TaxTech – Feb 04th, 2020
United Kingdom – Brexit is a fact. VAT refund portal remains open, for now.
Brexit is real! On 31 January, 2020, the United Kingdom left the European Union. At least politically, with the Withdrawal Agreement signed by the EU.
Technically, the VAT treatment of invoicing and reporting of transactions between the UK and the EU will not change until the transition period has ended. This will be on 31 December 2020, or sooner if the UK and the EU reach an agreement on the Brexit details earlier, however it is also possible that the transition period will be extended to 2021.
The Brexit story has many twists and keeps surprising us. What was not a surprise is that the EU gave its final, formal approval to Brexit on 30 January 2020, clearing the way for Britain to reverse 47 years of integration with the European mainland and leave the Union one day later.
Trade talks are to take place for the remainder of this year to agree on and straighten out all details of the Brexit. One thing that was still uncertain but has been voted in, is that EU VAT refund portal remains open until 31 December, 2020.
During the transition period, a new refund system is likely to be agreed upon between the EU and the UK since both sides are not looking forward to falling back into the 13th Directive (alike) processes.
More info can be found on the website of HMRC, HERE.
European Commission – Tax policies in the European Union Survey
The “Tax policies in the EU Survey currently in its fourth edition, examines how Member States’ tax systems perform in terms of fighting tax abuse, promoting sustainable investment, supporting job creation and employment and mitigating inequalities.
To this end, the report presents the main indicators used by the European Commission to analyse tax policies in the context of the European Semester and substantiates the tax policy priorities of the Commission’s Annual Sustainable Growth Strategy. It also includes an overview of recent tax reforms at both EU and Member State level.
New elements of this year’s edition include discussions on:
- Tax competition,
- The design and distribution of the overall tax mix,
- The sustainability of tax systems in a changing world,
- Measuring effective tax rates on corporate income,
- The Tax Administration EU Summit,
- And more.
Click HERE to read the full survey
France – Changes in the VAT Law at the start of 2020
1 January is always a date when many countries introduce changes to their VAT rules. France is one of them.
France implements the EU “Quick Fixes” into its domestic law. As mentioned in our earlier TaxTech, although obligatory, not all EU Members States were able to do this on time. The French 2020 finance law introduces three of the VAT quick fixes into the French tax code: (1) New requirements for intra-EU supplies to be VAT-exempt, (2) New EU chain transaction rules and (3) Simplification of call-off stock arrangements. The fourth quick fix, i.e. new presumption rules regarding documentary evidence of EU cross-border movements of goods, has not been transposed into domestic law, but it still applies.
Other changes include a clarification of the VAT exemption for the management of special investment funds and a modification of the definition for online marketplaces. The latter includes the creating of a “name and shame” platform where online marketplaces may be listed under certain circumstances.
Furthermore, some changes to VAT rates were introduced and clarified. For example, transactions involving non-alcoholic drinks are subject to a reduced VAT rate of 5.5%. However, drinks sold for consumption on-site (such as at a restaurant), for takeaway/take-out or delivery and intended for immediate consumption are subject to the 10% VAT rate. Alcoholic beverages are always subject to the standard rate of 20%. The latter includes all beverages with an alcoholic strength greater than 1.2% alcohol by volume (alc/vol) and beers with greater than 0.5% alc/vol.
More information can be found HERE.
Poland – White List and JPK file
In Poland, taxpayers will no longer have to submit regular VAT returns as of 1 April 2020. Instead, Poland will be using the ‘JPK-filing’ as the basis for reporting VAT transactions. This sounds very efficient, but it means that businesses will have to ensure that they can create and upload these JPK-files in a correct and timely manner, including special coding for specific goods and services. The requirement applies to all large VAT taxpayers and from July 2020 onwards to all other taxpayers.
Information on what the JPK-files should look like can be found HERE.
In addition, it is known that as of 1 September, 2019, the new electronic register of Polish registered VAT payers was set-up, the so-called ‘White List’. The register is available on the Ministry of Finance’s website and apart from the data previously stored – it contains numbers of taxpayers’ bank accounts. As of 1 January, 2020, the use of the White List became mandatory.
The White List makes it possible to check if the contracting party is an active VAT taxpayer, to confirm the bank account number to which the payment to the counterpart should be made and if the counterpart has been refused registration, removed from the register or re-registered as a VAT payer.
While making payments for goods or services purchased with respect to transactions in the amount exceeding PLN 15,000 (around EUR 3,500), the taxpayers are required to verify the bank account of the supplier every time, so that the transfer is made to the right bank account, i.e. the bank account number included in the White List kept by the Head of the National Tax Administration.
One of the problems is that the White List currently does not show foreign bank accounts. Payments to foreign accounts must be registered with the Polish tax authorities separately.
A summary of the Polish White List can be found HERE.
United States – Will there be VAT?
The USA is one of the few big countries that does not have a VAT system. Every once-in-a-while the discussions starts again about the advantages of a VAT system, compared to the current sales/use tax system.
Mr.William G. Gale has written a proposal in which he explains the advantages of a VAT system for the fiscal and economic health of the United States. “A VAT does not distort savings decisions and is very difficult to avoid or evade. However, VAT has been criticised for being excessively burdensome for low earners, given that consumption is a higher share of income for people of limited means and consumption taxes are typically applied at a flat rate.”
For a non-US reader, some of the terminologies may be somewhat confusing, such as “a broad-based, credit-invoice value-added tax” or the idea that “a refundable credit would be available to all households”.
Still, it’s an interesting proposal, which can be found HERE.
Hungary – Digital reporting as of 1 April, 2020
In Hungary, taxpayers are obliged to report transactions above HUF 100,000 electronically, since 1 July, 2018. Hungary will introduce changes to these rules in the coming years.
As of 1 April, 2020, a new version of the invoice reporting interface (Online Invoice 2.0) must be used. Furthermore, as of 1 July, 2020, the threshold of HUF 100,000 for the invoice data reporting will no longer apply, which means that taxpayers must provide data on all invoices issued to resident taxable persons for completed transactions within the country.
As of 1 January, 2021, the range of invoices to be reported will be further expanded, as the invoices issued to taxable persons on intra-Community and non-EU transactions will have to be reported and – with a few exceptions – invoices issued to non-taxable persons as well.
More information can be found HERE.
India – E-invoicing obligatory as of 1 April, 2020
India will introduce electronic invoicing rules as of 1 April, 2020. As of this date, large and mid-sized companies will be required to issue e-invoices. Later, also other taxpayers will have to follow these rules.
The new rules were proposed in 2019. Since there was no standard for e-invoice existing in the country, such a standard was finalised after consultation with trade/industry bodies, advisors and the government.
The GST Council approved the standard of the e-invoice in September 2019, however many questions still exist. For example, when is something an ‘electronic invoice’? Shall we consider an e-receipt or a pdf-file an e-invoice? Who can create such an invoice, and when and how can it be accepted?
To help small taxpayers adopting the e-invoice system, the Indian Authorities have recommended using one of eight accounting & billing software packages, which provide basic accounting and billing system free of cost to small taxpayers.
More information can be found HERE.
Italy – No VAT rate increase yet
Italy announced changes in its VAT legislation. We summarise some of the highlights below.
Italy considered increasing its VAT rates already in 2020. This has now been postponed and will not happen before 2021.
Currently, Italy considers increasing the rates as follows: standard rate from 22% to 25% on 1 January, 2021, and to 26.5% on 1 January, 2022. This would mean that Italy would be the second EU Member States that would go higher than the ‘magical’ 25%.
The 10% reduced rate would also be increased to 12% as of 1 January, 2021. No increases will apply to the 4% and 5% super-reduced rates.
Italy required taxpayers to periodically submit data relating to the transactions with counterparties not established in Italy (so-called “esterometro” form). As of 2020, these forms will have to be submitted quarterly, instead of monthly.
More information can be found HERE.
Global – Google checking accounts may give banks an edge in deposit wars
Google’s new checking account service could help banks in their battle for consumer deposits. For Google, the bank partnerships will give the tech behemoth a better ability to show advertisers how marketing dollars spent on its system can drive purchases, according to Graseck. In a Morgan Stanley survey, consumers expressed high levels of confidence in Google’s ability to offer banking services. Click HERE to read the full article.
Global – PwC Predictions for 2020 “Slowbalisation” is the new Globalisation
Projecting what the future holds is an important exercise for businesses looking to plan ahead. Click HERE to read a summary of some of the themes PwC assess will likely prevail in the global economy in 2020.
VATBox – 2nd part of our ‘Thought Leaders Reveals’ interview series.
1:1 conversation between Remco Dewaerheijt, VATBox’s VP Tax & Product Strategy interviews Ilona van den Eijnde, Global Trade & Indirect Tax Advisor at E&Y and lecturer at the Erasmus University as they discuss all things that relate to VAT, technology and beyond – Click to read and listen to the full interview.
See you in two weeks!
VATBox Tax Knowledge team