The reduced rate of 12% applies to a limited list of supplies of services in the financial services and healthcare industry that are not otherwise exempt, effectively reducing the VAT rate on such services from 18% to 12%. Moreover, an attractive 12% reduced VAT rate will apply to certain short-term hires of pleasure boats. The four supplies, subject to the reduced VAT rate are listed below:

1. Custody and management of securities.
2. Management of credit and credit guarantees by a person or body other than those who granted the credit.
3. Hiring of a pleasure boat to a person according to an agreement for any term or part of a term that, when added to the term of a previous hiring, of the same goods or of other goods of the same kind, to the said person during the previous twelve (12) months ending on the date of the beginning of the existing hiring, does not exceed five (5) weeks.
4. Services consisting of the care of the human body 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 (in terms of Item 11 of Part Two of the Fifth Schedule to the VAT Act).

The Legal Notice comes into effect on the 1st of January 2024 and further clarifications and guidelines are expected from the Malta Tax & Customs Administration (MTCA). Should you have any questions or require any clarification, please do not hesitate to contact our BDO Malta Indirect tax team on tax@bdo.com.mt.