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By Council Implementing Decision (EU) 2021/753 published on 6th May 2021, Malta has been authorised to exempt from VAT, taxable persons whose economic activity consists principally in supplies of services with a low value added (high inputs), or the supply of services with high value added (low inputs), whose annual turnover is no higher than EUR 30,000. This derogation shall expire on 31st December 2024.

This 2021 Budget measure was placed on hold on account of the fact that such a change to the small undertakings threshold for services required authorisation from the Council of the European Union. As a matter of fact, the Commissioner, by means of Legal Notice 463 of 2020 published on 18th December 2020 had already announced the changes in the Sixth Schedule to the VAT Act necessary to implement this measure, namely the merging of the two categories of services, that is those with high inputs and those with low inputs, into one titled “other economic activities”, and raising the annual threshold to EUR 30,000. The Minister for Finance and Employment has established 1st July 2021 as the date of coming into force of the new threshold.

It is anticipated that this measure will impact a number of taxable persons, particularly those supplying services whose annual turnover hovered in the region of the old thresholds of EUR 24,000 (services with low value added) and EUR 20,000 (services with high value added) but may now become eligible as small undertakings under the new EUR 30,000 threshold. However, a taxable person registered under Art. 10 supplying services, can only apply to be registered under Art. 11 (as a small undertaking) if during a relevant period of twelve months preceding his application to be so registered, has not exceeded the “exit” turnover threshold set at EUR 24,000. On the other hand, non-registered taxable persons supplying services intending to apply for a VAT registration number as a small undertaking, have to indicate the estimated annual threshold as being under EUR 30,000 in the application form.

As a small undertaking registered under Art. 11, a taxable person is exempt from charging VAT, has no right of deduction of Input VAT and has limited compliance obligations, such as the furnishing of just one calendar year declaration instead of a quarterly/annual VAT return.

Are you a taxable person registered under Art. 10 and supplying services? Is your annual turnover below the “exit” threshold? Are you registering for VAT for the first time and consider yourself a small undertaking? Do you consider it an advantage to be registered as a small undertaking? Are you interested but have lingering doubts? If yes, why not give the Zampa Debattista VAT Team a call? They would be at your full disposal to direct and guide you on the matter.