On the 22nd May 2018, the Government of Malta published LN 162 of 2018, a new Legal Notice entitled ‘Value Added Tax (Regulation as a Single Taxable Person) Regulations, 2018.  This LN will allow separate persons, which are connected together by specific criteria to be grouped together as a single taxable person for VAT purposes.  These regulations came into force on 1st June 2018.  VAT grouping is for now limited to persons which are operating in the financial services and gaming industries.  It is hoped that vat grouping will provide an opportunity for tax optimization to persons engaged in the gaming and financial services industries.

Two or more legal persons established in Malta will be allowed to register as a single taxable person under the VAT Grouping mechanism provided the following conditions are satisfied:

  1.  at least one of the applicants must be a taxable person licensed or recognized by the MFSA or the MGA as prescribed;
  2.  each of the applicants must be bound to each of the other by financial links, organizational links and economic links:

financial link is deemed to exist where the same legal/physical persons, hold directly or indirectly more than 90% of at least two of the following:

  • – voting rights or equivalent interests;
  • – entitlement to profits available for distribution; or
  • – entitlement to surplus assets available for distribution on a winding up or equivalent event.

An organizational link is deemed to exist where the applicants have a shared management structure, whether in whole or in part.

An economic link is deemed to exist where

  • the activity of each of the applicants is of the same nature or within the same industry, or where
  • the activities of the applicants are interdependent or complementary, or where
  • one member of the group carries out activities which are wholly or substantially to the benefit of any one or more of the other members.

iii.  one member of the group carries out activities which are wholly or substantially to the benefit of any one or more of the other members.

Applicants cannot be members of more than one VAT Group at the same time.  The VAT Group will be allocated one VAT identification number.  The VAT identification number of the members of the VAT Group, will be cancelled from the date of registration as a VAT Group or from the date of joining an existing VAT Group.

The members of the VAT Group must nominate one member of the group as a Group Reporting Entity to exercise all the rights and discharge all obligations of the VAT Group. Any intra-group supplies would fall out of the scope of VAT since a taxable person cannot charge tax to itself.