Further to our previous communications with respect to new VAT related measures we reach out once again with the most updated and, from what it appears, final position of the Ministry of Finance and Tax Department concerning VAT compliance and payment of VAT due by businesses.
As per the latest Regulatory Administrative Act, published in the Gazette on 16.04.2020, businesses who have received relevant Notification (through their email address registered with the TaxisNet System or otherwise) have, in simple terms, the following obligations:
1. Submit monthly VAT returns from March 2020 up to and including the month of June 2020, with a submission deadline 27th of the following month.
Certain specific cases exist however. Specifically:
a. Businesses whose normal VAT period is January 2020 to March 2020, must submit the VAT return for the relevant quarter by 27 April 2020 and commence filing monthly VAT returns from April onwards.
b. Businesses whose normal VAT period is February 2020 to April 2020, must submit a VAT return covering the months of February and March, by 27 April 2020 and commence filing monthly VAT returns from April onwards.
2. Businesses whose code of economic activity as per their VAT certificate falls into one of the categories of this appendix, must pay relevant VAT in full by the due date.
3. Businesses whose code of economic activity does not fall into this appendix but have nonetheless received the relevant Notification, must pay by the due date (27th of the following month), 30% of the VAT due for the relevant period/ month.
An additional 30% shall be payable by the deadline for the next month and so on, up to 27th of July 2020 (i.e. deadline for submission of the VAT return for the month of June 2020).
If, following the above, the total VAT payable for the relevant periods is not fully paid by 27 July 2020, the remaining amount due shall be paid by 10 November 2020.
First important point is that businesses affected are only those who have received relevant Notification through their email address registered with the TaxisNet System or otherwise. Therefore, a business which has an economic activity falling in the appendix who did not however receive relevant Notification, is not affected by the present Order. A strong recommendation is for businesses to ensure that no email/ notification oversight occurred.
A further important point to note is that the deferral of VAT payment provided originally as per this communication is not affected. Relevant amounts of VAT deferred can be settled by the 10 November 2020.
For businesses who have received relevant Notification and fall into the categories of said appendix, the position is clear. VAT returns must be submitted for the relevant periods/months by the 27th of the following month and relevant VAT due must also be paid by the same day.
For businesses who have received relevant Notification and do not fall into the categories of the appendix, as noted above, will pay VAT due in instalments. See relevant table with details here.
It is apparent that the measure aims to enhance government cash-flow needed to finance the announced COVID-19 impact measures.
It is acknowledged that new VAT Decree has a profound cash-flow impact on numerous entities with perhaps most important being the inevitable compliance difficulties to arise.
We cannot comment on whether the measure could have been avoided since forming an opinion on this matter requires holistic analysis and information. What we can comment on, is that under the current working conditions, the measure should have been reconsidered for the month of March 2020, with the deadline only 4 business days away.
In addition to this, special measures for ‘correction of errors’ without the need for written approval by the authorities should have also been considered since a number of inaccuracies are inevitable due to shortage of time in conjunction with current working conditions. One such measure could be lifting for the relevant period the ‘correction of errors’ threshold of €1.708.
Businesses which for any reason cannot comply either for cash-flow considerations or for operational considerations must examine their response to the Order thoroughly.
We are at your disposal to assist with ensuring compliance and/or liaising with the authorities in pre-empting subsequent challenges and unnecessary leakages.