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The Introduction of the new reduced VAT Rate of 12%

Following the adoption of Council Directive (EU) 2022/542 by the European Parliament, granting Member States wider rights to use reduced VAT rates, Malta has introduced a new VAT rate.

Following the adoption of Council Directive (EU) 2022/542 by the European Parliament, granting Member States wider rights to use reduced VAT rates, Malta has introduced a new VAT rate. This change is formalised through the transposition of Legal Notice 231 of 2023, which amends the Eight Schedule of the Value Added Tax Act.

 

The Malta Tax & Customs Authority (‘MTCA’) issued guidelines on the interpretation and application of the recently introduced 12% VAT rate on certain supplies of services. These are applicable with effect from 1st January 2024.

 

The services falling within scope of the reduced VAT rate of 12% are the following:

 

      1. Short-term chartering or hiring activity of pleasure boat to a person pursuant to an agreement where such lease does not exceed five weeks. In order to embed certainty on whether a service contract falls within the scope of the reduced rate, one need to consider any previous leases made by the same person during the previous 12 months. 

        1. Supply of ‘management of credit’ and ‘credit guarantees’ by a person (legal or natural) other than those persons who granted the credit. Pursuant to exemptions contained under Part Two of the Fifth Schedule, the management of credit and credit guarantees by the person granting the credit, is exempt without credit and no amendments shall apply in this regard. 

          1. Services consisting of the care of the human body required to be delivered by a person in the exercise of any profession as regulated by the Health Care Professions Act, including services supplied in the course of a health studio or similar. This excludes and does not apply to supplies referred to in item 11 of Part Two of the Fifth Schedule. 

            1. Custody and management of securities. 

          Should you require further information or wish to discuss the potential impact of these amendments on your business, please get in touch with the undersigned.

            

           

          KEY CONTACT AND ARTICLE WRITTEN BY: 

           

          Samuel Amato

          Director

          Jean Paul Apap Dougall

          Senior Manager - Tax & Corporate Services

          Petra Magro

          Senior - Tax and Corporate Services

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