31 May 2018
VAT Grouping Financial Services and Gaming Industries
In presenting the Malta Budget 2018, the Minister for Finance announced the introduction of VAT Grouping – a fresh concept in Malta, which allows for separate legal persons, connected together by specific criteria to be grouped together as a single taxable person for VAT purposes.
The legal notice outlining the rules entitled ‘Value Added Tax (Regulation as a Single Taxable Person) Regulations, 2018, was published on 22nd May 2018 as legal notice 162 of 2018. These regulations came into force on 1st June 2018.
Two or more legal persons established in Malta will be allowed to register as a single taxable person under the VAT Grouping mechanism provided the following conditions are satisfied:
where the same legal/physical
person/s, hold/s directly or indirectly more than 90% of at least two of the following:
b.an organizational link is deemed to exist where the applicants have a shared management structure, whether in whole or in part.
c.an economic link is deemed to exist where:
iii. one member of the group carries out activities which are wholly or substantially to the benefit of any one or more of the other members.
Applicants cannot be members of more than one VAT Group at the same time.
The VAT Group will be allocated one VAT identification number and any individual VAT identification number of the members, if any, will be cancelled from the date of registration as a VAT Group or from the date of joining an existing VAT Group.
The members of the VAT Group must nominate one member of the group as a Group Reporting Entity to exercise all the rights and discharge all obligations of the VAT Group.
Any intra-group supplies would fall out of the scope of VAT since a taxable person cannot charge tax to itself.
VAT Grouping mechanism may provide an opportunity for tax optimization in the gaming and financial services industries.
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