On the 6th of October, Legal Notice 231 of 2023 ("Legal Notice") was published in the government gazette, adding new services to the list found under the Eighth Schedule of the Value Added Tax Act (Chapter 406 of the Laws of Malta) ("VAT Act") which will be taxed at a lower rate than 18%. The Legal Notice transposes paragraph 5 of Article 105a of Council Directive 2006/112/EC of 28 November 2006 as amended by Council Directive (EU) 2022/542 of April 2022 which obliges Member States wishing to apply reduced rates not lower than 12% on certain transactions to publish detailed rules governing such by the 7th of October 2023.
The Eighth Schedule to the VAT Act lays down the rate of tax to be charged on specific supplies or the importation of such supplies which benefit from a reduction from the standard tax rate of 18%. By virtue of this Legal Notice, four new items have been added, all of which are to be taxed at the rate of 12%. The four types of services are:
- Custody and management of securities;
- Management of credit and credit guarantees by a person or body, other than those who grant the credit. (The management of credit by persons who grant it is already subject to an exemption without credit in terms of the VAT Act);
- Hiring of a pleasure boat, provided that it is not rented for a period exceeding five weeks when adding up the time spent on rentals during the previous year. It is expected that this provision will be further clarified by the MTCA; and
- Services consisting of the care of the human body required to be delivered by a person in the exercise of any profession regulated by the Health Care Professions Act (Chapter 464 of the Laws of Malta), including services supplied in the course of a health studio business or similar business, but not including exempt supplies. This is a follow up to the Guidelines issued by the MTCA in September on the application of the VAT exemption on certain health care services.
The list of supplies and the reduced rates under the VAT Act will now look as follows:
|
Service |
Rate of Tax |
|
Accommodation |
7% |
|
Supply of electricity |
5% |
|
Confectionery and similar items |
5% |
|
Medical accessories |
5% |
|
Services closely lined to Covid-19 in vitro diagnostic devices |
5% |
|
Printed matter |
5% |
|
Items for the exclusive use of the disabled |
5% |
|
Importation of works of art, collector's items and antiques |
5% |
|
Certain minor repairs |
5% |
|
Domestic care services |
5% |
|
Admission to museums, art exhibitions, concerts and theatres |
5% |
|
Use of sporting facilities |
7% |
|
Custody and management of securities |
12% |
|
Management of credit and credit guarantees by a person or body other than those who granted the credit |
12% |
|
Hiring of a pleasure boat (subject to certain conditions being met) |
12% |
|
Services consisting of the care of the human body required to be delivered by a person in the exercise of any profession regulated by the Health Care Professions Act |
12% |
The new 12% VAT rate shall come into effect as from the 1st of
January 2024, with more details on their implementation expected to
be released by the MTCA in the coming weeks.
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.
