A derogation given by the EU allowing Malta not to charge VAT on food and medicines has been extended to the end of 2010.

The decision was taken in Brussels during a finance ministers' meeting where Malta was represented by Parliamentary Secretary Tonio Fenech. 

The meeting decided that early next year the European Commission will present proposals on VAT harmonisation by the member states. Therefore, derogations given to the new member states  allowing them to charge lower rates of VAT will be extended to the end of 2010, the government said in a statement.  In Malta's case, the derogations apply to food and medicines, which are zero-rated. They were to expire at the end of next year.

It was also agreed that VAT should be charged in the country where a service is availed of and not where the supplier is based. A proposal by Malta for such changes not to apply for yachting was accepted.