Compliance Alert - Reduced VAT rate of 12% on certain services

Update: Compliance Alert - Reduced VAT rate of 12% on certain services
Date: 2023-10-19

Legal Notice 231/2023 was published in the Government Gazette, adding new services to the list within the Eighth Schedule of the Value Added Tax Law (VAT Law) that will be taxed at a rate lower than 18%.

The Legal Notice transposes directives that oblige Member States wishing to apply reduced rates of no less than 12% on certain transactions to publish detailed rules governing them by 7 October 2023.

The Eighth Schedule to the VAT Act specifies the tax rate for specific supplies or imports that qualify for a reduction from the standard tax rate of 18%. In this new Legal Notice, the following four new types of services to be taxed at a rate of 12% are listed:

  1. Custody and management of securities;
  2. Management of credit and credit guarantees by a person or body other than those who grant the credit;
  3. Hiring of a pleasure boat provided that it is not rented for a period exceeding five weeks when adding up the time spent on rentals during the previous twelve months;
  4. Human body care services required to be delivered by a person in the exercise of any profession regulated by the Health Care Professions Act (Cap. 464), including services supplied in the course of a health studio business or similar business, but not including exempt supplies referred to in item 11 of Part Two of the Fifth Schedule.

The new 12% VAT rate shall come into effect beginning 1 January 2024. 


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