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Malta introduces VAT Grouping


As of 1st June 2018, operators of financial or gaming entities may opt to be treated as a single taxable person for VAT purposes. This has been made possible through the introduction of the new VAT Grouping Provisions published on 22nd May, by means of Legal Notice 162 of 2018. The Value Added Tax (Registration as a Single Taxable Person) Regulations introduce the option for two or more persons to register as a single taxable person for the purposes of VAT, thus constituting a VAT Group. This is the result of consultations with the EU VAT Committee in the application of the EU VAT Directive, which gives discretion to Member States to implement VAT Grouping in their domestic legislation.

The VAT Grouping Provisions only apply in the case of legal persons established in Malta, when at least one of such VAT registered persons is authorised to provide financial or gaming sector services.

Moreover, entities can apply VAT Grouping if they are financially, economically and organisationally linked:

  1. The group is financially linked when at least two of the following conditions are held:
    a) All group entities have voting rights;
    b) All group entities are entitled to any profits that are available for distribution;
    c) All group entities are entitled t to the distribution of any surplus assets upon winding up.
  1. To be economically linked:
    a) The activities of each member of the Group must be of the same nature, complementary, interdependent, or forming part of the same industry;
    b) The activities of the individual members of the Group are wholly or substantially for the benefit to the other members of the Group.
  1. Finally, organisationally all members must share the same management structure.

The benefit of VAT Grouping is that any supplies of goods and services between the Group’s members are treated as outside the scope of the VAT Act. Other supplies made to or by the Group to or by third parties shall be deemed to be supplies made by or to the Group Reporting Entity. The Group Reporting Entity must be nominated by the members as the representative of the VAT Group, in terms of the rights and obligations of the Group to conform with the VAT obligations of all members involved. Notwithstanding this, all members of the group are jointly and severally liable for the timely filing of VAT returns, and the settlement of the Group’s VAT liabilities.

For assistance and whether the amendment applies to your business do contact Ecovis Malta by clicking here