in the VAT Act.

In the case of a local transaction where the taxable person liable for VAT is not liable to pay VAT and the amount of the invoice inclusive of the tax is not higher than €100, or where the registered person making the supply is an exempt person, a simplified invoice may be used. Such simplified invoice shall contain at least the following details:

• the date of issue;
• a sequential number, based on one or more series, which uniquely identifies the invoice;
• the name, address and the Value Added Tax identification number of the supplier;
• the Value Added Tax identification number of the person to whom the supply is made;
• a description sufficient to identify the goods and services supplied;
• the total amount of tax payable or the information needed to calculate it;
• where the invoice issued is a document or message treated as an invoice, specific and unambiguous reference to that initial invoice and the specific details which are being amended.

Fiscal Receipts

Retailers and persons whose activity consists in the supply of food in the course of catering (e.g. restaurants and snack bars) must issue a fiscal receipt by means of a fiscal cash register.

Service providers must issue a manual fiscal receipt from manual fiscal receipt books supplied by the Department on application.

The Fiscal Cash Register and manual fiscal receipts should be kept at the premises where the economic activity is intended to be carried out.

Taxi drivers must issue fiscal receipts by means of a fiscal taximeter.

Registered persons who intend to use computerised receipts must seek prior approval in writing from the Department. On approval the exemption number issued by the Department should be shown on the receipt, or by an electronic means.

Admission tickets to events may also accepted as fiscal receipts provided that prior approval in writing is sought from the Department. The VAT permit number issued by the Department should be shown on the ticket.

WHAT DOES MAKE A RECEIPT A FISCAL RECEIPT?

A fiscal receipt is considered as such when issued in one of the following situations:

• By means of an approved fiscal cash register
• On manual fiscal receipt books supplied by the Department
• By means of a computerized or electronic system or a point of sale system, provided that prior approval has been obtained from the Department and the exemption number issued by the Department is printed on the receipt
• On application and following approval by the Department, tickets of admission to a function may be approved as fiscal receipts provided that the information as required in writing by the Department is printed on each ticket
• By means of a fiscal taxi-meter.

SINCE MEDICAL, HEALTH AND EDUCATION SERVICES ARE EXEMPT WITHOUT CREDIT, IS IT NECESSARY FOR PERSONS SUPPLYING THESE SERVICES TO ISSUE FISCAL RECEIPTS?

Persons who provide exempt without credit supplies are not required to issue fiscal receipts, although they are still obliged to issue an ordinary receipt under other existing legislation.

Such persons are not required to register with the Department.

I AM A NON-EXEMPT REGISTERED PERSON. IF I SUPPLY GOODS OR SERVICES TO PEOPLE WHO ARE EXEMPT WITHOUT CREDIT, DO I HAVE TO ISSUE A TAX INVIOCE OR A FISCAL RECEIPT?

You must issue a fiscal receipt. Fiscal receipts must always be issued for supplies of goods or services to people who are exempt without credit. It does not matter whether the supplier is a non-exempt registered person or an exempt registered person.

I AM A RETAILER. WHEN SHOULD I ISSUE A FISCAL RECEIPT AND WHEN SHOULD I ISSUE A TAX INVOICE?

A retailer and a person who supplies food in the course of catering (e.g. restaurant or snack bar) should always issue a fiscal receipt for each and every supply made (except in the cases where legislation allows certain supplies to be covered by a fiscal receipt to be issued at the end of the day to cover the supplies made during that day). This applies both to taxable supplies and to exempt with credit supplies.

Where a retailer makes a taxable supply to another registered person the latter may request the retailer to issue a tax invoice instead of a fiscal receipt.

A fiscal receipt issued by means of a fiscal cash register may be accepted as a tax invoice if it includes the details above which are required in a tax invoice.

IF THERE IS A POWER FAILURE, CAN I ISSUE ONE RECEIPT MANUALLY TO COVER ALL THE SALES DURING THE TIME THE FAILURE LASTED?

If there is a power failure a registered person must issue a manual fiscal receipt for each and every supply made.

The same applies when a cash register is out of order. However the registered person concerned is obliged to ensure that his fiscal cash register is repaired within a very short time.

I AM A RETAILER AND CLASSIFIED AS AN EXEMPT PERSON. WHEN I ISSUE FISCAL RECEIPTS, ARE GOODS SOLD WHICH WOULD NORMALLY BE SUBJECT TO VAT TO BE INDICATED AS “E” OR AS “F”?

When a retailer who is classified as an exempt person issues a fiscal receipt by means of a fiscal cash register on the sale of a supply which would have been taxable had it not been for that classification, the tax rate to be indicated on that fiscal receipt should be 'F' and not 'E'.

IS THERE ANY CATEGORY OF REGISTERED PERSONS TO WHICH DIFFERENT ARRANGEMENT FOR THE ISSUE OF FISCAL RECEPT APPLY?

Yes, the categories of business shown here under are entitled to issue one fiscal receipt at the end of the day to cover sales of supplies made during the day:

• Registered persons who make supplies from a vehicle either by door-to-door delivery or to the general public in a public road, of gas, milk and milk products or bread.
• A registered person who makes supplies of fuel from pumps.
• A registered person who makes supplies of food and beverages situated in a work or study area, after authorisation had been requested and granted in writing by the Department to issue one fiscal receipt at the end of the day to cover supplies of food made during that day and another fiscal receipt to cover supplies of beverages made during that day.
• A registered person who makes supplies of bread from the bakery where that bread has been baked.

In the case of the registered persons referred under the 3rd and 4th bullets above, the Department may, at any time, withdraw the authorisation by means of a notice in writing.

WHAT KIND OF BOOKS AND RECORDS DO I NEED TO KEEP AND HOW LONG DO I NEED TO PRESERVE THESE RECORDS AND BOOKS?

You need to keep the following records and documents:

• Copies of Fiscal Receipts issued
• Fiscal cash register FCR Z Readings
• All Customs import/export documentation
• Purchases and Sales Invoices
• Debit and Credit Notes
• Cash Books and Petty Cash Books
• Day Purchases and Sales Ledger
• Value Added Tax Account and Annual VAT Account
• Bank Account connected with the business
• Any other records and documents relevant to your economic activity

You are obliged to retain these records and documents for six years as the Department may request them for inspection.

However in cases where the provisions for adjustment of input tax on capital goods and on immovable property applies, the six years shall start to run from the end of the five year period or twenty years period respectively as the case may be.

WHAT ARE THE REASONS AND PURPOSE OF ANY INSPECTION BY THE VAT DEPARTMENT?

Inspections by the VAT Department are intended to:

• Educate registered persons about their rights and obligations vis-a-vis VAT;
• Check the tax liability of a registered person to ensure that the right amount of tax is being collected and submitted to the Department;
• Examine and verify claims for refunds made by registered persons;
• Exercise control on the business activity of registered persons by examining their business records and books of account to ensure that no under-declaration of output tax and/or over-declaration of input tax is being made;
• Spot-check registered person's establishments to ensure that fiscal receipts are being issued to clients on sale of a product/service.

WHEN A VAT INSPECTOR ANNOUNCES AN INSPECTION VISIT, CAN I ASK TO CHANGE THE PROPOSED DATE OR CAN I REFUSE TO RECEIVE THE INSPECTOR?

You definitely may contact the VAT Inspector to agree on a convenient day for both to set up an appointment. However, you cannot refuse to receive the Inspector as this goes against the law.

You are also advised that the VAT inspector may request any person to produce, or may remove from any person, including a third party, the records, documents, accounts and electronic data required to be kept by him and to make copies thereof.

IF THE VAT INSPECTOR AT THE END OF THE INSPECTION VISIT CONTENDS THAT I MADE MISTAKES AND I DON’T AGREE WITH THE INSPECTOR, WHAT CAN I DO?

The VAT Inspector is obliged at the end of a visit, to discuss areas of disagreement with you. If disagreement still persists and in the opinion of the VAT Inspector your mistakes resulted in tax being under-declared or input VAT being over-declared the Department will proceed to raise "Provisional Assessments".

When you receive notice of a "Provisional Assessment" you are to register within 30 days, if you so wish, a "Request for a Review" with the Department stating precisely and specifically your reasons for disagreement.

This "Request for a Review" will be processed by a Review Officer who after conducting the necessary verifications may cancel, adjust or confirm the provisional assessment.

WHAT ARE THE CONDITIONS FOR A REGISTERED PERSON TO LODGE AN APPEAL?

In order to be valid an appeal against an assessment submitted to the Administrative Review Tribunal must satisfy the following criteria:

• a return for the tax period to which the assessment refers has been delivered to the Commissioner before the appeal is entered;
• all tax payable by the appellant which is not in dispute has been paid;
• it is made within thirty days from the date of the service of the notice against which the appeal is made;
• it is made in such form and in such manner as may be prescribed under the Administrative Justice Act;
• a payment of such fees for lodging an appeal as may be prescribed under the Administrative Justice Act has been made.

IS A NON-PROFIT MAKING ORGANISATION REQUIRED TO REGISTER FOR VAT?

Services made to members of non-profit making organisations are exempt without credit and the organisation is not required to register for VAT.

However, where the organisation provides other services against payment, each supply will have to be considered in the context of VAT legislation.

The following are some examples where a non-profit organisation will be required to register with the Department, and subject to its right and option to be classified as an exempt person, charge and collect VAT:

• operating a bar for its members
• renting of space to third parties to be used as a bar
• selling of advertising space in its magazine
• Fund raising activities, except were the beneficiary of such activities will be a health, welfare or education institution. In such cases the Department's prior permission for the exemption will be required.

If a non-profit making organisation is required to register with the Department and does not opt to be classified as an exempt person, its right to claim input tax is limited to the supplies on which VAT is collected, either by directly attributing its inputs or by partially attributing such inputs.

AM I REQUIRED TO ACCOUNT FOR VAT ON ACCRUALS OR ON A CASH BASIS?

As a general rule all registered persons must account for VAT on an invoice (accruals) basis. However, the Department may direct that accounting for VAT for the following suppliers be made on a cash basis:

• Retailers.
• Supplies by civil, mechanical and electrical engineering contractors.

Supplies of professional services where the person supplying those services holds a warrant issued under any law in force in Malta to practice that profession are to account for VAT on a cash basis. In order to account for VAT on invoice basis people who provide such services must request authorisation in writing from the Department.

When a registered person accounts for VAT on cash basis such accounting must be made in respect of supplies made to him and supplies made by him.

AFTER COMPILING AND SUBMITTING MY TAX RETURNS I DESTROYED THE INVOICES, AS I SINCERELY DID NOT KNOW THAT I WAS OBLIGED TO RETAIN THEM FOR SIX YEARS. WHAT IS MY POSITION WITH THE DEPARTMENT PARTICULARLY WITH RESPECT TO MY INPUT VAT?

By destroying your invoices you seriously jeopardised your claim for Input VAT since Input VAT may only be allowed if backed by a valid tax invoice. Failure to produce valid tax invoices for inspection by the Department would result in an assessment being raised to annul your Input VAT claim.

RECENTLY I MOVED HOUSE AND DULY CHANGED MY ID CARD. I WAS UNDER THE IMPRESSION THAT THE ID CARDS DEPARTMENT WOULD INFORM THE VAT DEPARTMENT ABOUT MY CHANGE OF ADDRESS, BUT I CONTINUED TO RECEIVE MY TAX RETURNS AT THE OLD ADDRESS. WHAT IS THE PROCEDURE ONE HAS TO FOLLOW IN SUCH CASES?

Registered persons are required to inform the Department with any changes, including change of address, changes in details appearing on the registration application and the cessation or transfer of business or part thereof, within fifteen days from that change.