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Expenses allowable for tax deduction purposes will highly depend on presentation of valid VAT invoices.

Expenses allowable for tax deduction purposes will highly depend on presentation of valid VAT invoices.

The 2016 Budget Measures Bill proposes that from year of assessment 2017, all expenses will be considered allowable for tax deduction, only if the invoice/fiscal receipt presented is valid for VAT purposes.

Should the new provision be enacted, it will consequently amend Article 14 of the Income Tax Act-“Deductions”, whereby expenses which are not supported by a valid VAT document as required under the VAT Act, will be disallowed for tax purposes.

VAT documents that are required to be issued by suppliers as per VAT Act can be the following:

  • Tax Invoice
    A supplier should issue a tax invoice when a customer provides his VAT identification number.
    According to the VAT Act, a tax invoice should include the following:

    • Customer and supplier names;
    • Customer and supplier Addresses;
    • Customer and supplier VAT number;
    • Date of issue and invoice number;
    • Description of service/good supplied;
    • Amount excluding VAT;
    • VAT amount payable;
    • Applicable VAT rate;
    • Reference to the scheme applied (if any).
  • Simplified invoice
    When the value of a particular invoice does not exceed €100, simplified invoices can be issued and can exclude the name and address of the customer. However the issue date, invoice number, VAT registration number of the customer, the VAT amount payable and a description sufficient to identify the goods/services supplied are still required to be included.
  • Fiscal receipt
    When a customer does not provide a VAT registration number to the supplier, the supplier will have to treat the customer as a non-taxable person for VAT purposes and hence is required to issue a fiscal receipt. Fiscal receipts take the following forms:

    • Issued by a fiscal cash register by a person who is a retailer e.g. selling in retail outlets;
    • Through approved fiscal taxi meters;
    • Printed grey forms supplied by the VAT department upon registration.

A supplier registered under Article 11 of the VAT Act “Small Undertakings”, shall issue receipts using the grey printed form supplied by the VAT department.

Persons providing exempt without credit supplies, such as Insurance services, transfers of immovable property, supplies of Health, Educational and cultural services are not required to issue any VAT documents.

Although the amendment has not yet been enacted, it is suggested that all tax computations for basis year 2016, will take into consideration the amendment. Should the bill be approved, the amendment will affect all tax computations as of 1stJanuary 2016.

Should you require any further information or assistance on the matter, kindly do not hesitate to contact us on info@emd.com.mt.

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