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VAT TREATMENT IMPORTATIO N

Learn about VAT treatment on importation of goods in Malta, including definitions, exemptions, liable persons, and special topics like customs duty suspension regimes. Gain insights on place of importation and examples to understand the process better.

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VAT TREATMENT IMPORTATIO N

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  1. VAT TREATMENT IMPORTATION

  2. Overview • Definition • Place of importation • Exemptions • Person liable to pay VAT • Special topics

  3. DEFINITION

  4. Definition DEFINITION • “Importation of goods” means: • The entry into Malta before 1 May 2004 of goods transported from any other country; • The entry into the Community on or after 1 May 2004 of goods transported from a third territory. Art. 6 (a) VAT Act Item 19 Second Schedule

  5. Definition DEFINITION • A “third territory” means: • The territory of a non-EU Member State; and • The territory of an EU Member State, which for VAT purposes is not considered being a part of the Community. Art. 2 (1) VAT Act Fifteenth Schedule

  6. Definition The following territories of Member States are for VAT purposes NOT considered being a part of the Community:

  7. Definition The following territories are for VAT purposes considered being a part of the Community:

  8. Definition REMARKS • Importation only applies to goods. Services cannot be imported! • Any person can act as importer for an importation • The subsequent use of the imported goods does not matter

  9. Definition REMARKS • The territories of the Community for Customs purposes, Excise purposes and VAT purposes are different: CUSTOMS EXCISE VAT

  10. Definition REMARKS Terminology: • Importation of Community goods: the entry into the Community for VAT purposes of goods that, for customs purposes, are already in free circulation • Importation of non-Community goods: the entry into the Community for VAT purposes of goods that, for customs purposes, are not yet in free circulation

  11. Definition REMARKS • In some cases goods are physically entering the Community, they are not put into free circulation, but placed under a customs duty suspension regime • In that case, there is also a (VAT exempt) importation of goods and VAT on importation will only fall due when the goods cease to be subject to that regime (unless at that time another exemption of VAT upon importation is applicable) Art. 9 VAT Act and item 2 (b), Part Four, Fifth Schedule Art. 8 VAT Act and item 7 (1) and (4) Fourth Schedule

  12. Definition REMARKS • The following customs duty suspension regimes exist: • The temporary storage of goods; • The placing of goods in a free zone or free warehouse; • Customs warehousing or inward processing; • The admittance into territorial waters of goods on drilling and production platforms; • The temporary entry of goods into an EU Member State; • External transit procedures; • Internal transit procedures Item 7 (4) Fourth Schedule

  13. Definition REMARKS With respect to goods placed under a customs duty suspension regime before 1 May 2004 and released from that regime on or after 1 May 2004, special transitional provisions are applicable for determining the events that are considered to be an importation Art. 87 (1) and (2) VAT Act

  14. PLACE OF IMPORTATION

  15. Place of importation PRINCIPLE • An importation of goods takes place where the goods are at the time when the chargeable event takes place Art. 7 VAT Act Item 15 (1) Third Schedule

  16. Place of importation PRINCIPLE • The date of chargeable event in case of an importation of goods is the following: • As a general rule, when customs duties become chargeable (or would have become chargeable if the goods were subject to those duties) • In case the goods are placed under a customs duty suspension regime, the chargeable event takes place on the date when the goods cease to be subject to that regime Art. 8 VAT Act and item 7 (2) and (3) Fourth Schedule Art. 8 VAT Act and item 7 (1) Fourth Schedule

  17. Place of importation EXAMPLES • When goods, transported from a third territory, are in Malta at the moment customs duties fall due, the importation for VAT purposes of the goods takes place in Malta • When goods are transported from a third territory and on entry on the Maltese territory they are placed under a regime of customs warehousing, the importation for VAT purposes of the goods takes place in Malta if the goods are in Malta at the moment the goods cease to be subject to that regime (and are not put under another customs duty suspension regime)

  18. EXEMPTIONS

  19. Exemptions EXAMPLES • The importation of goods whose supply by a taxable person is exempt from VAT (e.g. food, pharmaceutical products) • The importation of goods that are intended to be placed under a customs duty suspension regime Art. 9 VAT Act and item 1 and 6, Part Four, Fifth Schedule Art. 9 VAT Act and item 2 (b), Part Four, Fifth Schedule

  20. Exemptions Art. 9 VAT Act and item 2 (a), Part Four, Fifth Schedule Directive 83/181/EEC dated 28 March 1983 EXAMPLES • The importation of goods exempt from customs duty E.g. personal property belonging to individuals coming from countries situated outside the community; goods imported on the occasion of a marriage; personal property acquired by inheritance; school outfits, scholastic materials and other scholastic household effects under certain conditions; imports of negligible value; capital goods and other equipment imported on the transfer of activities; importation of certain agricultural products and products intended for agricultural use; therapeutic substances, medicines, laboratory animals and biological or chemical substances; goods for charitable or philanthropic organizations; importation in the context of certain aspects of international relations; goods for the promotion of trade (e.g. goods used or consumed at a trade fair or similar event); goods imported for examination, analysis or test purposes; tourist information literature; documents and publications of foreign governments and publications of official international bodies; coffins, funerary urns and ornamental funerary articles, etc.

  21. Exemptions EXAMPLES • The importation of goods followed by an exempt intra-Community supply of goods or an exempt deemed intra-Community supply of goods to another EU Member State (see later on under Special Topics) Art. 9 VAT Act and item 3, Part Four, Fifth Schedule

  22. Exemptions EXAMPLES The re-importation by the person who exported them outside the Community: • of goods in the state in which they were exported outside the Community • of goods which have undergone outside the Community repair, transformation or adaptation, or after having been made-up or reworked abroad: provided that this exemption is limited to the value of the goods at the time they were exported outside the Community Art. 9 VAT Act and item 5, Part Four, Fifth Schedule

  23. PERSON LIABLE TO PAY IMPORT VAT

  24. Person liable to pay VAT • The payment of the tax on a taxable importation is the liability of the importer • The importer is the person in whose name the goods are at the time when tax on the importation becomes chargeable Art. 20 (1) (c) VAT Act Art. 2 (1) VAT Act

  25. Payment of VAT • As a general rule, VAT upon importation is paid at the Customs authorities • However the Commissioner can allow deferring the payment of the import VAT to the VAT return Art. 21 (5) VAT Act Art. 60 (1) (c) and (2) VAT Act

  26. VAT treatment importation Example A Maltese company A, registered under art. 11 VAT Act, purchases office equipment from a Libyan company B. A has the goods transported from B’s premises in Tripoli to its office in Valetta. Goods are put into free circulation.

  27. VAT treatment importation Example Libya Malta Movement of goods B A B supplies goods

  28. VAT treatment importation Solution: B-A • Taxable person: YES • Operation in the scope of VAT: YES (supply of goods) • Place of supply: Libya (Item 1 (b) Third Schedule – where transport begins) • Exemption: N/A • Person liable to pay VAT: N/A

  29. VAT treatment importation Solution: A • Qualifying person (importer): YES • Operation in the scope of VAT: YES (importation of goods) • Place of importation: Malta (Item 15 Third Schedule and item 7 Fourth Schedule) • Exemption: NO (assumption) • Person liable to pay VAT: the Maltese company A (art. 20 (1) (c) VAT Act)

  30. SPECIAL TOPICS

  31. Supplies of goods following an importation of goods PRINCIPLE • As a general rule, supplies of goods that are transported take place where the goods are at the time when the transport of those goods begins Art. 7 VAT Act and item 1 (b) Third Schedule

  32. Supplies of goods following an importation of goods EXCEPTION • When it concerns supplies of goods whereby the transport of goods begins outside the Community and ends in the Community, the supplies of goods by the importer and any subsequent supply up to the acquisition of those goods, take place in the Member State where they are imported Art. 7 VAT Act and item 1 (c) Third Schedule

  33. Supplies of goods following an importation of goods Example A, a US company, supplies computers to B, a Maltese company registered under art. 10 VAT Act. The computers are put at the disposal of B in the USA. B supplies the goods to C. In the frame of this sale, the computers are transported by B from the USA into Malta (to the premises of C). B acts as importer of the goods.

  34. Supplies of goods following an importation of goods USA Malta A supplies goods A B B supplies goods B acts as importer B transports goods C

  35. Supplies of goods following an importation of goods Solution: A-B • Taxable person: YES • Operation in the scope of VAT: YES (supply of goods) • Place of supply: USA (Item 1 (a) Third Schedule – where goods are placed at the disposal of B) • Exemption: N/A • Person liable to pay VAT: N/A

  36. Supplies of goods following an importation of goods Solution: B • Qualifying person (importer): YES • Operation in the scope of VAT: YES (importation of goods) • Place of importation: Malta (Item 15 Third Schedule and item 7 Fourth Schedule) • Exemption: NO • Person liable to pay VAT: the Maltese company B (art. 20 (1) (c) VAT Act)

  37. Supplies of goods following an importation of goods Solution: B-C • Taxable person: YES • Operation in the scope of VAT: YES (supply of goods) • Place of supply: Malta (Item 1 (c) Third Schedule – in MS of importation) • Exemption: NO • Person liable to pay VAT: the Maltese company B (art. 20 (1) (a) VAT Act) In case item 1 (c) would not exist: Place = USA

  38. Supplies of goods following an importation of goods Example A, a US company, supplies computers to B, a Maltese company registered under art. 10 VAT Act. The computers are put at the disposal of B in the USA. B supplies the goods to C. In the frame of this sale, B takes care of the transport of the computers from the USA into Malta (to the premises of C). C acts as importer of the goods.

  39. Supplies of goods following an importation of goods USA Malta A supplies goods A B B supplies goods C acts as importer B takes care of the transport to Malta C

  40. Supplies of goods following an importation of goods Solution: A-B • Taxable person: YES • Operation in the scope of VAT: YES (supply of goods) • Place of supply: USA (Item 1 (a) Third Schedule – where goods are placed at the disposal of B) • Exemption: N/A • Person liable to pay VAT: N/A

  41. Supplies of goods following an importation of goods Solution: B-C • Taxable person: YES • Operation in the scope of VAT: YES (supply of goods) • Place of supply: US (Item 1 (b) Third Schedule – where transport begins) • Exemption: N/A • Person liable to pay VAT: N/A

  42. Supplies of goods following an importation of goods Solution: C • Qualifying person (importer): YES • Operation in the scope of VAT: YES (importation of goods) • Place of importation: Malta (Item 15 Third Schedule and item 7 Fourth Schedule) • Exemption: NO • Person liable to pay VAT: the Maltese company C (art. 20 (1) (c) VAT Act)

  43. Importation followed by an exempt IC supply of goods PRINCIPLE • An importation of goods into Malta, followed by an exempt intra-Community supply of the same goods by the same taxable person, registered under art. 10 VAT Act, is exempt from VAT • The importer has to prove at the moment of importation that there will be a subsequent exempt intra-Community supply of the goods (i.e. proof of transport and VAT identification number final recipient) Art. 9 VAT Act and item 3 , Part Four,Fifth Schedule

  44. Importation followed by an exempt IC supply of goods PRINCIPLE • The subsequent exempt intra-Community supply can either be: • A (normal) exempt IC supply from Malta to another EU Member State, whereby the customer is liable for the VAT on his ICA; or • A (deemed) exempt IC supply in the frame of a transfer by a taxable person, registered under art. 10 VAT Act, of goods forming part of his economic activity to another EU Member State Art. 9 VAT Act and item 3 (1) , Part One,Fifth Schedule Art. 9 VAT Act and item 3 (4) , Part One,Fifth Schedule

  45. Importation followed by an exempt IC supply of goods Example A Maltese company B, registered under art. 10 VAT Act, purchases office equipment from a Libyan company A. B has the goods transported from A’s premises in Tripoli to Malta. B imports the goods into Malta. At the moment of importation, the goods are destined to be supplied to C, an Italian company that is VAT registered in Italy, whereby the unaltered goods are transported from Malta to Italy. C provides B with its Italian VAT identification number.

  46. Importation followed by an exempt IC supply of goods Libya Malta Movement of goods B A supplies goods A Movement of goods B supplies goods Italy C provides IT VAT number C

  47. Importation followed by an exempt IC supply of goods Solution: A-B • Taxable person: YES • Operation in the scope of VAT: YES (supply of goods) • Place of supply: Libya (Item 1 (b) Third Schedule – where transport begins) • Exemption: N/A • Person liable to pay VAT: N/A

  48. Importation followed by an exempt IC supply of goods Solution: B • Qualifying person (importer): YES • Operation in the scope of VAT: YES (importation of goods) • Place of importation: Malta (Item 15 Third Schedule and item 7 Fourth Schedule) • Exemption: YES (Item 3, Part Four, Fifth Schedule) • Person liable to pay VAT: N/A

  49. Importation followed by an exempt IC supply of goods Solution: B-C in the head of B • Taxable person: YES • Operation in the scope of VAT: YES (IC supply of goods) • Place of supply: Malta (Item 1 (c) Third Schedule – in MS of importation) • Exemption: YES (Item 3 (1), Part One, Fifth Schedule) • Person liable to pay VAT: N/A

  50. Importation followed by an exempt IC supply of goods Solution: B-C in the head of C • Taxable person: YES • Operation in the scope of VAT: YES (IC acquisition of goods) • Place of supply: Italy (Item 13 Third Schedule – where transport ends) • Exemption: N/A • Person liable to pay VAT: N/A

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