An Extension to the Malta VAT exemption


By virtue of Legal Notice No. 383 of 2016 an extension to the VAT Exemption of Investment Scheme Management Services has been made. This legal notice amended the VAT exemption in such a field by giving a wider scope to the VAT exemption.

Directive 2006/112/EC contains a mandatory VAT exemption in respect of the management of special investment funds as defined by Member States. The corresponding section in the Maltese VAT lies within Part Two of the Fifth Schedule to the Malta VAT Act, which gives a comprehensive list of exemptions without credit.

Prior to the amendment, services provided by item 3.6 of Part Two of the Fifth Schedule to the Malta VAT Act only allowed the exemption to be applied for management services which are being provided to collective investment schemes and retirement schemes. Following the change, the provision will also cover such services provided to Securitisation vehicles as defined under the Securitisation Act and also Authorised Reinsurance Special Purpose Vehicles as defined in the Re-Insurance Special Purpose Vehicle Regulations.

Item 3.6 Part Two of the Fifth Schedule now lists:

‘The supply of services consisting of the management of any investment scheme, provided that these services are limited to those activities that are specific to and essential for the core activity of the scheme:

Provided further that investment schemes shall refer to:

“collective investment  scheme”  as  defined  under  the  Investment Services Act;

“retirement scheme” as defined under the Retirement Pensions Act;

“securitisation vehicle” as defined under the Securitisation Act; and

“authorised reinsurance special purpose vehicle” as defined in the Re-Insurance Special Purpose Vehicle Regulations’

One can safely state that as a result of this amendment, the scope of the VAT exemption has been significantly extended.

Prior to this amendment, such services were not covered by the VAT Exemption, thus often resulting in an irrecoverable VAT cost for such vehicles.

Managers providing their services to securitisation vehicles or to authorised reinsurance special purpose vehicles will be impacted as well. This mainly arising from the fact that their services will now classify as VAT exempt (without credit), and their right to recover VAT incurred on their expenses will be significantly curtailed.

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