VAT on Property Rental in Malta; No More!

What’s it about

Some good news for renters and lessors alike. As of the 5th of February 2016, the Malta Travel and Tourism Services Act (MTTSA) has been amended by virtue of ACT No.XII of 2016 on property for rent in Malta (click here to view the full ACT). No more tax for some foreigners and no license needed by lessors for particular guests.

Generally, the lessor of a property for rent in Malta would not charge VAT on the lease of their property for rent and would not be able to claim VAT that was incurred on any related purchases. However, there are a few exceptions to this rule. One relating to the letting of or the provision of rental property in Malta to “tourist”.

Before the admendment

Before the ACT No.XII of 2016 was carried out, Malta lets used to include a charge of VAT at a rate of 7% for any “tourist” renting a property in Malta for the first consecutive 12 months of their stay. This means that any foreigner, arriving in Malta for any purpose other than tourism, example to start a business or for employment, would also be considered a “tourist” and would be subject to the charge of VAT by the lessor of the property for rent in Malta.

After the admendment

While this rule is still in place, the ACT No.XII of 2016 has amended the definition of the word “tourist”. Before the word “tourist” was defined as “any person traveling to and staying in places outside his usual environment for not more than one consecutive year for leisure, business and other personal purpose”. Now it has been amended and the following has been added to the end of the definition – “… other than by taking up employment or to establish a business in the place visited”. Click here to view the amended ACT.

So this means that the letting of property in Malta, to any person who has just arrived for employment purposes or to start a business and staying in Malta for one year or longer, would not require a license under the MTTSA thus must not be charge the 7% VAT.

Mazars, a global audit, accounting and consulting group, had published an article on this amendment. For those interested, please find the direct link here.