TaxTech – Nov 12th, 2019

European Union – Use of bank card data to spot VAT fraud

The council of the European Union has provisionally approved new reporting rules for card companies to combat VAT fraud in cross-border e-commerce. The new rules will enable countries to collect in a harmonised way electronic records from payments companies like banks that operate credit and debit cards used to buy goods online.

This is a next step by the European Union to try and close the ‘VAT Gap’, i.e. the difference between the VAT that should be received, and the VAT that is actually collected. It has been mentioned earlier that banks and credit card companies should get involved in combating this VAT fraud. That seems to get a step closer now.

More information can be found HERE.

Peru – Next country to introduce E-invoicing

Countries worldwide are looking at ways to digitalise their systems and processes, allowing, or obliging, taxpayers to also adjust their processes and documentation to align with these developments. The International Monetary Fund (IMF) is a global organisation that advises countries on how to best ensure the stability of the international monetary system. In this respect, they also look at international trends and developments in the area of tax collection.

The latest paper from the IMF examines the impact of e-invoicing in Peru. According to the IMF, e-invoicing increases sales, purchases and overall VAT liability  by over 5 per cent in the first year after adoption. It will also thus increase tax collection, although the IMF also notes that there are shortcomings in the VAT refund mechanism in Peru.

Although this paper is focusing on Peru, there are certain elements that can (and will) be used by other countries. Thus, this is a good example of how international organisations are promoting the digitalisation of tax authorities, and thus of business processes.

The paper can be found HERE.

United Arab Emirates – Updated guidelines on VAT refunds

The UAE tax authorities published their guide on Value Added Tax (VAT) foreign refunds.

This guide provides information on when and how foreign businesses and business visitors can obtain refunds of VAT incurred in the UAE. As the UAE applies the  reciprocity principle, only businesses established in certain countries can claim a VAT refund.

More information can be found HERE.

India – GST refund processes too complicated

The GST rules in India are complicated. Even with the new GST Law that was implemented some time ago, many businesses have a hard time to understand the rules, and how to correctly apply them. Not only businsesses, but also the tax authorities are struggling.

According to the latest news, millions of GST payers are awaiting for clarity over the new rules notified early this month that restricted the refund of input tax credit to 20% of the total claimed amount. This means that the businesses will only receive 20% of the reclaimed amount if they do not upload their GST Return (‘GST 1 form’) correctly or with the complete data. The problem is that it is not clear when the GST Returns are correct and complete and that it is not clear how the 20% is calculated.

The new rules were introduced as a measure against the use of fake GST invoices to claim the input GST. The lack of clarity over certain provisions of the new rules has caused uncertainty.

More information can be found HERE.

World – How much tax do you pay?

PwC and the World Bank Group published their new study on Paying Taxes, which investigates and compares tax regimes across 190 economies worldwide. The research focusses on the balance between labour and income taxes using a medium-sized domestic case study company.

This year, the study includes details on how new tax software, real-time reporting systems and data analytics are changing the way companies meet their tax compliance obligations and how tax authorities monitor and enforce those obligations.

This very interesting study can be found HERE.

The tax landscape is changing at a rapid pace.

Tax authorities are picking up the pace on developing and implementing digital solutions, especially for transactional taxes like VAT & GST. Are corporates ready or falling behind? Which capabilities must today’s Indirect Tax Manager bring?

In our new article and in-depth eBook, we discuss some of the key areas in which the tax landscape is making the digital shift for both the tax authorities’ and corporates side. We also deep dive into three disruptive trends in the global digitalisation of VAT & GST:

  • Digital reporting and analytics
  • Standard Audit File for Tax (SAF-T)
  • Exchange of information – Transaction Network Analysis (TNA)

The article and the e-book can be found HERE.

United Kingdom- Brexit Update – EORI numbers & Transitional Simplified Procedure (TSP) Registration

HMRC sent out an update in light of the extension to the Brexit Deadline until 31 January 2020 focussing on EORI numbers and the TSP registration.

The article can be found HERE

United Kingdom- Re-clench for MTD 2020: Three major changes

It is the April 2020 phase of MTD introduction that will cause most issues. How are the three reforms going to affect over one million VAT registered businesses in 2020?

The article can be found HERE

European Union- Revisiting EU VAT “2020 Quick Fixes”: What can be fixed?

The European Council in December 2018 formally approved proposals for four “quick fixes” VAT to simplify international trade. The “VAT quick fixes” will be effective beginning 1 January 2020, and will be expected to have considerable implications for businesses trading in international goods, aiming to improve the day-to-day functioning of the VAT system for EU cross-border B2B trade. On 26 September 2019, the European Commission published a draft version of the Explanatory Notes in relation to the so-called ‘quick fixes’.

A good summary of the Quick Fixes can be found HERE

European Union- European VAT and the Sharing Economy

The past few years have seen a sensational rise of new models of production, distribution, and consumption of goods and services, which have been synthetically captured under the umbrella definition of the “sharing economy”. The ascent of digital platforms – including renowned companies like Airbnb and Uber, or the French unicorns HomeExchange and BlaBlaCar – expand dramatically the range of possibilities for businesses and consumers alike to exchange with each other anything, but what is the VAT impact?

The article can be found HERE

See you in two weeks!

VATBox Tax Knowledge team

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