Introduction of VAT Grouping Scheme into Maltese VAT Law

24 May 2018

Legal notice 162 of 2018 introduces for the first time the concept of VAT Grouping Scheme into Maltese VAT law. This provides for the possibility of two or more single taxable persons established in Malta to form a group for VAT purposes. The regulations will come into force on 1st June 2018.

Please find below a summary of the salient provisions:

  1. In terms of the regulations a VAT Group registration needs to satisfy the below listed conditions:
  1. minimum two or more taxable persons have the right to apply under the scheme and should be established in Malta. At least one of them must be licensed or recognised as a taxable person operating in the financial services, insurance or gaming industries, as prescribed.
  2. the taxable persons must be owned by the same persons, who hold more than 90% of at least two of the following:

- the voting right or equivalent interest;

- the entitlement to profits available to distribution

- the entitlement to surplus assets available for distribution on a winding up;

  1. the applicants must have a shared management structure (in whole or in part)
  2. the applicants must carry out the same trading activity or operate in the same industry, or their activities are interdependent and are to the benefit of any of the other applicants;
  3. at the time of the application all applicants must be fully compliant – all VAT and tax returns are submitted, and all tax, interest and penalties are settled (excluding tax and penalties under appeal);
  4. the applicants cannot be members of more than one VAT Group at the same time;


  1. A person established in Malta can join an existing VAT group provided it satisfies the conditions above.


  1. One member of the group must be appointed as the Group Reporting entity, which shall exercise any and all rights and discharge any or all obligations arising to the VAT group under the VAT Act.


  1. Any supplies to and from the members of the group shall be deemed to be supplies made to and from the VAT group, represented by the Group Reporting Entity.


  1. Any supplies made between member of the VAT group shall be disregarded for VAT purposes.


  1. Provided that all conditions are satisfied, the VAT group will be recognised as such by the VAT authorities through a written notice specifying the effective date of registration, the VAT number (issued in terms of article 10 or 12 depending on the case) and the member appointed as Group Reporting Entity.


  1. The Application for registration as a VAT group and the application to join an existing group are be submitted electronically.


  1. The individual VAT registrations of each member (where applicable) will be cancelled with immediate effect from the date of registration as a VAT Group, or from the date of joining an existing VAT Group.


  1. The VAT de-registration of the individual members would not cancel any liabilities incurred prior to the de-registration.


  1. Refunds due to any of the members prior to the VAT de-registration shall not be available for set off by, or refund to the VAT group.


  1. For the purpose of the Capital Goods Scheme (Adjustments relating to Input Tax on Capital Goods Regulations) any adjustments required in respect of capital goods by a change in circumstances with regard to Input VAT deducted by members at the time they did not form part of the VAT group are to be carried out by Group Reporting Entity.


  1. Each member of the VAT Group shall be jointly and severally liable for the payment of any tax, interest or penalties due by the Group Reporting Entity, and after leaving the VAT Group shall remain liable for the payment of any tax, interest or penalties incurred while it was still a member.


  1. Each member of the VAT Group shall inform the Commissioner within 15 days about any changes, and the Commissioner shall terminate the membership of the person who no longer satisfies the conditions indicate above.


  1. If the Group Reporting Entity’s membership is terminated, the other members must appoint a new entity. The VAT group may apply to cancel its VAT registration at any time after the lapse of twenty-four calendar months from the effective date of registration and the VAT group cannot subsequently be reconstituted with the same membership until the lapse of twenty-four calendar months from the effective date of cancellation thereof.


  1. Each member of the VAT Group shall keep full and proper records of all transactions entered. The Group Reporting Entity is required to keep consolidated records of all transactions which are treated as carried out by the Group Reporting Entity


If you require any information in relation to the opportunities afforded by VAT grouping or the increased small undertaking threshold and would like to learn more on what Malta has got to offer, please do not hesitate to contact Josef Mercieca or Milena Palikarova.