TaxTech – Oct 29th, 2019
European Union – Judgments of the European Court of Justice
The European Court of Justice gave its judgment in various cases in the past couple of weeks.
We picked the most relevant ones and provided you with a summary below.
- Case C-692/17 (Paulo Nascimento Consulting) deals with the question if the transfer of a right is exempt from VAT. It is a difficult case to read.Paulo Nascimento Consulting (hereafter: ‘PNC’) provided agency services regarding a sale of agricultural land. However, the owner of the land refused to pay for the services, upon which PNC went to Court. The Court decided that the owner had to pay the fees, but the owner still did not pay, upon which PNC started a procedure whereby the immovable property of the owner was sold. PNC was entitled to receive its payment from the proceeds of the sale.PNC did not wait for the payment but transferred its rights to a third party, Starplant, and it received payment from Starplant. When it received this payment, PNC reported in its VAT Return the initial fees charged for the agency fees, which included VAT. The surplus it received on the transfer of the rights to Starplant, it did not report, treating this as exempt from VAT.The Portuguese tax authorities did not agree with this and argued that the total amount received as payment for taxable services.
The ECJ ruled that the VAT exemption for financial activities does indeed not apply to the transfer or assignment of rights if the underlying payment is in fact for taxable services that were provided.
A summary of the case can be found HERE.
- In case C-653/18 (Unitel sp. z o.o.) the question is answered if tax authorities may refuse the application of the VAT zero-rate if an invoice mentions the wrong name of the recipient.Unitel sold mobile telephones to two Ukrainian entities. It appeared that these two entities were plotting a VAT fraud scheme, and they provided Unitel with wrong information. This resulted in Unitel mentioning the name of one entity on its invoice, while the goods were supplied to the other.The Polish tax authorities, therefore, denied the application of the VAT zero-rate.The ECJ ruled that in case of export supply, whereby it is clear that the goods have been moved outside of the European Union, the VAT zero-rate cannot be denied, purely because of mentioning the wrong name on the sales invoice. The ECJ repeats that the taxable person knew or ought to have known that that transaction was part of a fraud committed to the detriment of the common system of VAT.
A summary of the case can be found HERE.
- This week’s last case deals with the VAT exemption for educational services. The question in case C-47/19 (HA) is if sailing and surfing tuition is exempt from VAT.HA operates two surfing and sailing schools in Germany. He provides surfing and sailing lessons to customers, including lessons organised for schools or universities as part of the sports program or vocational training of the sports teachers, and for which students received grades. The costs of these courses have in certain cases been borne by the school or university.HA treated these activities as VAT exempt, arguing that the surfing and sailing lessons formed part of the curriculum for the students, and thus the VAT exemption for education applied.However, the ECJ ruled that the concept of ‘school or university education’, does not cover the teaching of surfing and sailing provided by surf and sailing schools.
The decision is like the judgment in ECJ case C-449/17, in which the ECJ decided that driving lessons also do not fall under the VAT exemption for educational services.
A summary of the case can be found HERE.
European Union – Implementation of Digital Services Tax
The taxation of e-commerce is growing. Not only because countries are trying to tax services provided by foreign companies with VAT or sales tax, but the Digital Services Taxes are implemented in many countries as well. On 9th October 2019, the OECD published its ‘unified approach’ for public consultation, to arrive at a consensus, to develop a solution for its final report to the G20 in 2020. Read this article to gain an overview of the current status of the Digital Services Tax implementation in the various EU Member States.
The article can be found HERE.
Singapore – Introduction of reverse-charge as of January 1, 2020
From 1 January 2020, Singapore will introduce a reverse-charge mechanism for the purchase of services from foreign suppliers. The reverse-charge mechanism requires the GST-registered recipient to account for GST (‘output tax’) on the value of the imported services (with some exceptions) from overseas suppliers. At the same time, the GST-registered recipient would be entitled to claim the self-accounted output tax as input tax, subject to the usual partial exemption recovery rules.
In other countries, companies may be more familiar with the reverse-charge mechanism. However, for Singapore, this is a new concept. Applying the reverse-charge mechanism correctly may include making changes to the IT set-up and the bookkeeping.
More information can be found HERE.
Poland – Split-payment regime as of November 1, 2019
After being postponed several times, businesses in Poland will finally have to comply with the new split-payment rules as of 1 November 2019. These new rules will oblige companies to pay and receive the VAT charged on invoices on a separate bank account. This way, the Polish tax authorities are trying to ensure that there will be less loss of VAT due to fraud.
When comparing a split-payment regime with a reverse-charge mechanism, the former seems to have several advantages. For example, it is not necessary to check the status of the customer.
A further comparison can be found HERE.
Greece – E-invoicing and real-time reporting
Greece will be implementing new rules that will oblige taxpayers to submit electronic invoices for B2G transactions and to report their sales and purchase invoices in real-time, together with receipt data delivered electronically to the myData platform (My Digital Accounting and Tax Application).
At this moment, there is not a definitive timeline yet, but it is expected that the Greek authorities will be informing companies of the requirements at the beginning of 2020, with a possible implementation as of January 1, or March/April 2020.
More can be found HERE.
Hungary – Updated real-time invoicing and reporting requirements
As of 1 April, 2020, companies will have to comply with new, updated rules for real-time invoicing. With ‘Version 2.0’ of the real-time reporting system, the Hungarian authorities introduce new requirements regarding both the format of communication with the computer servers of the tax authorities and the format and content of reportable invoice data.
It has been compulsory for all VAT-registered companies in Hungary to report their invoices to the tax authority in real-time since 2018. The files are directly transmitted through the Hungarian Tax Authority´s online invoicing portal. The motivation behind this move was to acquire more information on taxpayers´ activities and cut down on tax avoidance and evasion, leading to increased revenues and improved public services.
More information on the new rules can be found HERE.
United States – Guidance for out-of-state sellers on sales tax requirements
More than one year after ‘Wayfair’, companies are still struggling to comply with the sales tax requirements in the different States.
States including Texas, Massachusetts and California recently issued guidance for remote sellers and marketplace facilitators, which includes information on registration and reporting requirements.
For example, States have issued ‘Frequently Asked Questions document’, in which they address issues such as how to establish the ‘economic nexus thresholds’.
An overview of these States can be found HERE.
SAP Concur –interviewed about spend management
Inspiring interview featuring SAP Concur’s Jim Lucier & Mike Koetting talks about Concur’s strategic position within SAP’s new Intelligent Spend Group. SAP Concur’s growth outlook and product road map. As Jim Lucier, SAP Concur’d President mentioned: “Customers are forever asking for new technologies around artificial intelligence and machine learning. That’s something we’ve been doing for a number of years even before anyone called it by that name. But there’s much more realisation on the potential power of this, so the customers are asking for that dynamic. Traveller experience is another big one. We are hitting a tipping point [in travel management] where [buyers] have squeezed [out] most of the costs that can be squeezed, so experience is the next dynamic to work on. The focus on the traveller experience is in the heritage of our business and has been the magic of integrated travel and expense. From the company perspective, integrated travel and expense doesn’t make that much sense: Travel rolls up to procurement and the metrics they’re concerned about are cost savings, price and that sort of thing. Of course, expense goes in through accounts payable. They have a very different set of things they care about. It wasn’t until you said, “Wait. From the business traveller’s perspective, this is one process.” Concur cleaned that up and delivered it as a single process for the business traveller. We were also very early into mobile, and we talk all the time about how Concur technology can help the traveller.”
PwC – Internal controls: Top 10 best practices
Every company is expected to have a certain amount of insight and control over its activities, systems and people. However as every company is different, there are also different ways to obtain these controls.
PwC has made a Top 10 of best practices, which start with defining a clear scope of key controls and risks, and how to implement the next steps.
It all comes down to knowing your own business, the processes and the people, and having the right tools to help you.
An interesting article from PWC on this topic can be found HERE.
See you in two weeks!
VATBox Tax Knowledge team