When a commercial property is rented the place of supply of any service related to property in Malta is subject to Maltese VAT laws. Hence any agency fee’s due must include an 18% VAT.
VAT rates in Malta
The VAT rates in Malta are:
- 18% on the taxable value of every taxable supply of goods, services or importation.
- 7% on accommodation supplies in premises licensed under the H.C.E.B. Act.
- 5% on various printed matter.
- 5% on the supply of electricity
- 5% on various confectionery items.
- 5% on various medical accessories.
- 5% on various items for the exclusive use of the disabled.
- 5% on works of arts, collectors’ items and antiques.
- 5% on minor repairing of bicycles, shoes and leather goods, clothing and household linen (including mending and alteration)
- 5% on domestic care services such as home help and care for the young, elderly, sick or disabled.
There are also certain products which are exempt and on which no VAT is charged.
The EU’s common system of value added tax (VAT)
WHAT IS THE AIM OF THE DIRECTIVE?
VAT is applied to all transactions carried out in the EU for consideration (payment) by a taxable person, i.e. any individual or body that supplies taxable goods and services in the course of business. Imports by any person are also subject to VAT.
Taxable transactions include supplies of goods or services within a single EU country, intra-EU acquisitions of goods (goods supplied and dispatched or transported by a business in one EU country to a business in another) and imports of goods into the EU from outside.
Regarding the place of transaction, different rules apply depending on the nature of the transaction, the kind of product supplied and whether transport is involved.
- Supply of goods — the place of taxation is where the goods are supplied.
- Intra-EU acquisition of goods — the place of taxation is where the party acquiring goods has them delivered, i.e. the EU country where the goods are finally located after transport from another EU country.
- Imports of goods — the place of taxation is where goods imported from non-EU countries are generally taxed, i.e. in the EU country where they arrive.
- Supply of services — the place of taxation is where the services are supplied. This depends not only on the nature of the service supplied but also on the status of the customer receiving the service. To ensure that the service is taxed at the place where it is actually consumed, there are some exceptions to these general rules, such as:
- services connected with immovable property (real estate);
- passenger transport;
- activities relating to culture, sport, education and entertainment;
- restaurant services.
VAT is charged according to the nature of the transaction, e.g. when the goods or services are supplied. VAT may be charged for an intra-EU purchase when the supply of goods to the relevant EU country is completed. For imports into the EU, the chargeable event occurs when the goods are brought into an EU country.
The taxable amount for supply of goods and services and the intra-EU acquisition of goods includes all payments to the supplier . Where goods are imported, this amount is their value for customs purposes. Duties, taxes and other charges are included in the taxable amount but the VAT itself, price discounts and rebates granted to the customer are excluded.
The standard rate of VAT to be applied by all EU countries to goods and services is at least 15%. EU countries may apply one or two reduced rates of at least 5% to specific goods or services listed in Annex III to the directive. A number of arrangements which derogate from these rules (lower rates, reduced rates on other goods or services, etc.) also apply under certain conditions.
The directive allows for exemptions from VAT. Most of these are exemptions without the right to deduct, e.g. financial and insurance services, medical care or social services. However, exemptions with the right to deduct also exist, e.g. intra-EU supplies of goods or exports of goods to a non-EU country. Certain exemptions are obligatory for EU countries, while others are optional.
A taxable person has the right to deduct the amount of VAT paid on acquired goods or services in the EU country where these transactions are carried out. This input VAT can be deducted from VAT payable on taxable transactions, e.g. domestic supplies of goods or services. There is in general no right to deduct in the case of an economic activity that is exempt from VAT, or if the taxable person qualifies for a special scheme. In certain cases deductions may be limited or adjusted.
The directive sets out the obligations of taxable and certain non-taxable persons. Generally, VAT is payable by any taxable person making a taxable supply of goods or services. Exceptions include specific transactions where it is the customer who pays VAT, e.g. supplies of natural gas, and transactions where the EU country may choose to designate the customer to pay VAT, as with certain fraud-sensitive supplies such as emission allowances (until 31 December 2018).
The directive permits derogations by EU countries from standard VAT rules, e.g. to prevent certain types of tax evasion. There are also special VAT schemes designed to reduce paperwork, e.g. for small businesses and for farmers.