In terms of the Maltese VAT Act the letting of or the provision of accommodation in premises which is required to be licensed in virtue of the MTTSA falls outside the scope of the VAT exemption which is generally applicable to the letting of immovable property. Indeed income from licensable rental activities is subject to a 7% reduced VAT rate.
In terms of the MTTSA premises is required to be licensed when the letting/accommodation is provided to a tourist.
Prior to the publication of ACT XII of 2016 a tourist was defined as “any person who travels to a place other than that of his usual environment for less than twelve months and who stays at least one night in the place visited”. On this basis short-term lets to both Maltese and foreign citizens were subject to 7% VAT. Moreover, based on the interpretation given by the Malta Tourism Authority any foreign person who travelled to Malta (for any purpose) and rented immovable property herein was considered to be a tourist during his first year of stay. Consequently, in the case of long-term lets to foreigners a lessor was required to charge 7% VAT on the rent charged for the first year of the lease.
In terms of the new definition a foreign individual who travels to Malta to either take up employment or establish a business is no longer considered to be a ‘tourist’. This implies that a lessor is no longer required to obtain a license under the MTTSA with respect to property leased to a person satisfying these criteria, even if such person stays in Malta for less than a year. On this basis rent charged by a lessor to persons travelling to Malta for employment purposes or to establish a business now falls within the scope of the exemption (without credit) and no Maltese VAT is chargeable.