Water supplied by a company is exempt from VAT.
True or False?
The Facts:
Under Item 14 of Part Two to the Fifth Schedule of the Malta VAT Act (Chapter 406 of the Laws of Malta), the supply of water services is exempt (without credit) only when such supply is made by a public authority.
This exemption applies, for example, when Malta’s Water Services Authority supplies water directly to end-users, whether households or businesses However, the exemption is narrowly framed and does not extend to recharges or onward supplies of water by private entities
In practice, this distinction becomes particularly relevant in scenarios such as the rental industry. Where a landlord receives a VAT exempt water bill from a public authority and subsequently recharges that same cost to a tenant, the landlord is not supplying water as a public authority.
As a result, the recharge: does not fall within the scope of the exemption, and is subject to VAT at the standard rate of 18%.
This position reflects the settled principle in VAT law that exemptions are to be interpreted strictly, and that a recharge does not inherit the VAT treatment of the original supply where the conditions of the exemption are no longer met.
Conclusion:
Water services are only exempt (without credit) when supplied by a public authority, otherwise VAT at the standard rate of 18% applies.
Verdict:
Statement is False.
Donations
Under the Donations to Voluntary Organisations Rules, 2024 (L.N 86 of 2024), a company may claim a tax credit for any cash donations to a voluntary organisation involved in social, environmental, or animal welfare, and which is enrolled with the Commissioner for Voluntary Organisations under Chapter 492.
Such donations must meet the criteria outlined under Rule 5. The tax credit would amount to the lesser of 35% of the qualifying donations made in the preceding year or €500.
Other deductible donations include cash donations to the Malta Community Chest Fund, the Creativity Trust, and other various organisations supporting National Heritage.
One should keep in mind that any other donations will not be eligible for a tax credit or considered as tax deductible.
Is VAT on staff christmas events & related hospitality recoverable?
As the festive season approaches, many companies host internal staff Christmas events. To organise these functions, businesses typically incur costs for venue hire, catering, drinks, DJs or bands, photographers, decorations and staff transport (for example, taxis). Under Maltese VAT law, input VAT on these expenses is generally not recoverable because they are used in the provision of receptions, entertainment or hospitality, which are blocked under Item 3 of the Tenth Schedule to the VAT Act. This restriction applies irrespective of whether the event is held on‑ or off‑site and whether it occurs during or outside working hours; what matters is the nature of the expenditure as entertainment or hospitality.
For completeness, the above does not apply to businesses that supply receptions, entertainment or hospitality for consideration in the normal course of their economic activity (for example, hospitality operators) to the extent the costs are directly used to make those taxable supplies. This carve‑out does not ordinarily extend to an employer’s internal staff party.
How is VAT treated when purchasing single purpose or multi purpose gift vouchers?
A single purpose voucher (“SPV”) is a voucher for which, at the time of issue, both the place of supply and the VAT due for the underlying goods or services are known for all potential redemptions. A multi purpose voucher (“MPV”) is any voucher that does not meet that test. For SPVs, VAT is chargeable on issue and on each subsequent transfer by a taxable person acting in their own name; redemption does not trigger a separate VAT charge on the underlying supply. For MPVs, VAT arises only when the voucher is redeemed for an identifiable supply; pre redemption transfers do not give rise to VAT on the underlying goods or services, though distribution/service fees may be taxable.
As a practical rule of thumb: if, at issue, you can determine the place of supply and the VAT treatment (including the applicable rate or exemption) for all goods/services to which the voucher can be applied, it is an SPV. If either element cannot be fixed, e.g., the voucher can be used for items with different VAT rates or in different countries, it is an MPV.
System (FSS), these bonuses are treated as part of an employee’s gross emoluments. This means they are subject to PAYE tax deductions in the same way as basic wages. Employers must process these bonuses through the December payroll, by treating them as a pre-tax adjustment to the payslip and applying the relevant tax deductions to these amounts.
Director fees should be included in the FSS.
Director’s fees refer to payments received by an individual in their capacity as a member of a board of directors.
Directors’ fees are considered as income arising in the jurisdiction where the company is resident. A company is deemed a resident of Malta if it is either a company incorporated in Malta, or, if incorporated abroad, its effective management and control are exercised in Malta.
With respect to directors’ fees derived from appointments on Maltese entities, given that such fees are deemed as sourced in Malta, they should be taxed herein, irrespective of the residence and domiciled of the individual director.
On this basis, all directors’ fees, together with the corresponding tax, must be paid through the Final Settlement System (FSS), regardless of whether the payments are made to resident or non-resident directors.
Where directorship services are provided by a Corporate Service Provider (CSP), fees may be invoiced by the CSP, provided the services are rendered in its corporate capacity and not personally by an individual affiliated to the CSP.