TaxTech – Sep 17th, 2019
European Union – VAT Gap report and fact-sheet published
The so-called ‘VAT Gap’ – or the overall difference between the expected VAT revenue and the amount actually collected – has reduced somewhat compared to previous years but remains very high. The EU VAT Gap decreased by €8 billion to €137.5 billion in 2017.
The largest gaps were registered in Romania (35.5%), Greece (33.6%), and Lithuania (25.3%). Overall, half of the 28 EU Member States recorded a gap above 10%.
The Top 3 countries with the lowest VAT gap are Cyprus (0.6%), Luxembourg (0.7 %) and Sweden (1.5%).
The European Commission presented a full report, including country-specific overviews on 5 September 2019. The VAT gap report concentrates in 2017, as this is the most recent period for which comprehensive national accounts data and own resources data are available.
The press release with a link to the full report and fact sheet can be found HERE.
Global – New Incoterms in 2020
The International Chamber of Commerce (ICC) updated the internationally commonly used Incoterms. The new Incoterms 2020 should take effect on 1 January 2020, and this version drafted by the International Chamber of Commerce includes some changes in relation to previous versions of Incoterms Rules.
The new Incoterms include some changes, such as the removal of the Incoterm FAS, a possible distinction between land and maritime delivery for the Incoterm FCA, new terms for FOB and CIF for container shipping and the creation of a new Incoterm: CNI.
Over the next few months, the Committee will meet periodically to address these and other issues that will eventually be incorporated into Incoterms 2020. Hopefully, the version of Incoterms 2020 that comes into force, will serve to facilitate international trade between exporters and importers, adapting to the changes that have occurred in the last decade.
More information can be found HERE.
European Union – Implementation of VAT quick fixes
Only a couple of months to go and the European Member States must have implemented the VAT quick fixes.
There are four quick fixes that will come into effect as of 1 January 2020:
- Conditions for applying the zero VAT rate to intra-Community supply of goods;
- Simplification for Call-Off Stock;
- New rule for chain transactions;
- Proof of intra-Community transport of goods.
Especially on the second and fourth topic, Member States are expected to provide specific guidelines for businesses.
For some questions, guidance from the European Commission or VAT Committee might prove to be useful, e.g. on the existence of a fixed establishment for VAT if a business holds call-off stock in another Member State.
An overview of the current status of the implementation by the various EU countries is available HERE.
European Union – Overview European Court of Justice judgments
The European Court of Justice is back from its summer recess. There have already been several questions, opinions and judgments published. This is a summary of what we believe are the most relevant cases:
- In case C-145/18 (Regards Photographiques) the ECJ was asked if photographs, which are signed and limited in the number of copies, can be regarded works of art, to which the reduced VAT rate can be applied.
Regards Photographiques SARL made and sold photographs, mostly portraits and wedding photographs, to which it applied the reduced VAT rate. The French tax authorities did not agree, as they did not regard the photographs ‘works of art’.
The ECJ considers that the concept of ‘works of art’ must be interpreted in the context of the VAT Directive. The EU VAT Directive lists photographs as ‘works of art’, if “the photographs taken by the artist, taken by him or under his control, signed and numbered in the limit of thirty copies, all formats and media combined”.
A Member State can only set more strict criteria if these criteria are within the limits of clear and precise objective criteria. In this case, France did not have such criteria, and thus Regards Photographiques was allowed to apply the reduced VAT rate.
A summary of the case can be found HERE.
- Case C-71/18 (KPC Herning) deals with the question if the transfer of a piece of land can be exempt from VAT if there is a building on that land that is to be demolished.
VAT and immovable property are always a bit complicated. There are many exceptions and specials rules. The main rule is that the supply of immovable property is exempt from VAT unless it concerns ‘new immovable property’, or ‘building plot’.
In this case, KPC Herning A/S (a real estate developer and construction company) acquired and sold a piece of land with buildings, whereby the KPC agreed to partially demolish the warehouse that was located on the piece of land and convert it into a social housing project with partial new built. KPC treated the sale as exempt from VAT. The Danish tax authorities disagreed with this.
The ECJ rules as follows: a supply of land that includes a building, cannot be described as a delivery of a “building plot” when this operation is economically independent of other services, even if the intention of the parties was that the building is totally or partially demolished to make room for a new building. Thus, the supply by KPC should be exempt from VAT.
A summary of the case can be found HERE.
Global – Indirect taxes and e-commerce: not a perfect match, yet.
The International Chamber of Commerce released its Issues Brief on ‘Taxation of Physical Goods in the Context of E-Commerce’. This was developed by the ICC Working Group on e-commerce, to inform the ongoing WTO plurilateral negotiations on the trade-related aspects of e-commerce.
The issues brief explores the effects of indirect tax regimes on international trade in physical goods via e-commerce and highlights that such regimes may present non-tariff barriers to trade unless they are designed in a consistent and simple manner.
The ICC recommends that indirect tax regimes applicable to e-commerce shipments of physical goods must be simple and consistent. The Brief can be found HERE.
Poland – No more VAT Return, only SAF-T
The Polish Government adopted an amendment to the VAT Act, which provides for replacing the VAT declaration with SAF-T (i.e. JPK_VAT files).
As reported earlier, Poland has been announcing that they wanted to replace the VAT Return with the SAF-T files. Together with the implementation of a split-payment mechanism, Poland believes that it will be better equipped in finding fraudulent transactions, and to respond quickly to late, non-responsive or incorrect reporting by businesses.
The Government adopted the amendment to the VAT Act, that enables taxpayers to submit all VAT relevant data through a new type of SAF-T file (i.e. JPK_VAT file). Submitting the updated file will no longer require taxpayers to submit a VAT return separately.
The new requirements will come into effect as of 1 April 2020 for large taxpayers. As of 1 July 2020, also all other businesses in Poland will have to comply with the new rules.
You can read more about the new requirements HERE.
New world. New skills
We’re on the edge of a new world of work — one brimming with possibilities from automation, data analysis, artificial intelligence (AI) and other emerging technologies. However, generally speaking, technology is only as good as the leaders who identify its opportunities, the technologists who deliver it and the people who work with it every day.
46% of global CEOs say their first priority to remedy the issue, is upskilling their existing workforces – but many leaders are finding that their efforts aren’t paying off — they’re not getting the return on investment (ROI) they want or the change they need. It’s a problem they should solve now.
Organisations need a new approach; they should create the right mix of skilled and adaptable people, aligned to the right culture and with the right mindset and behaviours to empower their business.
Click HERE to see PwC’s Elizabeth Yates talks about why now is the time for organisations to start upskilling
10 ways to ensure your VAT department is ready for the digital tax transformation
It is no secret that corporations worldwide are facing major tax regulation reforms.
To help you get ready for the digital tax transformation, Rick Kostons – VATBox’s Senior Tax Manager – has created a list of 10 best practices to ensure your VAT department is ready for the digital tax transformation.
By putting these processes, technologies and resources in place, you can ensure that your company is up to the challenge and prepared to reap the benefits of the digital tax transformation.
You can read the full article HERE.
Survey: The impact of VAT Digitalisation on the future role of tax managers
Last chance to participate in our Benchmark Survey about VAT Digitalisation and its impacts on the future role of tax managers.
We invite you to explore how digitalisation impacts business and financial strategy and how it affects the future role of tax managers and financial leaders.
By participating in our survey, you’ll get early access to the in-depth survey’s results. Learn from your peers and see how your VAT organisation performs against the benchmark.
Take the survey > HERE
See you in two weeks!
VATBox Tax Knowledge team