Letting of immovable property
As a general rule, the letting of immovable property is an exempt without credit supply which means that the lessor does not charge VAT to tenants. However, the lessor cannot claim input VAT on expenses related to the business.
What are the exceptions?
In some cases, the letting of immovable property are deemed to be a taxable supply, meaning that Malta VAT incurred in the provision of such supplies may be recovered (to the extent not blocked in terms of the 10th Schedule to the VAT Act).
the letting of a hotel or guest house or similar establishment in a holiday camp or camping site and any other premises which for the purpose of the said letting or accommodation is required to be licensed in virtue of the Malta Travel and Tourism Services Act, or any Act which may be substituted therefor and the use of sporting facilities. These taxable supplies are chargeable at the rate of 7%.
the letting of property by a limited liability company to a person registered under Article 10 for the purpose of the economic activity of that other person is taxable at 18%, i.e. whether it is used as an office or for commercial purpose.
the letting of premises and sites for parking vehicles where such premises or sites have been designated by the Commissioner as parking areas or which fall to be treated as such in terms of such regulations as may be prescribed
the letting of permanently installed equipment and machinery and the hire of safes
the letting of immovable property for not more than thirty days by a taxable person in the course of an economic activity.
Is there any VAT on buying or selling of property?
There are no VAT implications on the buying & selling of immovable property situated in Malta. These are considered to be exempt without credit supplies and no VAT is chargeable on such supplies.
What about immovable property forming part of a business?
In the case of immovable property forming part of the business assets of a taxable person and used both for purposes of the taxable person’s business and for his private use or that of his staff, or, more generally, for purposes other than those of his business, VAT on expenditure related to this property shall be deductible only up to the proportion of the property’s use for purposes of the taxable person’s business which give him the right to deduct.
Input VAT recovery on the costs incurred for the Development and Construction
As per Part V of the Fourteenth Schedule of the VAT Act, Chapter 406 Laws of Malta, we can apply ‘Tax in Danger’. If a company engages a number of sub-contractors to develop and construct a building for its own use like a factory, the supplies of such sub-contractors are taxable and Input VAT would be fully refundable by the company engaging such sub-contractors.
Since this input VAT would be significant and to avoid the company having a serious cash flow problem, the company can apply for ‘Tax in Danger’. Subject to meeting specific conditions and notice is given in writing, this empowers the Commissioner for Revenue to allow that the sub-contractor shall not charge VAT on such supplies while the customer company can self charge VAT on the supplies and simultaneously deduct the VAT itself charged. This eliminates a potential cash flow problem to the company in question, which would have occurred had the normal rules been applied.
Get in Touch with Quazar
Understanding VAT requirements and ensuring compliance can be complex. At Quazar, we specialize in assisting businesses with all VAT-related matters, including guidance on VAT treatment, VAT registrations, Vat Return submission and VAT Compliance.
If you need further information on VAT or other business matters contact us today. Our experienced team is here to help your business stay compliant and operate smoothly.
Get in Touch:
Geraldine Abela:
gabela@quazar.mt / +356 2388 4600
Jade Sillato:
Finance Manager
jsillato@quazar.mt / +356 2388 4600
