Salient amendments to the Maltese VAT Act arising from the Budget Implementation Act

VAT refunds and set‑off mechanisms

The Commissioner for Tax and Customs (the “Commissioner”) is now expressly empowered to set off VAT refunds against liabilities arising under any of the revenue acts, rather than being limited to VAT liabilities alone. In this context, the revenue acts encompass the full spectrum of Malta’s tax and customs legislation, including income tax, stamp duty, VAT, eco-contributions, customs and excise duties, import duties, and other related fiscal laws and regulations. As a result, outstanding Maltese tax obligations may directly affect both the timing and the amount of VAT refunds.

VAT‑inclusive pricing rules

A key substantive amendment is the introduction of a rule providing that prices indicated for goods or services by VAT‑registered taxable persons are deemed to be VAT‑inclusive. Exceptions apply only where VAT cannot be determined at the time the price is indicated, or where the supply is made to a VAT‑identified customer and it is clearly and unequivocally stated that the price excludes VAT. This measure is particularly relevant for B2C operators, including retailers and hospitality operators, who may need to review their pricing and customer‑facing documentation.

Service of notices

The Act broadens the methods by which notices may be served by the Commissioner. Notices may now be validly served via the Malta Tax and Customs Administration (‘MTCA’) online portal, by email from an official MTCA address or by registered post. The amendments also clarify that notices issued electronically by the Commissioner do not require a signature. This shift towards electronic communication increases the importance of regularly monitoring official channels to avoid missing statutory deadlines.

Transactions between related parties

New rules require that in certain specific circumstances, supplies of goods or services between related persons to be taxed at open market value where the agreed consideration does not reflect market conditions and input VAT deduction is restricted. These circumstances include:

The definition of ‘related persons’ is broad and includes family members, employees, and their family members, cohabitants, persons holding jointly owned assets, and entities connected through direct or indirect ownership or control exceeding 50%. These changes will require taxpayers to reassess pricing policies for intra‑group and other related‑party supplies and to consider whether additional documentation is needed to support the use of market values.

Clarifications on reduced‑rate and exempt supplies

Amendments to the Fifth Schedule further clarify the VAT treatment of certain food and beverage items supplied for immediate consumption. Milkshakes, yogurts, chocolate, and similar products, including those supplied in liquid form, remain taxable supplies, except where they are sealed in a package by the manufacturer and supplied in that original sealed package. In practice, the VAT treatment of such items now depends on both the nature of the product and the manner of supply, drawing a clearer distinction between ready-to-consume offerings and prepackaged goods.

Next steps

The amendments brought about by the Budget Implementation Act will affect businesses differently based on the nature of their activities or organisation, their customer base, and existing VAT profits. Businesses are encouraged to:

• Review their pricing and invoicing practices, particularly for B2C supplies.
• Assess related‑party transactions to ensure that they reflect open market values where required.
• Verify the VAT treatment of food and beverage items and fundraising activities.

At PwC, we can assist you in assessing how these changes affect your business and in implementing any required adjustments to your systems and processes.