TaxTech – Nov 26th, 2019

Global overview

How to deal with VAT on down-payments in SAP?

If a company makes or receives a down payment, the question comes up if and how VAT must be calculated, invoiced and reported. Typically, the supply of goods or services has not taken place yet, which means that it does not necessarily have to be clear what VAT rate must be applied.

Even if this is known, the question is how this can be processed in the bookkeeping of the company.

SAP has published a new blog about this topic, explaining how down-payments can be dealt with in SAP — recommended for companies using SAP as an ERP.

The blog can be found HERE.

EY Study– Five key VAT trends

EY has made an overview of five key VAT trends.

  1. VAT is growing in popularity and importance
  2. Nations are pushing the limits on how high VAT rates can go
  3. VAT rules and rates are entering a period of volatility
  4. VAT fraud is alive and well
  5. Growing digital reporting and compliance requirements

For many years, VAT has been announced as ‘the tax of the future’. Advisors, international organisations and companies have been saying for many years that VAT – or more generally: taxes on consumption – will eventually become more important than taxes on income and profit.

VAT has become more popular as a source of income for governments. Income tax is not the most popular tax in class anymore. While corporate income tax rates generally have been dropping in the last few years, VAT rates slowly but steadily have been on the rise in quite a few countries, and also broadening the tax base helps to gain more income from VAT.

Only focussing on increasing VAT rates and broadening the base, will not lead to optimal income. There should also be the focus on VAT leakage. To combat fraud, authorities are also making their VAT system more robust and less fraud-sensitive.

Read the full EY study here HERE.

Knowing how the outside world is changing is good, but even more important is to assess whether your team and processes are ready to cope with these challenges. The tax professional is changing, and additional skills are required. Check out our recent article that addresses the impact of digital tax transformation on your team HERE.

To learn more about the changing tax landscape in our recently published eBook written by our VP Tax & Product Strategy Remco Dewaerheijt go HERE.

SAP Concur and VATBox joint webinar – Data Visibility & Digitalisation: The Future of VAT Reclaim on Travel & Expenses

Through a solid commitment to the digital transformation and resource allocation, company leaders can turn their financial departments into the organisation’s visionaries. Implementing the right digital solutions and processes will allow leadership to gain control over the ever-growing data lake, get the required business insights, act in full compliance and be empowered to make decisions that create long-term financial gains.

Ensure your company is up to the challenge and prepared to reap the benefits of the digital tax transformation. Join us for a webinar on the topic with VATBox experts and our partner, SAP Concur.

In this webinar led by Martin Leonard: EMEA FSI Director, Banking Resale & Partnerships at SAP Concur & Mark Stirling: VP & GM EMEA at VATBox, you will learn how to:

  • Eliminate the complexities of the VAT/GST recovery process
  • Achieve unparalleled compliance by using AI machine learning algorithms
  • Manage & improve transactional business data across your entities and jurisdictions
  • Maximise returns and reduce costs

You can register HERE.

European Union updates

Can a Subsidiary be (also) a Fixed Establishment under EU VAT?

Recently, the Advocate General of the EU Court of Justice gave her opinion in a case that got many companies worried in Europe. In the case (nr. C-547/18 – Dong Yang), of which a summary can be found HERE), the ECJ is asked if a subsidiary of a foreign company can be regarded a fixed establishment of this foreign company.

Some national tax authorities have been trying to argue that foreign companies have a fixed establishment in their country through such a subsidiary, where this interpretation of the EU VAT rules and case-law can be regarded as fairly ‘aggressive’. In her opinion, Advocate General Kokott (rightly) calms everybody down and explains that in her view a subsidiary is not automatically a fixed establishment of the parent company.

Most VAT people will agree with this opinion. An article with all the pro’s and cons can be found HERE.

Recent Judgment of the European Court of Justice

On 20 November 2019, the ECJ gave its judgment in case C-400/18 (Infohos). The case deals with the VAT exemption for groups of entities (not VAT groups), who perform activities for their members and non-members.

Infohos is an association that specialises in hospital information technology. It provides IT services to hospitals affiliated with it as well as to non-members. Infohos did not register as a taxable person because it considered that it could not be regarded as a taxable person or, at the very least, it would qualify for the VAT exemption.

The Belgian tax authorities took the view that the services provided by Infohos were subject to VAT, as these were not only provided to members but also non-members of the association.

The ECJ ruled that Member States are not allowed to require independent groups of persons that want to use the VAT exemption to only provide services to their members, and disallow the VAT exemption if such groups also provide services to non-members.

A summary of the case can be found HERE.

France – Draft bill on E-invoicing for B2B transactions

The French government published a draft bill, which includes the earlier announced new rules on e-invoicing for B2B transactions. The goal is to implement the new rules on 1 January 2023.

Under these new rules, all businesses will be required to issue and receive electronic invoices for B2B transactions. On top of that, these e-invoices have to be transmitted through the tax administration, via the so-called Chorus Pro portal. This procedure of e-invoicing would enable the French tax administration to collect the relevant numbers for the VAT return beforehand.

The French Government will submit a report to the French Parliament by September 2020, based on which an evaluation will be done with all stakeholders (businesses, accounting professionals, the tax administration).

The draft bill is only available in French and can be found HERE (article 56 on page 219 deals with the VAT invoicing rules).

The United States – Wayfair consequences: not only for use and sales tax

The Wayfair-case in 2018 is still keeping states busy. Many states have implemented new rules to ensure that out-of-state vendors are collecting sales tax.

Some states are even going so far in assessing Remote Sellers for Sales Tax for pre-Wayfair periods (see HERE).

But the states are also looking at the question if with this case, the definition of ‘Nexus’ (i.e. ‘fiscal presence’) has been changed, and how this affects other taxes. Many states are also implementing nexus rules for income and franchise taxes in this new post-Wayfair world.

Hawaii, Massachusetts, Pennsylvania and Texas recently issued administrative guidance or proposed new rules, and Indiana enacted a new nexus statute in 2019 for income tax purposes already.

More information on these developments can be found HERE.

Romania – Introduction of SAF-T reporting

The Romanian tax authorities have launched the tender for the implementation of a Standard Audit File for Tax (SAF-T) IT system. The SAF-T would allow Romanian tax authorities to gain more detailed insight in the key taxpayer’s AP and AR transactions, and by that achieve better compliance of taxpayers and become more successful in fighting tax evasion and fraud.

The objective of the tax authorities was a SAF-T pilot project for large taxpayers to be operational at the beginning of 2020, but the delay in launching the tender auction means, most likely, that SAF-T will become operational with a delay.

More information can be found HERE (in Romanian).

Deloitte’s European CFO Survey Autumn 2019

Uncover the issues that matter most to Europe’s CFOs in the latest European CFO Survey report – Into the woods – and see how responses compare by exploring a special tool.

The sheer number of CFOs is feeling less optimistic about the financial prospects of their companies. Over the past 18 months, global economic growth has slowed down, and future prospects worsened markedly. Weak business sentiment has resulted in a lower willingness to invest or add to their workforce across the board, and weakening demand is the main concern across the board.

Download the report and use the tools to compare responses on this website HERE

Your FREE VATBox pass for the ‘Tax Transformation Summit’ in London on 27-28 November 2019

As a valued member of the VATBox community, we want to invite you to the upcoming “Tax Transformation Summit” in London this week on 27-28 November 2019.

The “Tax Transformation Summit” is a cutting-edge forum designed to bridge the gap between the tax function and tax technology.

On Day 1, you will have the opportunity to meet and hear Jose-Manuel Pedron-Garcia, Global Tax Process Leader from Michelin, explaining his view on the impact of tax digitalisation on big corporates and how the VATBox solutions support the global tax strategy of Michelin.

Click HERE for full agenda. For your complimentary pass, please complete the registration form (you need to select “Corporate Tax professionals” for a FREE pass).

We are looking forward to seeing you in person in London or online for our upcoming TaxTech newsletter in two weeks!

On behalf of the VATBox Tax Knowledge team,

Remco Dewaerheijt

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