Malta VAT Grouping
The possibility of VAT grouping in Malta was introduced through the VAT Grouping Regulations published by Legal Notice 162 of 2018 and entered into effect as of 1 June 2018. This option allows for two or more persons established in Malta to form a group and apply to the Commissioner to be registered as a single taxable person.
Upon successful registration, transactions taking place between persons who form part of a VAT group are disregarded and fall outside the scope of Maltese VAT legislation.
Companies and other legal entities are allowed to form a VAT group if:
- each of the applicants is established in Malta for VAT purposes; and
- at least one of the applicants is a taxable person that is licensed in terms one of the following – Banking Act, Financial Institutions Act, Gaming Act, Insurance Business Act, Insurance Intermediaries Act, Investment Services Act, Lotteries and Other Games Act, Retirement Pensions Act and the Securitisation Act; and
- each of the applicants is bound to each of the others by financial links, organisation links and economic links.
The regulations specify that no person may be a member of more than one VAT Group at the same time. It adds that people having financial, organisational and economic links may only form part of the same VAT Group. The members of the VAT Group are required to nominate from amongst themselves the Group Reporting Entity. This role will exercise any and all rights and discharge any and all obligations arising to the VAT Group under the Act.
The required financial link exists where the members of the group are, directly or indirectly, held as to more than 90% by the same person or persons, including individuals, and the holding grants more than 90% of two of the following rights:
- voting or equivalent rights
- entitlement to profits available for distribution
- entitlement to surplus assets available for distribution on a winding or equivalent event.
The members of the group have the required organisation links where they have a shared management structure, whether in whole or in part.
The required economic links between the members of the group exist where the activity of each of the group members is of the same nature or within the same industry, or where their activities are interdependent or complementary, or where one of the members carries out activities which are wholly or substantially to the benefit of any one or more of the others.
Companies and/or other legal entities that wish to establish a VAT group are to submit an online application for this purpose. The application will contain further information financial, organisational and economic links.
A member of a VAT group may be a member of another VAT group.
Once the application is reviewed and approved by the commissioner, a notice in writing is issued to the applicant and the Group Reporting Entity. This notice will deem the applicant to be a member of the VAT Group with effect from the date specified in the said notice.
Effects of grouping
Upon the establishment of the VAT group, the members nominate the Group Reporting Entity (GPE) which shall enjoy all rights and be responsible for all obligations of the group members in terms of the Value Added Tax Act, chapter 406 of the laws of Malta.
Supplies, acquisitions and importations will be deemed to be made by and received by the GPE.
Intra-group supplies of goods or of services are not treated as supplies for the purposes of VAT.
VAT Grouping at EU level
At EU level, VAT Grouping is provided for in Article 11 of the EU VAT Directive, which is an optional clause that Member States might wish to use.
While not all EU Member States have adopted VAT Grouping, it has already been implemented by a majority of Member States. Its application however varies widely across the EU Member States, as the wording of Article 11 of the EU VAT Directive leaves it up to the Member States to lay down the detailed rules on implementation.
How can Grant Thornton help?
Grant Thornton's team of tax professionals are equipped to help those entities interested in VAT Grouping to navigate through this new regime.