TaxTech –March 31st, 2020
When time, optimisation and saving come together – A personal note from VATBox’s Founder and CEO Isaac Saft
Dear friends and clients,
I hope you are doing very well, taking all necessary actions to protect yourselves and also adjust your plan and your mindset to the new working environment.
While we all keep consuming coronavirus news, let’s not forget, this virus came out of nowhere and it isn’t going to stay here forever. We will. Sooner, hopefully, not later, we will overcome this virus and get back to our normal life.
The coming future requires more than ever, creativity, flexibility, an open mindset and focus.
What was considered as a very good plan just a few weeks ago, could now be a non-relevant plan for the near future.
Being able to adjust our plans; being able to pick up newly relevant ideas could be our biggest chance and opportunity in the coming years.
It is essential in these times to keep our mindset open, to keep our eyes open, to be flexible and to be able to adjust our plans and to be productive.
Here at VATBox, we’ve faced in the last weeks a very high demand from the market, particularly from our clients, asking us to pull a massive amount of transactions, mainly historical transactions, that hold high potential VAT savings.This doesn’t only benefit a company through nice financial savings but this also supports business continuity and time optimisation. Those are the three main triggers we see lately coming from our clients. Thanks to our great technology, we managed to deal with those transactions and to deal with this challenge remotely with very little human intervention from our clients’ side or from VATBox side.
We are very happy that we’ve managed to help you so far and we are looking forward to keeping up this support to help you in the near future and coming challenges.
On a personal note, I think it is the time to show power; it is the time to take care of our people, it is the time to be 10X more productive, creative and find a way to exceed. It is time to lead by example.
I wish everybody here good days, successful days and we are looking forward to seeing you; best regards from VATBox family and me.
The full article with immediate action items can be found HERE
VATBox is keeping the tax community united & connected.
In this webinar, you will learn how to adapt and prepare for the immediate financial future, by leveraging the range of opportunities hidden in your historical transactional data. The webinar is designed to help you focus on:
- Optimal savings.
- Resilient business continuity
- Time optimisation
These are just some of the topics that Isaac Saft, Founder and CEO of VATBox, will be covering in two live webinars on April 6th, 2020.
* Webinar on-demand available upon registration
Michelin’s Forward-thinking Path to Tax Digitalisation
In today’s uncertain financial times, many of our clients are looking for new and innovative ways to increase their bottom line while improving their day-to-day operations.
As the second-largest tire manufacturer with entities and factories all over the globe, Michelin faces huge expenses for business travel and incurs Foreign VAT on regular AP invoices from a wide range of suppliers. With no T&E system in place and no clear insight into their VAT recovery potential, Michelin needed a solution that would allow them to optimise their recovery using as few internal resources as possible. While business travel has come to a near stand-still, also the business has. This even puts more priority for Michelin on VAT recovery of past expenses that will directly impact their bottom-line results.
Click HERE to download the case study
The full article can be found HERE
European Union – VAT treatment of secondment of staff by a company to its subsidiary
Case C-94/19 (San Domenico Vetraria SpA) of 11 March 2020 deals with the question whether the secondment of staff by a company to its subsidiary is subject to VAT. According to the Italian tax authorities, this was not the case, because it was a service between a subsidiary and its parent company.
One of the main arguments of the tax authorities for taking that position was that the fee paid by the subsidiary did not fully cover the costs of the seconded staff.
The ECJ dismissed this argument and ruled that there is a direct link between the services (secondment of staff) and the remuneration (fee paid by subsidiary) and it is also clear that both the parent and the subsidiary are independent taxable persons.
The ECJ repeats that the amount of the ‘consideration’, in particular the fact that it is equal to, greater or less than the costs which the taxable person incurred in providing his service, is irrelevant for VAT purposes.
A summary of the case and a link to the full case can be found HERE.
European Union – VAT treatment of cancellation fees
For many hotels and travel agencies, most business has dropped to zero in the past couple of weeks. People are cancelling their business or vacation trips due to the Coronavirus.
In some cases, the terms and conditions allow these hotels and travel agencies to charge the customer a fee, or part of the agreed price, even though the customer does not use the service. The question then arises if this fee or charge is subject to VAT.
Luckily, the European Court of Justice has answered this question before, in cases dealing with a ‘no show penalty’ charged by airlines to customers that did not use their services. Interestingly though, the ECJ has decided differently in what in first instance look similar cases, taking into consideration that the underlying facts were different. The comparison between the two cases, Société thermale d’Eugénie-les-Bains (C-277/05) and Air France-KLM and Hop!-Brit Air SAS (C-250/14 and C289/14) can be found HERE
European Union – Germany guidance on ‘leasing contracts’ following the Mercedes-Benz Financial Services UK-case
Following the ECJ decision in Mercedes-Benz Financial Services UK (Case C-164/16), the German tax authorities published guidance regarding the VAT treatment of ‘contract for hire’.
In its decision of 4 October 2017, the Court decided that a “contract for hire which provides that in the normal course of events ownership is to pass at the latest upon payment of the final instalment”, must be interpreted as applying to a leasing contract with an option to purchase if it can be inferred from the financial terms of the contract that exercising the option appears to be the only economically rational choice that the lessee will be able to make at the appropriate time if the contract is performed for its full term.
The new German guidance notes that to assume the supply of goods, two conditions must be met. First, the underlying contractual agreement pursuant to which the goods are handed over must contain a clause expressly relating to the transfer of ownership of those goods from the lessor to the lessee. This condition is met if the agreement includes an option to purchase.
Second, it must be clear from the terms of the contractual agreement, as objectively assessed at the time when it is signed, that ownership of the goods is intended to be acquired automatically by the lessee if performance of the agreement proceeds normally, over the full term of the contract. This condition is met if exercising the option to purchase appears, in fact, given the financial terms of the agreement, to be the only economically rational choice the lessee could make.
The full German guidance (in German) can be found HERE.
European Union – Italian Supreme Court decides that a taxpayer is entitled to the refund of costs for issuing a bank guarantee relating to VAT refunds
In a case before the Italian Supreme Court, the question was answered if taxpayers that are required to provide bank guarantees to obtain refunds of Italian value-added tax (VAT) are entitled to a full refund of the amounts of the bank guarantee costs.
In this case, a company (the taxpayer) submitted a VAT refund claim for 2001 and submitted a bank guarantee as required under the VAT rules. Subsequently, the company asked the tax authority for a refund of the costs incurred for the bank guarantee, but this refund claim was denied. The company appealed, and the case eventually ended up before the Italian Supreme Court.
The Court decided that the Italian tax authorities must refund the amount of bank guarantee costs incurred by the taxpayer concerning the VAT refund.
More information about this case can be found HERE.
European Union – Luxembourg implements new Law regarding VAT penalties
Luxembourg implemented a new Law (No. 7144), implementing the EU Directive 2017/1371 on the fight against fraud to the European Union’s financial interest. The Law provides for the following repercussionsː
- in case of a criminal offence in a VAT reporting period exceeding 25% of the amount of VAT due with a minimum of EUR 10,000, or an unlawful refund exceeding 25% of the correct VAT refund with a minimum of EUR 10,000, or when the unlawful VAT refund exceeds EUR 200,000, a term of imprisonment varying from 1 month to 4 years and a penalty of EUR 25,000 up to a maximum of 6 times the amount of the fraud may be imposed;
- in case of systematic VAT fraud, a term of imprisonment varying from 1 month to 5 years and a penalty of EUR 25,000 up to 10 times the amount of the fraud may be imposed.
The Bill is not yet available online, but the EU Directive 2017/1371 can be found HERE.
European Union – Poland considers easing White List requirements
Since 1 January 2020, taxpayers in Poland must check if their suppliers are on the so-called ‘white list’, before making a payment. If the bank account of their vendor is not listed, the VAT paid to the vendor may not be deductible, and the taxpayer may become liable for the VAT charged on the invoice by the vendor.
The electronic list of VAT taxpayers, on the one hand, is intended to facilitate due diligence; on the other hand, it is also an additional administrative burden. Given the scale of the problems arising from the new regulations, the Ministry of Finance decided to soften the rules slightly.
The Polish government has now published an amendment bill that would make it easier for taxpayers to avoid penalties. If enacted, most of the changes would become effective on 1 April 2020; the implementation of the new rules may be postponed due to the current situation. More information can be found HERE.
European Union – Spain fights VAT fraud with electronic invoicing
Three regional tax authorities (Gipuzkoa, Biscay and Álava) and the Basque government have undertaken a joint venture to combat tax fraud by launching the ‘TICKET BAI system’, a set of technical and legal requirements that will change the way invoices are generated. The goal is to get a better grip on the taxable turnover, especially on B2C transactions.
All e-invoices will have to have a Ticket BAI identification code and a QR code. However, the method through which this information is to be presented has not yet been established.
The system will come into effect later this year voluntarily. The regions will make it obligatory for all taxpayers in phases, starting from 1 January 2021.
More information about this can be found HERE.
India postpones introduction of e-invoicing 1 October 2020
In the past couple of months, the new e-invoicing rules in India have been discussed, explained and re-invented many times already. At its latest meeting on 14 March 2020, the Indian GST Council postponed the target date for the introduction of e-invoicing and QR codes by six months to 1 October 2020.
In addition, various categories of taxpayers have now been exempted from the requirement to issue e-invoices and QR codes, including banks, financial institutions, insurance companies and goods and passenger transport providers. In other compliance changes, the existing monthly reporting framework via Forms GSTR-1 and GSTR-3B has been continued to September 2020; effectively, this also pushes back the introduction of the proposed simplified compliance via Forms ANX 01/ 02 and RET 1 by six months.
More information can be found HERE.
Tax measures are taken in respect of the Coronavirus – overview
Governments around the globe are taking measures because of Coronavirus. It impacts our daily lives heavily from going to work, for grocery shopping to having our kids at home due to the closure of schools to just mention a few. From a tax perspective, also measures are taken to support businesses. Examples are the temporary reduction of rates, the extension of tax payment deadlines and subsidies to businesses. New measures are announced almost every day, globally.
The VATBox knowledge team is reviewing the announcements from different sources on a continues basis and adding these to our website. We try to keep fully up-to-date, but with the overwhelming amount of changes and the short time from proposal to implementation, it may be that we might not have the latest status on our website. Still, the overview should provide you with a multi-source global tool with linkage to the underlying information source. The overview can be found HERE.
Electronic invoicing developments in Europe and the US
The European Commission has published the ‘e-invoicing Country factsheets’ that provide an overview of the state of e-invoicing in the different EU Member States. With country factsheets, the European Commission is aiming to provide visibility on how the European Directive 2014/55/EU on e-invoicing in public procurement, the adoption of the European standard on e-invoicing (EN 16931-1:2017) and the national Business to Government solutions are adopted throughout the different member countries.
The EU e-invoicing country fact sheets can be found HERE.
The e-invoicing developments in the United States are progressing more slowly. For example, in the US, there is no public sector push. The e-invoicing standards are also different, in that there are multiple technical standards, formats and networks.
An interesting article on e-invoicing in the US, comparing it to the situation in Europe can be found HERE.
VAT is important for FinTech companies
Financial technology, often shortened to fintech, is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. It is an emerging industry that uses technology to improve activities in finance. FinTech companies offer services such as payment infrastructure, stock trading, alternative lending marketplaces and tax solutions.
FinTech might be relatively new, but VAT is not. Especially, in such cases where areas have been explored little from a fintech perspective, the benefit of technology can be massive and a real game-changer.
In this interesting article published by E&Y, a review is performed on FinTech and VAT. The article can be found HERE.
Fraud rates remain at record highs – are you prepared to fight it off?
PwC surveyed more than 5,000 respondents across 99 territories about their experience of fraud over the past 24 months. They were asking things like (i) whether they’d been hit by fraud, (ii) how many times, (iii) what type of fraud they had to face and (iv) what they’d done to prevent it from happening again.
Here are their three steps to combat fraud:
- Taking action: being prepared.
- Responding: doing the right thing.
- Emerging stronger: measuring success.
The full article can be found HERE.
How to improve the exchange of information between tax authorities?
We invite you to read the joint article written by Ksenija Cipek, the Head of Tax Risk Analysis, Ministry of Finance, Tax Administration of the Republic of Croatia and Sean Brizendine blockchain technology researcher.
They share their views on how to engage the tax authorities with blockchain technology to improve compliance, efficiencies and protocols and by doing so to overcome the VAT gap.
The full article can be found HERE.
Stay healthy and connected.
On behalf of the
VATBox Tax Knowledge team