25 years ago, the Maltese Parliament enacted the Value Added Tax Act. This ‘anniversary’ passed by unnoticed. COVID-19, rightly so, is taking centre stage.
Back then, it was a time when Malta was at a crossroad and started shifting its tax base, from direct to indirect taxation. Without going into the historical or the political aspect of the introduction of such a fiscal measure, The VAT Act, as many would acknowledge with the benefit of hindsight, served as a catalyst of change, contributing towards the attainment of fiscal discipline. Government wanted to make tax collection more efficient and manageable.
One of the obligations imposed on taxpayers upon the enactment of the VAT legislation was the requirement for businesses to issue a fiscal document which supports the transaction that was carried out. On the one hand. this document could potentially take the form of a tax invoice where the businesses’ customers are taxable persons and on the other a fiscal receipt where the businesses’ customers are private consumers or as the law defines them non-taxable persons. This article is predominantly focused on the obligations imposed on taxpayers to issue fiscal receipts[1] in respect of business to consumer transactions.
As the ‘regulatory authority’ the Commissioner of VAT (now Commissioner for Revenue) sought to define what constitutes a fiscal cash register and a fiscal receipt. The provisions of the 13th Schedule of the VAT Act serve as the legal basis for this. The term fiscal cash register is quite open ended since it is defined as[2] ‘a cash register which conforms with the requirements specified in item 13 of this Schedule;’ This definition proved to be instrumental to the advent of the electronic point of sale as we shall see further on in this article. It did not envisage what kind of medium shall be used but set the legal parameters of the medium to be used. It is irrelevant to the Commissioner which medium is used if the receipt reflects the provisions of the 13th Schedule to the VAT Act
Furthermore, the 13th Schedule to the VAT Act defines the term fiscal receipt as: ‘a receipt or invoice issued on a form supplied or approved in writing by the Commissioner or issued in a manner as may be approved by the Commissioner and containing all the information and details required to be specified thereon, or a receipt issued by means of a fiscal cash register, . . .’.
Where are we Today?
Back in 1995, it was very difficult to explain the obligations at law imposed on taxpayers to record their sales on fiscal cash registers, let alone obliging them to issue the fiscal receipt to a customer. An epochal change was set in motor. It is not difficult to imagine why such a resistance was set up. But notwithstanding all the resistance mounted, this did not hinder the then Commissioner of VAT from enforcing the law and ensure compliance by using a two-pronged approach: launching targeted educational campaigns and carrying out field inspections.to ensure that paying customers are being furnished with a fiscal receipt for the purchase made.
These measures were taken to safeguard the provisions of the 13th Schedule of the VAT Act. This article is being written from the perspective of the obligations at law imposed on the retailers and the suppliers of food in the course of catering to use a fiscal cash register to record their sales and issue a fiscal receipt to their paying customer. These taxable persons can resort to manual fiscal receipt books in case of emergency only!A person caught contravening these provisions, upon conviction, is liable to pay a fine All this is backed up by countless judgements delivered by the Magistrates’ Court (Criminal) and confirmed by the Court of Appeals (Criminal).
aving said all that, the initial hurdles of managing change and other factors were surpassed and the local business community got accustomed to the fiscal cash register. These devices are relatively very easy to use and are cost effective for small businesses. The major concern about the use of a fiscal cash register might be related to its features limitation mainly being, lack of reporting, lack of data storage, lack of stock control and other relevant data analysis. The introduction of the fiscal cash register was great as a tool to record sales, but was it answering the needs of emerging business models? Greener pastures had to be sought. New technologies made up for this lacuna.
Back to 2020 and a shift from the use of fiscal cash register to the use of point of sale systems can easily be witnessed. These systems mushroomed all over Malta. When comparing a fiscal cash register to a point of sale, at first glance, the latter might be much more expensive, however it has various additional features which are absent in a fiscal cash register. It is not difficult to explain such a phenomenon, since nowadays, businesses have learnt to operate in a leaner way to be more profitable.
The advent of the electronic point of sale, increased efficiency, facilitated reporting, covered employee management, included detailed receipts, and increased payment capabilities. All this is excellent for businesses operating in the modern world. But will every system on the market do? Can a system be purchased off the shelf be used without obtaining prior approval and certification?
As explained beforehand, the Maltese tax authorities never put spokes in the wheel of progress, they only wanted to make sure that such systems will still be respecting the provisions of the VAT Act. If receipts are issued as described and details quoted are printed, nothing should stop a business from availing itself of such a product. It goes without saying that such systems put on the market in Malta, by Maltese suppliers should comply with the VAT Act. In this sense it is very dangerous for Maltese taxable persons adventuring in unchartered territory over the internet in search of such systems. One must keep in mind that foreign jurisdiction products might not be aware of the Maltese legislation and the system purchased might not be compliant with the VAT Act.
Having said that, and as described previously, one must put all this into a regulatory framework perspective as demanded by the Commissioner for Revenue. A point that needs to be made clear, is that these point of sale systems cannot be bought off the shelf and utilised prior the approval of the Commissioner for Revenue who rests on a bona fide computer system audit certificate of compliance signed by a registered auditor. The role of the auditor is to certify that the electronic point of sale is up to the provider’s claims, that in fact, it is compliant with the VAT Act and that the system under review cannot be tampered with. Once the Commissioner for Revenue is satisfied with the documentation and certifications made available, he issues the approval granting what is known as the EXO number which must be printed on every fiscal receipt issued.
The scene is set and there is no turning back. Electronic points of sale are here to stay. They increase efficiency, expand payment capabilities, are more accurate, are an effective inventory and employee management tool and they offer better reporting and detailed receipts. It will be the way forward for present and prospective taxable persons operating in Malta.
Do you have a point of sale? Do you have an EXO number? Are you opening a new business and require an EXO number for your point of sale? Contact Roderick or Brandon for a free consultation on the matter
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[1] Article 51 of the VAT Act, ”Any person who makes any supply, other than an exempt without credit supply or other than a supply in respect of which a tax invoice is required to be issued in terms of article 50, shall provide to the person to whom the supply is made an invoice, receipt or other document which shall be issued in the form and in the manner and shall contain the particulars set out in the Thirteenth Schedule.” – In other words, fiscal receipts should be issued in the context of supplies between businesses and private consumers, where the latter are classified as non-taxable persons.
[2] Item 1 of the 13th Schedule
[3] Item 3(1) of the 13th Schedule of the VATA
