VAT Updates 1/2013: Changes in the Invoicing Rules

All businesses should be aware of the new rules with regards to invoicing as these will automatically affect their day to day compliance requirements.

These changes seek to simplify, improve and achieve higher levels of harmonisation in the way invoices are prepared across the EU. The following points aim to offer an overview of the most salient changes.

Simplified Invoices

Where the amount does not exceed €100 (inclusive of VAT), a simplified version of an invoice may be issued, as long as this is not in relation to cross-border supplies or exempt intra-community supplies.
Nonetheless, there are still some minimum requirements for details which still need to feature in a simplified invoice:

• invoice issue date;
• invoice number;
• supplier’s details;
• supplier’s VAT Number;
• brief description of the goods/services being supplied; and
• clear amounts including the portion of VAT payable.

Summary Invoices

All supplies made to the same person with respect to whom VAT becomes chargeable during the same calendar month are now allowed to be reported in a single summary invoice.

Issuance of VAT Invoice

A VAT invoice must be issued by not later than the 15th day of the month following that in which the chargeable event takes place. This change seeks to improve the declarability in the recapulative statements across different EU member states.

Contents of a VAT Invoice

Greater emphasis is now being put on the use of certain terminology in the VAT invoices. Most notably the following references should start being made:

• ‘Cash Accounting’ – where the supplier applies the Cash Accounting procedures (explained further below);
• ‘Reverse-Charge’ – where no VAT is charged but the customer is required to reverse charge for it;
• ‘Self-billing’ – where the issues the invoice to himself (explained further below).

Self-Billing

The Maltese VAT Act is now allowing the issue of self-invoices by a customer to himself. Nonetheless, this is only possible as long as the following conditions are satisfied:

• the supply in question must be deemed to be made in Malta;
• the term ‘Self-billing’ is clearly indicated in the VAT invoice;
• there must be a prior agreement for this between the client and the supplier; and
• there must be a procedure ensuring that the supplier approves the said invoice.

The Cash Accounting Approach

The cash accounting approach as permitted under the VAT Act has now been severally limited. The option enabling the applicability of such approach is clearly constricted to professional services providers and retailers, civil, mechanical and electrical engineering contractors whose annual turnover does not exceed €2,000,000 (excluding VAT). Notwithstanding these conditions, VAT could not be accounted for on a cash basis in respect of exempt intra-community supplies or supplies requiring the application of the reverse-charge by the client.

The cash accounting approach is based on a like-with-like basis, meaning that:

• the right to claim input VAT on purchases only triggers in when the VAT on such purchases is fully paid to the supplier. Until that date, this supply should not even be reflected in the VAT return;
• a sale should only be reflected in the tax return as long as the VAT on such sale is received.

Translation of Invoices

In some cases, the VAT Department may require translated versions (in Maltese or in English) of invoices in respect of goods and services supplied in Malta or invoices received by Maltese taxable persons.

For any queries about the aforementioned issue or other matters, kindly contact Mr Joseph Gauci (Managing Partner) at: jgauci@ksimalta.com or Mr Benjamin Griscti (Senior Advisor) at:  bgriscti@ksimalta.com