VAT TREATMENT IMPORTATION. 2 Overview Definition Place of importation Exemptions Person liable to...

VAT TREATMENT IMPORTATION

2

Overview

• Definition

• Place of importation

• Exemptions

• Person liable to pay VAT

• Special topics

3

DEFINITION

4

Definition

DEFINITION

• “Importation of goods” means:

– The entry into Malta before 1 May 2004 of goods transported from any other country;

– The entry into the Community on or after 1 May 2004 of goods transported from a third territory.

Art. 6 (a) VAT ActItem 19 Second Schedule

Art. 6 (a) VAT ActItem 19 Second Schedule

5

Definition

DEFINITION

• A “third territory” means:

– The territory of a non-EU Member State; and

– The territory of an EU Member State, which for VAT purposes is not considered being a part of the Community.

Art. 2 (1) VAT ActFifteenth ScheduleArt. 2 (1) VAT ActFifteenth Schedule

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Definition

The following territories of Member States are for VAT purposes NOT considered being a part of the Community:

Finland Aland Islands

Federal Republic of

Germany

The Island of Heligoland The

territory of Busingen

French Republic The overseas departments

Hellenic Republic Mount Athos

Kingdom of Spain Ceuta, Melilla and The Canary Islands

Republic of Italy Livigno, Campione d’Italia The

Italian waters of Lake Lugano

United Kingdom Gibraltar and The Channel Islands

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Definition

The following territories are for VAT purposes considered being a part of the Community:

United Kingdom The Isle of Man

France The Principality of Monaco

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Definition

REMARKS

• Importation only applies to goods. Services cannot be imported!

• Any person can act as importer for an importation

• The subsequent use of the imported goods does not matter

9

Definition

REMARKS

• The territories of the Community for Customs purposes, Excise purposes and VAT purposes are different:

CUSTOMS

EXCISE

VAT

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Definition

REMARKS

Terminology:

• Importation of Community goods: the entry into the Community for VAT purposes of goods that, for customs purposes, are already in free circulation

• Importation of non-Community goods: the entry into the Community for VAT purposes of goods that, for customs purposes, are not yet in free circulation

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Definition

REMARKS

• In some cases goods are physically entering the Community, they are not put into free circulation, but placed under a customs duty suspension regime

• In that case, there is also a (VAT exempt) importation of goods and VAT on importation will only fall due when the goods cease to be subject to that regime (unless at that time another exemption of VAT upon importation is applicable)

Art. 9 VAT Act and item 2 (b), Part Four, Fifth ScheduleArt. 8 VAT Act and item 7 (1) and (4) Fourth Schedule

Art. 9 VAT Act and item 2 (b), Part Four, Fifth ScheduleArt. 8 VAT Act and item 7 (1) and (4) Fourth Schedule

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Definition

REMARKS

• The following customs duty suspension regimes exist:

– The temporary storage of goods;

– The placing of goods in a free zone or free warehouse;

– Customs warehousing or inward processing;

– The admittance into territorial waters of goods on drilling and production platforms;

– The temporary entry of goods into an EU Member State;

– External transit procedures;

– Internal transit procedures Item 7 (4) Fourth ScheduleItem 7 (4) Fourth Schedule

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Definition

REMARKS

With respect to goods placed under a customs duty suspension regime before 1 May 2004 and released from that regime on or after 1 May 2004,

special transitional provisions are applicablefor determining the events that are considered to be an importation

Art. 87 (1) and (2) VAT ActArt. 87 (1) and (2) VAT Act

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PLACE OF IMPORTATION

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Place of importation

PRINCIPLE

• An importation of goods takes place where the goods are at the time when the chargeable event takes place

Art. 7 VAT ActItem 15 (1) Third Schedule

Art. 7 VAT ActItem 15 (1) Third Schedule

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PRINCIPLE

• The date of chargeable event in case of an importation of goods is the following:

– As a general rule, when customs duties become chargeable (or would have become chargeable if the goods were subject to those duties)

– In case the goods are placed under a customs duty suspension regime, the chargeable event takes place on the date when the goods cease to be subject to that regime

Art. 8 VAT Act and item 7 (2) and (3) Fourth ScheduleArt. 8 VAT Act and item 7 (2) and (3) Fourth Schedule

Art. 8 VAT Act and item 7 (1) Fourth ScheduleArt. 8 VAT Act and item 7 (1) Fourth Schedule

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EXAMPLES

• When goods, transported from a third territory, are in Malta at the moment customs duties fall due, the importation for VAT purposes of the goods takes place in Malta

• When goods are transported from a third territory and on entry on the Maltese territory they are placed under a regime of customs warehousing, the importation for VAT purposes of the goods takes place in Malta if the goods are in Malta at the moment the goods cease to be subject to that regime (and are not put under another customs duty suspension regime)

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EXEMPTIONS

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Exemptions

EXAMPLES

• The importation of goods whose supply by a taxable person is exempt from VAT (e.g. food, pharmaceutical products)

• The importation of goods that are intended to be placed under a customs duty suspension regime

Art. 9 VAT Act and item 1 and 6, Part Four, Fifth ScheduleArt. 9 VAT Act and item 1 and 6, Part Four, Fifth Schedule

Art. 9 VAT Act and item 2 (b), Part Four, Fifth ScheduleArt. 9 VAT Act and item 2 (b), Part Four, Fifth Schedule

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Exemptions

EXAMPLES

• The importation of goods exempt from customs duty

E.g. personal property belonging to individuals coming from countries situated outside the community; goods

imported on the occasion of a marriage; personal property acquired by inheritance; school outfits, scholastic

materials and other scholastic household effects under certain conditions; imports of negligible value; capital goods

and other equipment imported on the transfer of activities; importation of certain agricultural products and products

intended for agricultural use; therapeutic substances, medicines, laboratory animals and biological or chemical

substances; goods for charitable or philanthropic organizations; importation in the context of certain aspects of

international relations; goods for the promotion of trade (e.g. goods used or consumed at a trade fair or similar

event); goods imported for examination, analysis or test purposes; tourist information literature; documents and

publications of foreign governments and publications of official international bodies; coffins, funerary urns and

ornamental funerary articles, etc.

Art. 9 VAT Act and item 2 (a), Part Four, Fifth ScheduleDirective 83/181/EEC dated 28 March 1983

Art. 9 VAT Act and item 2 (a), Part Four, Fifth ScheduleDirective 83/181/EEC dated 28 March 1983

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Exemptions

EXAMPLES

• The importation of goods followed by an exempt intra-Community supply of goods or an exempt deemed intra-Community supply of goods to another EU Member State (see later on under Special Topics)

Art. 9 VAT Act and item 3, Part Four, Fifth ScheduleArt. 9 VAT Act and item 3, Part Four, Fifth Schedule

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Exemptions

EXAMPLES

The re-importation by the person who exported them outside the Community:

– of goods in the state in which they were exported outside the Community

– of goods which have undergone outside the Community repair, transformation or adaptation, or after having been made-up or reworked abroad: provided that this exemption is limited to the value of the goods at the time they were exported outside the Community

Art. 9 VAT Act and item 5, Part Four, Fifth ScheduleArt. 9 VAT Act and item 5, Part Four, Fifth Schedule

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PERSON LIABLETO PAY IMPORT VAT

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Person liable to pay VAT

• The payment of the tax on a taxable importation is the liability of the importer

• The importer is the person in whose name the goods are at the time when tax on the importation becomes chargeable

Art. 20 (1) (c) VAT ActArt. 20 (1) (c) VAT Act

Art. 2 (1) VAT ActArt. 2 (1) VAT Act

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Payment of VAT

• As a general rule, VAT upon importation is paid at the Customs authorities

• However the Commissioner can allow deferring the payment of the import VAT to the VAT return

Art. 21 (5) VAT ActArt. 21 (5) VAT Act

Art. 60 (1) (c) and (2) VAT ActArt. 60 (1) (c) and (2) VAT Act

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VAT treatment importation

Example

A Maltese company A, registered under art. 11 VAT Act, purchases office equipment from a Libyan company B. A has the goods transported from B’s premises in Tripoli to its office in Valetta. Goods are put into free circulation.

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Example

BB AA

Movement of goods

Libya Malta

B supplies goods

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Solution: B-A

1. Taxable person: YES

2. Operation in the scope of VAT: YES (supply of goods)

3. Place of supply: Libya (Item 1 (b) Third Schedule – where transport begins)

4. Exemption: N/A

5. Person liable to pay VAT: N/A

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Solution: A

1. Qualifying person (importer): YES

2. Operation in the scope of VAT: YES (importation of goods)

3. Place of importation: Malta (Item 15 Third Schedule and item 7 Fourth Schedule)

4. Exemption: NO (assumption)

5. Person liable to pay VAT: the Maltese company A (art. 20 (1) (c) VAT Act)

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SPECIAL TOPICS

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Supplies of goods following an importation of goods

PRINCIPLE

• As a general rule, supplies of goods that are transported take place where the goods are at the time when the transport of those goods begins

Art. 7 VAT Act and item 1 (b) Third ScheduleArt. 7 VAT Act and item 1 (b) Third Schedule

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EXCEPTION

• When it concerns supplies of goods whereby the transport of goods begins outside the Community and ends in the Community, the supplies of goods by the importer and any subsequent supply up to the acquisition of those goods, take place in the Member State where they are imported

Art. 7 VAT Act and item 1 (c) Third ScheduleArt. 7 VAT Act and item 1 (c) Third Schedule

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Example

A, a US company, supplies computers to B, a Maltese company registered under art. 10 VAT Act. The computers are put at the disposal of B in the USA.

B supplies the goods to C. In the frame of this sale, the computers are transported by B from the USA into Malta (to the premises of C). B acts as importer of the goods.

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USA Malta

A A

C C

B B A supplies goods

B supplies goods

B transports goodsB acts as importer

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Solution: A-B



3. Place of supply: USA (Item 1 (a) Third Schedule – where goods are placed at the disposal of B)

4. Exemption: N/A


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Solution: B




4. Exemption: NO

5. Person liable to pay VAT: the Maltese company B (art. 20 (1) (c) VAT Act)

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Solution: B-C



3. Place of supply: Malta (Item 1 (c) Third Schedule – in MS of importation)

4. Exemption: NO

5. Person liable to pay VAT: the Maltese company B (art. 20 (1) (a) VAT Act)

In case item 1 (c) would not exist:Place = USA

In case item 1 (c) would not exist:Place = USA

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Example

A, a US company, supplies computers to B, a Maltese company registered under art. 10 VAT Act. The computers are put at the disposal of B in the USA.

B supplies the goods to C. In the frame of this sale, B takes care of the transport of the computers from the USA into Malta (to the premises of C). C acts as importer of the goods.

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USA Malta

A A

C C

B B A supplies goods

B supplies goods

B takes care of thetransport to Malta

C acts as importer

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Solution: A-B



3. Place of supply: USA (Item 1 (a) Third Schedule – where goods are placed at the disposal of B)

4. Exemption: N/A


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Solution: B-C



3. Place of supply: US (Item 1 (b) Third Schedule – where transport begins)

4. Exemption: N/A


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Solution: C




4. Exemption: NO

5. Person liable to pay VAT: the Maltese company C (art. 20 (1) (c) VAT Act)

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Importation followed by an exempt IC supply of goods

PRINCIPLE

• An importation of goods into Malta, followed by an exempt intra-Community supply of the same goods by the same taxable person, registered under art. 10 VAT Act, is exempt from VAT

• The importer has to prove at the moment of importation that there will be a subsequent exempt intra-Community supply of the goods (i.e. proof of transport and VAT identification number final recipient)

Art. 9 VAT Act and item 3 , Part Four, Fifth ScheduleArt. 9 VAT Act and item 3 , Part Four, Fifth Schedule

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PRINCIPLE

• The subsequent exempt intra-Community supply can either be:

– A (normal) exempt IC supply from Malta to another EU Member State, whereby the customer is liable for the VAT on his ICA; or

– A (deemed) exempt IC supply in the frame of a transfer by a taxable person, registered under art. 10 VAT Act, of goods forming part of his economic activity to another EU Member State

Art. 9 VAT Act and item 3 (1) , Part One, Fifth ScheduleArt. 9 VAT Act and item 3 (1) , Part One, Fifth Schedule

Art. 9 VAT Act and item 3 (4) , Part One, Fifth ScheduleArt. 9 VAT Act and item 3 (4) , Part One, Fifth Schedule

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Example

A Maltese company B, registered under art. 10 VAT Act, purchases office equipment from a Libyan company A. B has the goods transported from A’s premises in Tripoli to Malta. B imports the goods into Malta.

At the moment of importation, the goods are destined to be supplied to C, an Italian company that is VAT registered in Italy, whereby the unaltered goods are transported from Malta to Italy. C provides B with its Italian VAT identification number.

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A A

B B

C C

MaltaLibya

Italy

A supplies goods

Movement of goods

B supplies goods

C providesIT VAT number

Movement of goods

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Solution: A-B



3. Place of supply: Libya (Item 1 (b) Third Schedule – where transport begins)

4. Exemption: N/A


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Solution: B




4. Exemption: YES (Item 3, Part Four, Fifth Schedule)


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Solution: B-C in the head of B


2. Operation in the scope of VAT: YES (IC supply of goods)

3. Place of supply: Malta (Item 1 (c) Third Schedule – in MS of importation)

4. Exemption: YES (Item 3 (1), Part One, Fifth Schedule)


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Solution: B-C in the head of C


2. Operation in the scope of VAT: YES (IC acquisition of goods)

3. Place of supply: Italy (Item 13 Third Schedule – where transport ends)

4. Exemption: N/A


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Import into a Member State other than the Member State of arrival (1)

PRINCIPLE

• As a general rule, supplies of goods that are transported take place where the goods are at the time when the transport of those goods begins

Art. 7 VAT Act and item 1 (b) Third ScheduleArt. 7 VAT Act and item 1 (b) Third Schedule

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EXCEPTION 1

• Goods are deemed to be transported from the Member State of importation if:

– goods are supplied to a member of the “Group of 4” (“Group of 3” in Malta); and

– the transport is made from a third territory by or on behalf of the supplier; and

– goods are imported by the supplier into a Member State other than the Member State of arrival

Based upon art. 7 VAT Act and item 1 (c) Third ScheduleBased upon art. 7 VAT Act and item 1 (c) Third Schedule

Sixth DirectiveSixth Directive

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EXCEPTION 1

• For these types of operations, it should be determined whether or not distance sales rules or the rules on IC supplies/acquisitions are applicable

• The move of goods as from the MS of importation into the MS of arrival of the goods has to be taken in to account to determine whether:

– The threshold for IC acquisitions of the customers in the MS of arrival has been exceeded

– The threshold for applying the distance sales rules of the supplier for supplies from the MS of importation towards the MS of arrival of the goods has been exceeded

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EXCEPTION 1

The exception does not apply to:

New means of transportGoods to be installed or assembled

The exception does not apply to:

New means of transportGoods to be installed or assembled

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Example

• A, an Libyan company, supplies computers to B (without installation). B is a small undertaking established in another Member State than Malta (Member State 2). Goods are transported by A from Libya into Malta and subsequently A transports the goods to the other Member State 2. A acts as importer of the goods.

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Libya Malta

MS 2

A A

B B

A supplies goods

Movement of goods

Movement of goods

A acts as importer

A’ A’

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Solution: A




4. Exemption:

– YES, in case the importation is followed by an exempt IC supply

– NO, in case the importation is not followed by an exempt IC supply

5. Person liable to pay VAT: if no exemption, A (art. 20 (1) (c) VAT Act)

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• Hypothesis 1: B exceeded the threshold for IC acquisitions in MS 2 or opted to subject IC acquisitions to VAT in MS 2

Solution: A-B, in the head of A

• Taxable person: YES

• Operation in the scope of VAT: YES (IC supply of goods)

• Place of supply: Malta (Item 1 (b) Third Schedule – where transport begins)

• Exemption: YES (Item 3 (1), Part One, Fifth Schedule)

• Person liable to pay VAT: N/A

The importation by A will be exempt from VATThe importation by A will be exempt from VAT

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Import into a Member State other than the Member State of arrival (1)• Hypothesis 2: B did not exceed the threshold for IC acquisitions in MS 2 nor opted to subject IC

acquisitions to VAT in MS 2 AND A did not exceed the threshold for distance sales from Malta

towards MS 2 nor opted to subject his supplies from Malta to MS 2 to VAT in MS 2 under the

distance sales rules

Solution: A-B


• Operation in the scope of VAT: YES (supply of goods)

• Place of supply: Malta (Item 1 (b) Third Schedule – where transport begins)

• Exemption: NO

• Person liable to pay VAT: A (art. 20 (1) (a) VAT Act)

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Import into a Member State other than the Member State of arrival (1)• Hypothesis 3: B did not exceed the threshold for IC acquisitions in MS 2 nor opted to subject IC

acquisitions to VAT in MS 2 BUT A exceeded the threshold for distance sales from Malta

towards MS 2 or opted to subject his supplies from Malta to MS 2 to VAT in MS 2 under the

distance sales rules

Solution: A-B


• Operation in the scope of VAT: YES (distance sale)

• Place of supply: MS 2 (Item 4 (2) (b) Third Schedule – where transport ends)

• Exemption: N/A

• Person liable to pay VAT: N/A

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EXCEPTION 2

• Goods shall be deemed to have been dispatched or transported from the Member State of importation if they:

– are acquired by a non-taxable legal person;

– are dispatched or transported from a third territory; and

– imported by that non-taxable legal person into a Member State other than the Member State of arrival of the goods

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EXCEPTION 2

• The acquisition by the non-taxable legal person of the goods imported by him in another Member State than the Member State of arrival and subsequently transported to the Member State of arrival is considered to be an intra-Community acquisition of goods

• The supply of goods with the deemed transport as from Member State of importation into the Member State of arrival of the goods has to be taken into account to determine whether the threshold for intra-Community acquisitions of the non-taxable legal person in the Member State of arrival has been exceeded

Art. 6 VAT Act and item 18 (1) (c) Second ScheduleArt. 6 VAT Act and item 18 (1) (c) Second Schedule

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EXCEPTION 2

• If the acquisition by the non-taxable legal person is subject to VAT in the Member State of arrival, the non-taxable legal person may claim the refund of the import VAT in the Member State of importation

In case Malta is the Member State of importation:see art. 25 (4) VAT Act

In case Malta is the Member State of importation:see art. 25 (4) VAT Act

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Example

• A, an Libyan company, supplies computers to B (without installation). B is a non-taxable legal person (e.g. a pure holding company) established in another Member State than Malta (Member State 2). Goods are transported from Libya into Malta and subsequently transported from Malta to the Member State 2. B acts as importer of the goods.

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Libya Malta

MS 2

A A

B B

A supplies goods

Movement of goods

Movement of goods

B acts as importer

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Solution: A-B



3. Place of supply: Libya (Item 1 (a) Third Schedule – where the goods are placed at the disposal of B)

4. Exemption: N/A


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Solution: B




4. Exemption: NO

5. Person liable to pay VAT: B (art. 20 (1) (c) VAT Act)

B can claim the refund of the Maltese VAT upon importation

if the acquisition of the goods by B is subject to VAT in MS 2

B can claim the refund of the Maltese VAT upon importation

if the acquisition of the goods by B is subject to VAT in MS 2

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Solution: B with respect to movement of goods to MS 2

Hypothesis 1: B exceeded the threshold for IC acquisitions in MS 2 or opted to subject IC acquisitions to VAT in MS 2

1. Qualifying person: YES

2. Operation in the scope of VAT: YES (IC acquisition)

3. Place of operation: MS 2 (Item 13 Third Schedule – where transport ends)

4. Exemption: N/A


B can claim the refund of the Maltese VAT upon importationB can claim the refund of the Maltese VAT upon importation

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Solution: B with respect to movement of goods to MS 2

Hypothesis 2: B did not exceed the threshold for IC acquisitions in MS 2 nor opted to subject IC acquisitions to VAT in MS 2

1. Qualifying person: YES

2. Operation in the scope of VAT: NO

3. Place of operation: N/A

4. Exemption: N/A


B cannot claim the refund of the Maltese VAT upon importationB cannot claim the refund of the Maltese VAT upon importation

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