The agreement which was agreed by all EU member states for the possibility of lower VAT rates on specific services till 31 December 2010 has been welcomed by Malta.

This agreement will extend the European experiment and reflects on the fact that the union can reach agreement on issues of importance to all member states.

With this agreement, Malta can now apply for reduced VAT rates on two categories of services as specified in Annexe K of the Sixth Directive on Value Added Tax.

These include the fixing of objects such as bicycles, shoes and other leather products as well as the fixing of clothes, sheets and other cloth household goods, home maintenance, cleaning of private households, home services (elderly and disabled persons) and hair cuts.

The Maltese government is interested in applying for VAT reductions with the applicable rate on the above mentioned services going down to five per cent from 18 per cent. This is part of the tax reform introduced by the government earlier this year.