As of 1st June 2018, the newly implemented VAT Grouping regulations shall enter into force. Provided that entities satisfy the necessary criteria, groups of entities are provided with the possibility of forming a VAT Group. VAT Grouping is available in various EU member states and allows members of a particular VAT Group to avoid irrecoverable VAT due on charges made between such members. In addition to other necessary conditions, a VAT Group may be established where at least one of the applicants is recognised by the Malta Financial Services Authority (MFSA) or the Malta Gaming Authority (MGA).

A VAT Group is provided a single VAT identification number and any previous individual VAT identification numbers of the members of the Group are disabled. A Group Reporting Entity will be chosen by the members to act as representative and to exercise all rights and carry out all obligations of the VAT Group. However, each member of the VAT Group is considered jointly and severally liable for the payment of VAT due and payable by the Group Reporting Entity.

Once a VAT Group is established, any supply of goods or services supplies between group members are not taken into consideration for VAT purposes. This allows operators to outsource internally within the VAT Group without incurring irrecoverable VAT. Notably, overseas entities which have an establishment in Malta for VAT purposes may also join a VAT Group.

In addition, supplies of goods or services made by any of the members of the VAT Group to persons outside the VAT Group are considered to be carried out by the Group Reporting Entity. The VAT classification of such supplies affects the input VAT recoverability position of the Group Reporting Entity and therefore of the VAT Group as a whole.

Furthermore, the Sixth Schedule to the VAT Act has been amended and is effective as from 1st July 2018. These amendments provides for an increase in the turnover threshold for eligibility to register for VAT as a small undertaking. Taxable persons with economic operations involving a supply of services with a high value-added and an annual turnover of no more than €20,000 may opt to register for VAT as a small undertaking in terms of article 11 of the Vat Act. Consequently, such persons are exempt from charging VAT.

DF Advocates may assist you in assessing your eligibility to apply VAT Grouping as well as offering you the appropriate advice regarding VAT implications when registering as a VAT Group. For more information relating to VAT and other related matters, please contact us on info@dfadvocates.com or telephone +356 21313930/ 21340401.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.