Malta Tax Agency Clarifies Tax Treatment of Interest Under VAT Act

The Maltese Inland Revenue May 30 clarified the tax treatment of interest under the VAT Act. The clarification includes that: 1) due to the Budget Implementation Act XIII, Article 74 of the VAT Act has been repealed, effective Jan. 1; 2) the treatment of interest under the VAT Act is aligned with that under the Income Tax Acts, where interest on income tax refunds isn’t taxable, while interest expenses aren’t deductible for calculating taxable income; 3) administrative penalties under the VAT Act are not considered incurred in income production; and 4) taxpayers must prorate VAT interest income and expenses that ...