Reduction in interest rate for the late payment of VAT | KPMG | Malta

Reduction in the rate of interest for the late payment of VAT

Reduction in interest rate for the late payment of VAT

Following the recent series of amendments to the VAT Act aimed at revising the punitive measures for certain VAT infringements and the 2013 Scheme for Remittance of Interest and Penalties, the Government recently published new regulations that give effect to a reduction in the interest rate that falls due upon the late payment of VAT.

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Through the new regulations, entitled Value Added Tax (Rate of Interest) Regulations, 2014, the Minister of Finance has established that with effect from 1st January 2014 the interest rate incurred on the late payment of VAT is reduced from 0.75% to 0.54% per month or part thereof for the period in which the VAT remains unpaid, thereby reducing the annual rate to just under 6.5%. 

This new rate is also applicable on VAT refunds that are not issued by the VAT Department to VAT-registrants within five months from the later of the VAT return due date and the date when the VAT return is actually filed, bearing in mind that no interest is due by the VAT Department on VAT refunds that are withheld on grounds that the VAT-registrant is in default with his income tax return filings. 

The reduction in the interest rate is another measure aimed to review downwards additional VAT related payments and to alleviate the burdens on taxpayers who fall back on their VAT payments and follows these amendments introduced in November 2013: 

a) the capping of late registration penalties for an Article 10 VAT-registrant at:

- EUR250 when the VAT due for the first VAT period is EUR2,000 or less; and 

- 20% of the VAT due when the said EUR2,000 threshold is exceeded; 

b) the capping of late registration penalties for an Article 12 VAT-registrant at:

- EUR250 when the VAT due on the services received or the intra-EU acquisition of goods made in respect of which the person was required to register for VAT is EUR2,000 or less; and

- 20% of the VAT due when the said EUR2,000 threshold is exceeded; 

c) the removal of the daily fine that was imposed on conviction by the Court on the request of the prosecution on persons who fail to furnish any additional returns, statements or other information or fails to pay an VAT or penalty dues;

d) the reduction from EUR20 to EUR5 in the daily fine that is imposed on conviction by the Court on the request of the prosecution on persons who fail to submit a VAT return; and

e) the reduction from EUR20 to EUR5 in the daily fine that is imposed by the Court on the request of the prosecution in respect of irregularities falling under Article 77 of the VAT Act. 

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