Three Schedules to the local Value Added Tax Act have been amended, to facilitate reporting requirements for taxable persons providing TBE services to individuals. These changes come into effect from 1 January 2019.
As a response to the ever growing volume of commercial transactions executed online and globalised markets, three Schedules to the local Value Added Tax (VAT) Act have been revised in order to facilitate reporting requirements for taxable persons providing telecommunications, broadcasting or electronically supplied services to individuals. These changes are tackled in Legal Notices 297, 298 and 299 of 2018 and transpose the amendments made to the EU VAT Directive.
Amendment of the Third Schedule to the VAT Act
The place of supply of telecommunications, broadcasting and electronically supplied services (collectively referred to as 'TBE services ') to a non-taxable person is the place where the said consumer is established. As from 1 January 2019 the place of supply changes to the place where the supplier is established if all three conditions below are satisfied:
- The supplier is established in Malta only;
- The consumer is established in any Member State other than Malta; and
- The annual total value of TBE services toconsumers established in other Member States is less than Eur 10,000 (excluding VAT) in the particular year, as well as in the prior year.
If a Maltese supplier satisfies all three conditions above the place of supply of TBE services to non-taxable persons established within the EU will be Malta, unless he elects otherwise.
If the Maltese supplier exceeds the Eur 10,000 cap in supplies to other Member States, the place of supply of such TBE services reverts back to where the consumer is established.
This amendment does not affect the supply of TBE services to consumers established outside the EU which remain outside scope of EU VAT.
Amendment of the Twelfth Schedule to the VAT Act
Invoices for TBE services to non-taxable persons are to be issued in line with the requirements of the Member State where the supply is deemed to arise. This is generally the Member State where the consumer is established unless, as from 1 January 2019, the supplies fall within the parameters of the above three conditions.
With effect from 1 January 2019, suppliers providing TBE services under the Mini One-Stop Shop (MOSS) scheme are required to prepare and issue invoices in terms of the rules enforced by the Member State in which they are identified for VAT purposes.
Amendment of the Fourteenth Schedule to the VAT Act
Prior to 2019 taxable persons not established in the EU providing TBE services to individuals within the EU could not benefit from the MOSS scheme if they were registered for VAT in any Member State.
From 1 January 2019 the scope of the MOSS scheme applicable to taxable persons not established within the EU has been broadened and will no longer exclude persons registered for VAT in the EU. Indeed, as from 1 January 2019 non-EU suppliers will be able to apply for the non-Union MOSS scheme as long as their business is not established in the territory of the EU and they do not have a fixed establishment in any Member State.
Businesses established in the EU that occasionally supply TBE services to Maltese consumers will benefit from a simpler regime as from 1 January 2019. The reverse also applies to supplies of TBE services by persons established in Malta, when provided to individuals in other Member States.
EU suppliers of TBE services will no longer be required to charge VAT of the Member State/s where their consumers are established if their supplies to other Member States are less than EUR 10,000 annually for two consecutive years. This means that the supplier will be required to charge VAT in the Member State where he is established. For example, a Maltese photographer having a website through which photographs can be downloaded at a fee will not be obliged to charge foreign VAT on supplies to EU individuals provided that the EUR 10,000 threshold is not exceeded. Maltese VAT will be chargeable instead.
The above exception has similar implications on the supplier's invoicing requirements in that he would no longer be required to comply with the invoicing rules of all the different Member States in which TBE services are provided to non-taxable persons. On the other hand, invoices to individuals in other Member States may be issued in terms of the rules applicable in the supplier's place of establishment. A Maltese supplier of TBE services to individuals will therefore be required to issue a fiscal receipt in terms of Maltese law even when the consumer is established outside Malta.
In addition persons supplying TBE services under the MOSS scheme will also be required to follow the rules of the Member State where they are identified for VAT purposes. In this regard it is important to note that the Maltese VAT Act exempts suppliers from issuing fiscal receipts with respect to supplies of services made under the MOSS scheme.
Furthermore, taxable persons not established within the EU that are registered for VAT in a Member State will be able to benefit from the MOSS scheme, since the restriction of not being registered for VAT purposes in a Member State has been removed.
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.