Court nullifies €8.4 million VAT assessment against Vitals subcontractor

The First Hall of the Civil Court has declared a €8.39 million VAT assessment against Shapoorji Pallonji (Malta) Limited null and void, ruling that the Commissioner for Revenue failed to follow statutory notification and assessment procedures.

In a judgment delivered on Friday, the court found the tax authorities bypassed mandatory legal steps, effectively stripping the company of its right to contest the tax claim.

Shapoorji Pallonji (Malta), a subsidiary of the Dubai-based Shapoorji Pallonji Group, was incorporated in 2016 to execute design and construction works for Vitals Global Healthcare (VHG). The project involved works at St Luke’s, Karin Grech, and Gozo General hospitals.

The company issued 12 invoices to VGH between April 2017 and January 2018 before Steward Health Care took over the concession and terminated the agreement.

The tax dispute originated from a notice issued by the Commissioner for Revenue on 16 February 2021, demanding €8,394,294.94 in VAT, penalties, and interest.

The company argued that the assessment was based on "manifestly incorrect" calculations. It contended that the figure included a €25 million "security deposit" which was never paid by VGH, as well as works where VAT had already been settled by subcontractors.

The court found that the commissioner failed to issue a provisional assessment as required under Article 32 of the VAT Act.

Judge Henri Mizzi noted that when the commissioner intends to claim tax amounts that differ from a taxpayer's returns, he is legally obliged to issue a provisional assessment to allow for objections. By issuing a final assessment directly, the Commissioner prevented the company from exercising its right to appeal to the Administrative Review Tribunal.

The judgment also showed failures regarding the notification of the assessment.

The commissioner had attempted to notify the company at an old address in Sliema in August 2020, and subsequently resorted to notification by publication in the Government Gazette and a daily newspaper after the mail went unclaimed.

The court observed that the commissioner later successfully sent the final notice of payment to the company’s correct registered office in Paola in February 2021.

The judge remarked that the commissioner "necessarily" knew, or could have easily discovered, the correct address through the Malta Business Registry before resorting to the "exceptional" measure of notification by publication.

The court held that because the statutory process for making an assessment final and definitive was not observed, a valid executive title could not be established.

While the court does not have jurisdiction to decide on the actual calculation of the VAT due which is a matter reserved for the Administrative Review Tribunal, the procedural breaches rendered the current notice invalid.

The court upheld the company’s requests, declaring the February 2021 notice null and void. The Commissioner for Revenue was ordered to pay the costs of the proceedings.