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  • Tag Archive: New VAT rate on certain services

    1. Malta’s new VAT rate on certain services

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      Malta’s new VAT rate – Introduction


      On 6 October 2023, Legal Notice 231 (“The Notice”) was published by the Maltese government.


      The Notice amended the Eighth Schedule of the Value Added Tax Act in Malta (Chapter 406 of the Laws of Malta). 


      Broadly, this amendment introduced a reduced VAT rate of 12% for specific services.


      Let’s look at the reasons behind the Notice and where the changes might apply.


      The Why


      The Notice transposes paragraph 5 of Article 105a of Council Directive 2006/112/EC, as amended by Council Directive (EU) 2022/542 in April 2022. 


      This obliges Member States to provide detailed rules for applying reduced rates, not lower than 12%, to specific transactions by October 7, 2023.


      The Eight Schedule


      The Eighth Schedule of the VAT Act in Malta specifies the tax rates for particular supplies and imported goods, offering a reduction from the standard rate of 18%. 


      With the publication of this Legal Notice, four new services are included, all subject to the reduced VAT rate of 12%.


      Newly introduced services – where the new rate applies


      The newly introduced services are as follows:


      • Custody and management of securities;
      • Management of credit and credit guarantees, excluding those who grant credit. (Credit management by those granting credit is already exempt without credit as per the VAT Act.)
      • Hiring of pleasure boats, with the condition that they are not rented for more than five weeks when aggregating rental time during the previous year.
      • Services related to the care of the human body, provided by regulated healthcare professionals in accordance with the Health Care Professions Act (Chapter 464 of the Laws of Malta). This includes services offered in health studio businesses or similar enterprises, excluding exempt supplies. This addition aligns with the guidelines issued by the Malta Tax and Customs Authority (MTCA) in September concerning VAT exemptions for certain healthcare services.


      When is this effective?


      The implementation of the 12% VAT rate will become effective from 1 January 2024. 


      The MTCA is expected to release further details on its application in the coming weeks.


      If you have any queries about the Malta’s new VAT rate, Maltese tax, or tax matters in general then please get in touch.