Legal Update: Value Added Tax Act, 2013
News    ·   12-08-2013
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AUTHOR: Donald Vella

The main object of this Bill is to implement measures to review downwards the interest applicable on unpaid VAT payments and review fines for criminal offences in order to alleviate the burdens of taxable persons who fall back in VAT payments.

To this end, the Bill presents an amendment to the provision in the Value Added Tax Act (the “VAT Act”) catering for payments of tax which replaces the fixed rate of interest due on any tax which is not paid by the date on which it becomes payable from 0.75% for each month or part thereof to “a rate which the Minister shall, from time to time, by regulations prescribe for each month or part thereof”.

In addition, the Bill adds a proviso to Article 39 of the VAT Act which currently states that any person who defaults in applying for registration or giving a notice under the VAT Act shall be liable to an administrative penalty in an amount equivalent to the higher of 1% of any excess, if any, of the output tax over the deductions for the first tax period following the registration, and €20, for every month or part thereof that elapses from the date of default. The new proviso adds that where the excess, if any, of the output tax over the deductions for the first tax period following the registration is €2,000 or less, the administrative penalty shall not exceed €250. Otherwise, if the excess is more than €2,000 such administrative penalty shall not exceed 20% of such excess.

Similarly, the contents of this proviso are substantially replicated to become applicable to persons who make intra-community acquisitions and who are obliged to register under the VAT Act but are in default in this respect. In this context, the proviso will state that where the tax chargeable on the intra-community acquisitions and services received is €2,000 or less, the applicable administrative penalty shall not exceed €250. Where the tax chargeable is more than €2,000, the penalty shall not exceed 20% of such tax chargeable.

Pursuant to this Bill the provision of the VAT Act which deals with offences and punishment applicable on a failure to apply for registration, or to keep or deliver records and returns will be amended to the effect that the fines which may be payable by an offender are adjusted from not less than €5 and not exceeding €20 to a fixed fine of €5 for every day that the default continues. The same change is made by the Bill to fines payable on irregularities in records and false representations made in connection with obligations which arise under the VAT Act. Transitory provisions relating to the adjustment of these fines are applicable. 

For more information on VAT please contact Donald Vella on (+356) 2123 8989.

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