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VAT Compliance


  1. Local news
  2. European news
  3. Update of CJEU decisions
  1. Local news

1.1 Amendments to legislation 

Legal Notice 383 of 2016 published on 22 November 2016 amends paragraph 6 of Item 3 of Part Two to the Fifth Schedule to the VAT Act by the introduction of a new proviso pursuant to which a securitisation vehicle and an authorised reinsurance special purpose vehicle fall to be classified as investment schemes. As a result, the management thereof is classified as exempt without credit.

1.2 VAT Department Guidelines

The VAT Department recently published guidelines on its web portal titled “Electronic Communications with the Revenue Departments”. These guidelines lay down the procedures to be used by persons wishing to use electronic services for the purpose of filing statutory returns and other forms to the Inland Revenue Department and to the VAT Department. The guidelines may be viewed or downloaded via the following link:

Click Here

1.3 Decisions of the Administrative Review Tribunal

In cases 310/12, 126/12, 188/12 and 271/12 decided respectively on 20/10/2016 and 15/11/2016 and which all consisted of appeals against assessments issued by the Commissioner in terms of Article 32 of the VAT Act (Cap. 406) the Administrative Review Tribunal found in favour of the Commissioner in all four cases and confirmed the assessments as originally raised by the VAT Department.

In case 101/12 XXX vs Kummissarju tat-Taxxa fuq il-Valur Mizjud decided on 08/11/2016 the Tribunal dismissed the appeal on grounds that it was filed beyond the statutory time limit of thirty days from the date of being notified with assessments.

1.4 Decisions of the Civil Court (First Hall)

In case 1080/2013 JPG HSBC Bank Malta plc vs Direttur Generali (Taxxa fuq il-Valur Mizjud) et. decided on 17/10/2016 the Court ruled that a special privilege registered by the Commissioner in terms of Article 62 of the VAT Act would be null and without effect where the immovable property in respect of which the special privilege is registered does not constitute an asset forming part of the economic activity of a person in respect of any tax due by that person to the Commissioner, as is the case of the immovable property in respect of which the appeal was made.  In a nutshell, the Commissioner had registered a special privilege on a property belonging to a private person who in his capacity as a director of a company was according to the VAT Department a representative of that company in terms of Article 66 of the VATA and consequently was jointly and severally liable for any outstanding amounts due to the Commissioner by the person of whom he was a representative (i.e., the company). On its part, plaintiff argued that once the property in question was not an asset forming part of the economic activity of the company (the person who owed the amounts due to the VAT Department) then the special privilege provided for in Article 62 could not be invoked.

Our Comment:  This judgment is very important since it draws a clear line of where the powers of the Commissioner lie with regards to the application of the special privilege under Article 62.  However, it is to be noted that the Commissioner has appealed this decision and consequently the case  has to wait for the final decision by the Court of Appeal.

In case 99/15 LM  Direttur Generali (Taxxa fuq il-Valur Mizjud) vs Carmelo Meli decided on 24/10/2016 the Court ruled that any person who fails to contest an amount claimed by the Commissioner in the manner and within the time limit specified in Article 59 of the VATA, cannot institute civil court proceedings against the Commissioner with regard to an amount so claimed. This applies since in terms of the said Article 59 of the VATA, any notice issued by the Commissioner showing any amount of tax and administrative penalty due by a person shall, unless the contrary is proved, be sufficient evidence that that amount is due to the Commissioner by that person and shall constitute an executive title. The Commissioner may then request the payment of any tax and administrative penalty payable by any person by means of a demand note, and if the payment requested is not made within thirty days from the date when the said demand note is served on that person, the Commissioner may proceed to enforce payment in virtue of the executive title after two days from the service on that person of an intimation for payment made by means of a judicial act. On these grounds, the Court decreed the appeal instituted by plaintiff to be null and void.

Our Comment:  Pursuant to this decision, any person who is served with a notice by the VAT Department claiming any amount is to be aware that unless he contests the amount claimed in the manner and time prescribed at law the amount as notified shall constitute an executive title which entitles the VAT Department to request the payment and proceed with a judicial act if the payment is not made.

2. European News

2.1 EU Commission Proposal for new VAT rules to support e-commerce and on-line businesses in the EU

On 1st December 2016, the European Commission launched a proposal for the adoption of new VAT rules to support e-commerce and on-line businesses in the EU. The proposal embraces a new approach to VAT for e-commerce and follows up on its commitments made in the Digital Single Market strategy for Europe and the Action Plan towards a Single EU VAT area.

The new measures are aimed to improve the VAT environment for e-commerce businesses and will allow consumers and companies, particularly start-ups and SMEs, to buy and sell goods and services more easily online. The proposed measures include:

  • Sellers of goods on-line will be able to carry out all their VAT obligations in the EU through a digital on-line portal (“One Stop Shop”) hosted by their own tax administration and in their own language
  • A yearly annual threshold of €10,000 (to be treated as domestic sales) will be introduced to support start-ups and micro-businesses
  • Same invoicing and record-keeping rules will apply
  • Removal of the current de minimis exemption from VAT on imports of small consignments from outside the EU
  • Member States will be able to apply the same VAT rate to e-publications, such as e-books and e-newspapers, as they apply to their printed equivalent
  • The introduction of an annual threshold of €100,000 for on-line e-services providers whereby only one piece of evidence (as against the current two pieces) necessary to identify the location of the customer would be required if the threshold is not exceeded

It is envisaged that the new rules, if approved by the Member States, will come into effect in 2021 thus allowing all stakeholders ample time to adequately gear up and prepare for the changes.

2.2 COM (2016) 811 final – Proposal for the temporary application of a generalised reverse charge mechanism in relation to supplies of goods and services above a certain threshold

On 21 December 2016, the European Commission published a draft proposal to amend the VAT Directive to make provision for the introduction of a temporary generalised reverse charge for supplies of goods and services over a threshold of 10 000 EUR per invoice. This generalised reverse charge mechanism (GRCM), which will be optional for Member States, constitutes a derogation from the principle of payment of the VAT on each transaction in a supply chain. Where an EU Member State opts to implement this option, the generalised reverse charge will apply to all sectors and all supplies of goods and services carried out within its territory where the value per invoice exceeds 10,000 EUR. The Member State in question must apply to the European Commission for permission to implement the option. Moreover, the EU Member State must also fulfil certain criteria in terms of the size of its VAT gap and the level of VAT circuit fraud. An implementing decision by the European Commission would then allow the Member State to apply the mechanism. The measure is intended to apply until 30 June 2022.

2.3 Updated version of VAT Committee Guidelines

On 16/12/2016, TAXUD uploaded an updated version of the VAT guidelines resulting from meetings of the VAT Committee. Although not legally binding, these guidelines contain valuable information on how Member States view and treat particular VAT transactions and as such they constitute a valuable tool for tax practitioners and students pursuing a career in indirect taxation to help develop their awareness and knowledge in VAT matters.

The guidelines may be viewed or downloaded on the following link:

Click Here

2.4 Launch of Public Consultations 

On 20/12/2016 TAXUD launched three public consultations on its website. The public consultations are in the context of the “Action Plan on VAT – towards a Single EU VAT Area” adopted by the Commission earlier this year. Through the consultations, the Commission is aiming to seek the views of businesses, national administration or authorities, academics, tax experts, representative organisations and the general public on the following themes:

  • the reform of VAT rates
  • the definitive system for B2B intra-EU transactions of goods
  • the special scheme for small enterprises under the VAT Directive

Any person wishing to participate in any or all of the above public consultations may do so by not later than 20/03/2017 by submitting an on-line questionnaire on the relative link via the TAXUD website:

Click Here

3. Update of CJEU decisions in the field of VAT

3.1 By a decision published on 26th October 2016 in case C-24/15 Josef Plockl the CJEU found that the relative provisions in the VAT Directive must be interpreted as precluding a tax authority in the Member State of origin from refusing to exempt an intra-Community transfer from VAT on grounds that the taxable person had not provided a VAT identification number issued by the Member State of destination, where there is no specific evidence of tax evasion, the goods had been moved to another Member State and the other conditions of exemption from tax are also met.

According to the facts of the case, Mr Plockl, a sole trader in Germany, dispatched a vehicle from Germany to a dealer in Spain with a view to selling it in Spain, to what amounted to an intra-Community transfer of a good forming part of his economic activity. Subsequently the vehicle was sold to an undertaking in Spain. Whilst not declaring anything when effecting the transfer he however, declared an (exempt) intra-Community supply when the vehicle was sold. In the course of an audit, the tax office, took the view that once Mr Plockl had not produced a VAT identification number issued in the Member State where the dispatch of the good ended, i.e., Spain, then the transfer of the vehicle cannot be treated as an exempt intra-community transfer in Germany. Mr Plockl brought action against this decision in a higher court which in turn referred it to the CJEU for a preliminary ruling. In essence, the CJEU was asked whether the relative provisions in the VAT Directive permit member states to refuse to grant an exemption such as in the case of an intra-Community transfer of a good, where although there is no specific evidence of tax evasion, the good having been moved to another member state and the other conditions of exemption from tax are met, the supplier had not taken all the measures that can reasonably be expected of him from the point of view of the formal requirements, such as the recording of a VAT identification number.

In its analysis the Court noted that on the basis of the facts of the case, it appears that the “substantive” conditions laid down in the Directive for the exemption of an intra-Community transfer of a good to another Member State to apply had been met except for the “formal” requirement to communicate a VAT registration number issued by the Member State of destination. Moreover, no evidence or proof had emerged or been brought forward to suggest that VAT was intended or actually evaded or avoided as a result of the failure to communicate the said VAT registration number. Consequently, the Court observed that in circumstances such as those of the dispute in the main proceedings, a taxable person who acted in good faith, cannot be refused an exemption from VAT on grounds that he did not take all the measures which could reasonably be required of him in order to satisfy a formal obligation, namely the provision of a VAT identification number issued by the Member State of destination of the intra-Community transfer. If on the basis of national law an exemption is not allowed on account of non-compliance with a formal requirement, such as the provision of a VAT identification number, notwithstanding that all substantive conditions had been met, then that national law would not be strictly in line with the principle of fiscal neutrality. This applies since, according to settled case law. Whilst Member States are allowed to adopt measures to ensure the correct collection of VAT and the prevention of evasion within their respective territories, such a refusal would go further than is necessary to attain those objectives. According to the Court it would be more appropriate to penalise such infringements of national law by the imposition of penalties proportionate to the seriousness of the infringement.

Should you require further information on the above please contact Matthew Zampa on mz@zampadebattista.com or Charles Vella on cv@zampadebattista.com.




While every effort was made to ensure that the contents of this newsletter are accurate and reflect the current position at law and in practice, we do not accept any responsibility for any damage which may result from a change in the law or from a different interpretation or application of the local law by the authorities or the local courts.

The information contained in the newsletter is intended to serve solely as a guidance and any contents of a legal nature therein do not constitute or are to be interpreted as legal advice. Consulting your tax practitioner is recommended in case you wish to take any decision connected to contents of this newsletter.