TaxTech – April 16th, 2019
European Union – E-invoicing in the EU Member States
The European Parliament and Council agreed on a European Directive on electronic invoicing in 2014. With this Directive, the EU wishes to establish a standard definition for e-invoicing. Directive 2014/55/EC obligates the EU Member States to ensure that all “contracting authorities and contracting entities” receive and process e-invoices complying with the European standard.
This includes the State, regional or local authorities, bodies governed by public law or associations formed by one or more such authorities or one or more such bodies governed by public law.
The deadline for the implementation of this obligatory e-invoicing is 18 April 2019. However, there is an extended deadline until 2020, for the rules to actually take effect.
Many EU Member States have already implemented these rules. An overview of the status of the B2G e-invoicing rules per country can be found HERE. Some countries are combining e-invoicing with VAT real-time reporting to the tax authorities (e.g. Greece), or invoice pre-approval regimes (e.g. Portugal).
Examples of countries where the rules still have to be implemented or will apply soon are:
- Croatia – B2G mandatory invoicing as of 1 July 2019
- Greece – B2G mandatory e-invoice as of 1 January 2020 – also proposal for real-time invoicing for B2B and B2C as of 1 January 2010
- Poland – B2G mandatory invoicing as of April 2019
- Portugal – B2B mandatory pre-approval of invoices as of 1 July 2019
- Sweden – B2G mandatory invoicing as of April 2019
Aside from compliance with the local rules, eInvoicing has been shown to be a useful tool for businesses, helping them to work more efficiently and to save costs on processing. But it also brings benefits in terms of archiving, invoice retrieval and above all for VAT recovery. Just imagine the process simplification for those countries or refund processes that still require hard copies for VAT refunds. An e-invoice will take this administrative burden fully away. VATBox has developed a platform where many merchants already send our clients’ invoices directly to us for immediate processing.
If you’re interested in learning more about how VATBox integrates e-invoicing into our solution to increase compliance, reduce disqualification, improve vendor performance analysis, as well as eliminating paper D13 invoices, contact me or your VATBox success team representative
Middle-East – VAT refunds and VAT compliance in GCC countries
The United Arab Emirates (UAE) published updated guidance on VAT refunds for business visitors to the UAE, with details on the procedural aspects of the refund application process. An earlier version of the guide, laying out the conditions for claiming a refund, was published in December 2018.
The updated guide includes a list of countries with which the UAE has reciprocal agreements for the business visitor VAT refund scheme. These countries include the neighbouring Gulf countries, and some (but not all) EU countries. Some countries such as the United States of America are not on the list. The Guide can be found HERE.
In Saudi Arabia, the tax authorities updated the Arabic version of its Invoicing and records guide. The update includes changes to the language requirements. The guide clarifies a practical interpretation allowing the use of common international invoicing features to be used as part of the tax invoice – including the use of numerical values, currency codes, dates, invoice numbers and proper nouns. The updated Guide can be found HERE (available in Arabic only).
Bahrain published a Guideline on VAT and E-commerce. The Guideline describes the general VAT rules and processes, and explains how the place of supply rules work with regard to goods and services that are supplied via e-commerce platforms, or electronically, making a distinction between B2B and B2C transactions. The Guide can be found HERE.
Norway – Changes in form for Foreign VAT Refunds
The Norwegian authorities published a change to application form RF-1032 which should be used for VAT refunds to Foreign businesses. As it is no longer required to send in hardcopy invoices, and instead soft copies can be used, one does have to explicitly request for sending the hardcopies back if hardcopies would still be sent as part of the refund application.
Russia and South Africa – Electronic services
When it comes to the taxation of electronic services, such as streaming, electronic gaming and software downloads, the rules are not always clear. It seems that the (old fashioned) VAT rules are not always able to capture and keep up with the new economic and technical developments. An example is Guatemala, where the tax legislation does not include specific provisions for the treatment of e-services.
However, even in countries where (new) rules have been established, there is still uncertainty.
The Russian tax authorities recently met with both tax and industry professionals to discuss the application of the new VAT rules on e-services in order to better understand the practical implications and questions. This resulted in the Russian tax authorities announcing that they will publish a position paper (guidance) soon.
The new rules obligate non-resident service providers to register for VAT in Russia, and to collect and pay Russian VAT. However, the implementation is not always smooth, and could even result in double or no payment of VAT. More information can be found HERE.
In South Africa, the new rules for e-services came into effect on 1 April 2019. Simply said, based on these new rules, a non-resident service provider that provides e-services to South African customers must register for VAT in South Africa. This includes services provided to or by group companies, and intermediaries who facilitate the supply of e-services. There is a threshold of ZAR 1 million over a 12-month period.
European Court of Justice – Overview of case-law
There have been two VAT judgements by the European Court of Justice in the past two weeks.
- Case C-691/17 (PORR Építési Kft. vs HU) deals with the question of whether input VAT can be deducted if the VAT was wrongly charged.Asking that question is almost like giving the answer: of course not. So, in that respect, the judgement of the ECJ is not surprising.The case concerns a construction company in Portugal, which built a motorway. The company hired other construction companies for part of the work, and these suppliers issued an invoice and charged local VAT.This was wrong, as for (certain) construction work, a reverse charge mechanism applies. This means that the suppliers should not have charge VAT. One of the arguments used by PORR was that the suppliers probably had paid the VAT anyway, and therefore the tax authorities were not losing any VAT by granting the refund. However, the ECJ was very clear: the suppliers were not allowed to charge VAT, and therefore the VAT was not recoverable.For a summary of this case, see HERE. The full text of the judgement can be found HERE.
- The facts in Case C‑214/18 (PSM ‘K’) are as follows.In Poland, a company paid (legal) fees to an enforcement officer. The enforcement office charged the fee to the company, which was based on a specific article in Polish Law. The enforcement officer added VAT.The Polish company did not accept this (additional) VAT, as it argued that the fees mentioned in the law were already inclusive of VAT.The ECJ ruled that the fees mentioned in the law indeed did not specifically mention whether they were inclusive of exclusive of VAT. a Fairly simple logic follows that if a fee is charged, that fee (thus) is the consideration for a supply of goods or services. And that consideration is the basis for the VAT calculation.
This means that the Polish enforcement officer was indeed allowed (or even obligated) to add VAT to the fee.
Italy – Transfer of a Business
The Italian tax authorities published an opinion regarding the possibility of qualifying the purchase of client list as a transfer of going concern rather than an asset deal. Normally, a transfer of a business as going concern can be performed without VAT, if it concerns a transfer of a ‘totality of assets, or an independent part thereof.’ Furthermore, it is required that the business continues after the transfer.
In this specific case, a ruling was submitted to the Italian tax authorities that qualified the transfer of a client list as an asset deal, rather than the transfer of a totality of assets. In its response, however, the Italian tax authorities qualified that the transfer of the client list as a transfer of going concern for the purposes of direct and indirect taxes, and thus out of scope for VAT purposes.
For businesses, this means that they will have to check the VAT treatment for any transfer of a business asset, as a whole or as a part.
European Union – VAT rates as of 1 January 2019
The European Commission published the update overview of the VAT rates applicable in the EU Member States as of 1 January 2019. The overview includes the standard VAT rates, as well as all reduced and historic rates.
The overview now also contains a specific line for the VAT rate of e-books. EU Members states are allowed to apply the reduced VAT rate to e-books and other e-publications, but not all countries are doing this (yet). Malta was one of the countries that started applying a 5% reduced VAT rate as of 1 January 2019, Belgium started using the 6% reduced rate as of 1 April 2019, and Sweden will apply a 6% reduced rate as of 1 July 2019.
The overview or all VAT rates can be found HERE.
PWC’s Global Consumer Insights Survey 2019
With all this talk of tax, let’s not forget the most important assets we have: our customers. PWC recently released its latest customer experience survey, which highlighted how delivering a superior experience is the recipe for success, no matter what good or services your company provides. PWC surveyed more than 21,000 online consumers in 27 territories and found that new technologies have made the customer experience more important than ever. For more insights into this eye-opening report, click HERE.
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