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Definition and Threshold for Intra-Community Acquisitions by Group of 3

This article defines the Group of 3, consisting of non-taxable legal persons, small undertakings, and other taxable persons without VAT deduction rights. It explains the threshold for VAT exemption and liability on intra-Community acquisitions in Malta.

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Definition and Threshold for Intra-Community Acquisitions by Group of 3

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  1. INTRA-COMMUNITY ACQUISITIONS BY MEMBERS OF THE “GROUP OF 3”

  2. DEFINITION

  3. Definition of “Group of 3” The “Group of 3” consists of: • The non-taxable legal persons (essentially public authorities acting as such and not performing activities referred to in Schedule 1 as well as some pure holdings) • The small undertakings registered under article 11 • The other taxable persons not registered under articles 10 and 11 that only make exempt operations without any right to deduct VAT (e.g. bank, insurance companies, non-profit making organisations, hospitals…) • The farmer subject to the flat-rate scheme in some Member States (thus “Group of 4”) = not applicable in Malta

  4. THRESHOLD

  5. Threshold A threshold of the equivalent in Maltese liri of EUR 10,000 has been fixed: • Under which or up to which the intra-Community acquisition by a member of the “Group of 3” is not subject to VAT in Malta • Above which the intra-Community acquisition by a member of the “Group of 3” is subject to VAT in Malta The threshold is calculated on an annual (calendar year) basis Art. 12(1) VAT Act Item 1 Part Two Sixth Schedule

  6. Threshold The calculation of the threshold must take into account: • The value of all intra-Community acquisitions following purchases made in all other Member States, except those listed in next slide • The value of the transaction that leads to exceeding the threshold • The value of importation made by a non-taxable legal person in another EU Member State of goods that are transported to Malta after importation • The value of importation made by a supplier in another EU Member State of goods that are supplied and transported to Malta after importation (will be examined during the session on importation)

  7. Threshold The calculation of the threshold must not take into account: ·The value of intra-Community acquisitions of excise goods made by the member of the “Group of 3” (no threshold for excise goods) ·The value of intra-Community acquisitions of new means of transport made by the member of the “Group of 3” (no threshold for new means of transport) ·The value of supplies with installation made to this member of the “Group of 3” by a taxable person established in another EU Member State for which Maltese VAT is due ·The value of distance sales made to this member of the “Group of 3” by a taxable person established in another EU Member State that are deemed to take place in Malta

  8. Threshold exceeded Once the threshold is exceeded, the member of the “Group of 3” is liable to pay Maltese VAT on all his intra-Community acquisitions for the rest of the calendar year during which the threshold has been exceeded and for at least the following calendar year. If the threshold is also exceeded during this following year, the same rules apply regarding the liability of Maltese VAT on the intra-Community acquisitions made by the member of the “Group of 3” Example If a member of the “Group of 3” exceeds the threshold in March 2005, he will be liable to pay Maltese VAT on all his intra-Community acquisitions made in 2005 as from the moment the threshold is exceeded (March 2005) as well as those made at least in 2006. He will also have to register under art.12 by not later than the date of that acquisition Art. 12(1), (4) and (5) VAT Act

  9. OPTION

  10. Option = application for registration art.12 The member of the “Group of 3” is liable to pay Maltese VAT on all his intra-Community acquisitions from the moment he opts for and for the rest of the calendar year during which he has opted as well as for at least the two following calendar years. If the threshold is in any case exceeded during these following years, the rules regarding the threshold also apply regarding the liability of Maltese VAT on the intra-Community acquisitions made by the member of the “Group of 3” Example If a member of the “Group of 3” opts in March 2005 for taxation in Malta of all his intra-Community acquisitions, he will be liable to pay Maltese VAT on all his intra-Community acquisitions made as from the moment of the option (March 2005) as well as those made at least in 2006 and 2007. If the threshold is exceeded in 2007, he will be in any case liable to pay Maltese VAT on all his intra-Community acquisitions in 2008 Art. 12(2) and (6) VAT Act

  11. EXAMPLES

  12. FACTS • A member of the “Group of 3” purchases goods in Italy • Goods are not excise goods nor new means of transport (special regime examined in next session) • Goods are transported from the other Member State to Malta on behalf of the member of the “Group of 3” (special regime for distance sales examined in next session) Other EU MS Malta Sale of goods A B = member of “Group of 3” Transport on behalf of B

  13. First hypothesis The member of the “Group of 3” does not exceed the threshold at the time of the acquisition and did not exceed it during the previous calendar year and he does not opt for the taxation of its intra-Community acquisitions in Malta • Is there an ICA in Malta? YES • Where is the place of this ICA? In Malta (where transport ends) • Is this ICA subject to VAT in Malta? NO • Is there any exemption? N/A • Who is liable to pay VAT? N/A Art. 4(b)(i) and 12 VAT Act

  14. Second hypothesis The member of the “Group of 3” exceeds the threshold at the time of the acquisition or he has exceeded this threshold during the previous calendar year or he has opted for the taxation of its intra-Community acquisitions in Malta • Is there an ICA in Malta? YES • Where is the place of this ICA? In Malta (where transport ends • Is this ICA subject to VAT in Malta? YES • Is there any exemption? NO (assumption) • Who is liable to pay VAT? The member of the “Group of 3” Art. 4(b)(i),12 and 20(1)(b) VAT Act

  15. COMPLIANCE

  16. Obligations to be respected by the member of the “Group of 3” The member of the “Group of 3” must: ·  Inform the VAT Commissioner that the threshold will be exceeded ·  Ask for a VAT registration under article 12 ·  Keep records of the intra-Community acquisitions made (Art.30(2) VAT Act) ·  Submit a special VAT form (Art.21(5) VAT Act) for the month during which he has made intra-Community acquisitions and during the period during which he is liable to pay Maltese VAT on these acquisitions (only if there are ICA made) ·  Pay VAT due on these intra-Community acquisitions by not later than the fifteen day following the month during which the tax becomes chargeable ·  Communicate his VAT identification number to his suppliers in other EU Member States during the period he is liable to pay Maltese VAT on his intra-Community acquisitions

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