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Malta's value-added tax (VAT) department has released guidance on how supplies provided by education services providers should be taxed.
In general, registered persons who render educational services in Malta are exempt from VAT without credit – that is, the supplier of the services does not charge VAT and cannot claim back any VAT incurred in the course of its activity.
Tangible goods related to education are taxed differently. The guidance explains that Maltese VAT rules are harmonized with the European Union VAT Directive. As such, all supplies of goods and services incur VAT except where a specific derogaton exists or where these supplies are exempt.
Malta has no derogation to exempt from VAT any books, school uniforms, shoes and carried bags for students, and other goods related to education. Therefore, Malta has to impose VAT at the standard rate of 18 percent with the exception of books and other printed matter on which a reduced rate of five percent may be applied under item six of Annex III of the Directive. The same applies to any other services that are not otherwise exempted.
However, there are circumstances where such goods and services are exempt in the case where "the said supply is connected with and essential for the supply of educational services exempt from VAT (as set out in the guidelines), if this supply is provided by a school, institution, university, teacher, or organization supplying the service, or supplied by any other organization recognized by the Commissioner for Revenue as having similar objectives.
For example, if an institution (school) purchases books or uniforms or other goods which are essential for the provision of its educational services, in order to supply them to its students, it will include the VAT which it incurs in the price of the product but it cannot charge VAT on the final price of the item it supplies to the customers. That is to say, it will incur the input VAT without deduction and it will supply it to the students without charging further VAT.
However "connected with and essential for" does not refer to: the provision of accommodation; catering services; the letting of any movable or immovable tangible property; parking facilities; and social activities and entertainment.
According to the guidance, the supply of an excursion is only considered as "connected with and essential for" the educational services' supply when this would form part of a study visit in the course of the provision of education in school curriculum subjects.
The new guidelines, released on July 20, 2016, replace those published in September 2007.
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