TaxTech –March 17th, 2020
European Union – VAT’s up? – Changes in 2020 and 2021
In the past couple of years, the European VAT rules have changed significantly. The implementation of the ‘transitional rules’ in 1993, the changes regarding the supply of services in 2010 and the most recent implementation of the ‘Quick Fixes’ are examples of this and more changes are expected to come.
In 2021, new rules for e-commerce activities will become active, and the Mini One Stop Shop rules will be extended to the distance selling of goods and at the horizon the new definitive VAT system is coming, a shift towards the principle of taxation at the destination. This is now envisaged for 2022 for the supply of goods.
An interesting article with an overview of the recent developments can be found HERE.
Germany –Authorities to accept not fully compliant invoices in VAT refund procedures
For cross-border VAT refunds within the European Union, it is not necessary to send the original hardcopy invoices to the tax authorities for review. Instead, it is sufficient to upload a scan of specific invoices and submit those with the EU VAT refund request.
Both the EU VAT Directive and local German VAT Law lists these invoice requirements. This is one of the formal requirements to effectuate recovery of the VAT charged on the supply. In practice, we see, however, that invoices may have some flaws which therefore could block the recovery of VAT. On the hand, the recovery of input VAT is a right which prevails over strict formal requirements. In this German case, the Federal Fiscal Court has confirmed in a recent ruling that the requirements for the invoices to be enclosed with the VAT refund request must not be overstretched. In the underlying case, a company based in the Netherlands applied for an input tax refund to the German tax authorities. With this request, he attached two documents which technically did not meet the full VAT invoicing requirements.
The German court decided that in this specific case it was sufficiently clear that the Dutch company has paid the VAT and that the VAT was charged correctly. Therefore, the VAT refund was granted.
The case can be found HERE (in German).
Germany – Official recognition of Bitcoin and cryptocurrencies as legal, financial instruments
Germany’s Federal Financial Supervisory Authority (BaFin) issued new guidance that clarifies the status of Bitcoin and cryptocurrencies while providing a regulatory framework for crypto custodial firms. With this classification, the exchange of cryptocurrencies now falls under the regulated banking and other financial services category.
So far, more than 40 banks in Germany have applied for the crypto-custodial license per Leaders League.
The full article can be found HERE.
Netherlands – Single-step adjustment of initial input VAT deduction
On 3 March 2020, Advocate General Bobek of the Court of Justice of the European Union (ECJ) gave his opinion in the case ‘Stichting Schoonzicht v. Staatssecretaris van Financiën (Case C-791/18)’. In the case concerned, the AG proposed that the Court should answer the questions referred to as follows:
“A national adjustment regime for capital goods which provides that in the year in which the goods enter into use the total amount of the initial deduction may be adjusted in a single step if, upon entry into use, it turns out that that initial deduction deviates from the deduction to which the taxable person is entitled based on the actual use of the capital goods, does not fall under article 187 et seq. of EU VAT Directive (2006/112) but falls under articles 184 to 186 of that directive. Those provisions do not oppose such a national adjustment regime.”
A summary of the Opinion can be found HERE.
European Union – Deduction of import VAT
EU Members States have been implementing changes of the EU customs regulations into their national legislation, and this has led to some questions from businesses. The new rules aim to make the customs rules more transparent and flexible, but for non-EU businesses who want to import or export goods into or out of the European Union, the rules have become stricter.
One of the rules is that only the ‘owner’ of the goods can deduct the VAT paid upon the importation of the goods. On the other hand, the customs rules no longer allow a non-EU business to act as the importer of record, which means that they will have to appoint a customs representative to import goods on their behalf.
The CFE Fiscal Committee has prepared an Opinion Statement on issues concerning the deduction of import VAT on the import of goods. In this opinion, they state that such ‘representative’ can be regarded like a commissionaire or agent who contracts in his name and is treated as both receiving and making a supply and thus, should be able to claim the VAT paid upon the importation of goods.
The opinion can be found HERE.
Norway – No VAT exemption in e-commerce
The Norwegian tax authorities announced that goods supplied via or by e-commerce companies would follow the normal VAT rules. There has been some confusion about this as the Norwegian authorities had initially announced that Norwegians, for the time being, did not have to pay VAT on foreign e-commerce supplies. The tax authorities clarified, however, that the duty to charge goods for less than NOK 350 will be introduced as planned on April 1, 2020.
More information can be found HERE.
Nigeria – Lack of use of technology in tax
Where many countries around the world are using technology to collect tax more efficiently and effectively, Nigeria stays behind, according to local experts and tax professionals.
The Nigerian government has not spent much time and money on effective tax collection tools. The problem is that this is holding back the development of the country’s taxation infrastructure to improve the business environment and grow the nation’s economy. Businesses in Nigeria may not like paying taxes. Still, they are calling to the government to at least ensure that the tax is collected more efficiently, by improving the ease of paying, collection and administration of taxes in the country.
An article on this can be found HERE.
United Arab Emirates – Refund of VAT paid on goods and services connected to Expo 2020 Dubai – guide issued
The UAE Federal Tax Authority (FTA) published a Guide on the refund of VAT paid on goods and services connected with Expo 2020 in Dubai. The guide provides that the offices of the Official Participants can reclaim VAT incurred on the import and acquisition of the following five categories of goods or services without the need to use them for making taxable supplies:
- Goods and services in direct connection with the construction, installation, alteration, decoration and dismantlement of their exhibition space;
- Goods and services in direct connection with the works and activities of organizing and operating the Official Participant’s exhibition space and any presentations and events within the Expo 2020 site;
- Goods and services relating to the actual operations of the Official Participant provided that the value of each good and services, for which the Office of the Official Participant makes a claim, is not less than AED 200;
- All operations, services and activities provided for participation in Expo 2020 Dubai, whether located within or outside the boundaries of the Expo 2020 Dubai site; and
- Import of goods for the personal use of the Official Participant’s Section Commissioner-General, Section Staff and the Beneficiaries.
Official Participants are entitled to obtain a refund of input VAT whether they are VAT registered or not. Those who are VAT registered may claim the refund on their regular return. Those who are not registered may apply for the VAT refund using a special refund application process within the following time frame:
- within 15 days of the end of the calendar month in which the total VAT value to be claimed is AED 10,000 or more, and
- within 15 days of the end of the calendar quarter where the total VAT value to be claimed is less than AED 10,000.
The full article can be found HERE.
Mexico – New rules for non-Mexican digital service providers
The Mexican government published modifications on its Value Added Tax Law (VATL) as part of the Tax Reform for 2020. As of July 1, 2020, new rules will apply to digital platforms.
In specific, a new Chapter is added in the VAT Law for “Digital Services Rendered by Foreign Residents without Permanent Establishment”. This chapter includes a list of requirements for non-Mexican digital service providers to be registered, collect and remit VAT on income derived from digital platforms, websites and similar electronic distribution methods.
More information can be found HERE.
E-commerce and sales tax developments
The waves of the Wayfair case are calming down, but for e-commerce businesses, the sales tax rules in the US can still be a puzzle that they need to solve. The States are moving to enforce sales tax collection by marketplaces and collect sales tax on cloud-based services and digital content.
For e-commerce businesses, it is therefore recommended that they solve the sales tax puzzle, before commencing business in an(other) state.
An interesting article about this topic can be found HERE.
Tax measures in relation to the Coronavirus
The World Health Organization has labelled the Coronavirus (Covid-19) as a global pandemic. Governments are taking measures to reduce the spread of the virus, but this has a huge effect on the economy. Production decreases, consumers, spending less, events being cancelled, and employees staying home.
Many governments have announced fiscal measures to help businesses to reduce the administrative burdens and to delay (tax) payments. VAT seems a very effective tool to do this. Measures include tax rate cuts, targeted benefits for sensitive sectors such as tourism or payment holidays.
Especially the latter seems a popular way of giving companies some ‘breathing air’.
Although the map changes constantly, an overview of the current measures per country can be found HERE.
Pairing tax with artificial intelligence
Read Deloitte’s perspective on how pairing tax with artificial intelligence (‘AI’) fuses your tax data with analytics
Businesses can harness technology and new ways of working to increase agility and shift human focus to activities that drive competitive advantage. Tax departments are charged with providing greater value than ever before. With tax AI and analytics, they are well-positioned to do it.
Leading tax departments are generating deeper insights from the large volume of data they collect, helping business leaders identify issues and seize opportunities. They’re doing so by employing advanced AI and analytics tools that can aggregate and draw conclusions from multiple data sources and provide solutions to specific challenges faced by individual tax departments.
Cognitive technologies and advanced analytics can allow tax departments to accomplish the following tasks, such as:
- Analyse global compliance data to help business leaders anticipate trends, spot anomalies, and reduce global effective tax rates
- Streamline quarterly and annual tax provision processes while leveraging the data generated for better insights for tax planning
- Verify-in real-time the tax treatment of individual transactions across multiple jurisdictions, for improved business operations
The main thing is to Think big. Start small. Act fast.
Deloitte’s full article can be found HERE.
To learn how to leverage VATBox’s AI capabilities, contact us.
3 Golden VAT Tips from VAT Insiders: Part 5 of 5 of VATBox’s” Industry Leaders Reveal” interview series
With VAT rules becoming more sophisticated and business data becoming more transparent, effective management of global VAT has never been more critical for an organisation. Maximum compliance is critical to lessen the risk of exposure. VAT audits are on the rise as tax authorities are increasingly using sophisticated data-mining technology tools on companies’ records while also seeking to increase revenues in these uncertain economic conditions. Breaches in compliance lead to both damages to reputation and financial penalties. Businesses simply cannot afford to misunderstand the impact VAT has on an organisation.
Discussing this topic are VAT experts from multiple industries who were interviewed by Remco Dewaerheijt, VP Tax & Product Strategy for VATBox, about global VAT developments for the” Industry Leaders Reveal” series. These industry leaders offer their personal views and experiences with VAT and discuss the impact of VAT on an organisation.
The full article can be found HERE
Take care and stay safe. See you soon.
On behalf of the
VATBox Tax Knowledge team