TaxTech – Sep 3th, 2019

France – guidance about vouchers

Vouchers are still a hot topic in the VAT world. The European Union has laid down the rules for vouchers in  Directive 2016/1065/EC of 27 June 2016, which France has already implemented in its national VAT legislation.

France recently published guidelines which amongst others define the concept of vouchers for VAT purposes and clarify the regime applicable to the two main categories of vouchers (single purpose-use and multi purpose-use vouchers). A “single-purpose” voucher is treated as a prepayment to the product for which it can be redeemed, and is taxed at the point of sale, whereas a “multi-purpose voucher” is treated similarly as money, which is only taxed at the time of redemption.

United Kingdom – VAT recovery allowed prior to VAT registration

In a case before the First-tier Tribunal, the question arose to whom legal services were performed: the company Koolmove Ltd., or to Mr McKee, who incorporated this company.

Mr McKee developed software, which he wanted to market and sell via a company. However, before this company was incorporated, he incurred legal costs, on which the VAT was deducted. The UK tax authorities argued that legal services were not supplied to the company, because this company did not exist yet and was not VAT registered, and denied the VAT refund.

The judge decided that Koolmove Ltd. was entitled to claim VAT on invoices issued before the VAT registration, even though those invoices were not issued directly to that company. This case is in line with EU case law, but it is interesting to see that local tax authorities are still trying to apply the rules differently sometimes, despite having pretty clear EU case law.

Russia – VAT deduction on e-services

If a foreign service provider provides electronically supplied services (e-services) to customers in Russia, the foreign service provider must register for VAT in Russia and charge Russian VAT. The services may be performed via a foreign intermediary, who is not providing these e-services himself, but who is collecting the payments from the Russian customers. In that case, this foreign intermediary is obliged to register for VAT in Russia and charge Russian VAT.

For some time, it was not clear if this VAT was recoverable by the Russian customer if the payment was not made to the actual service provider. The Russian VAT Law did not seem to allow this.

The Federal Tax Service of Russia has now confirmed that payments for e-services to a tax-registered foreign intermediary also qualify for input VAT recovery.

United Kingdom – New policy for price adjustments

The UK VAT authorities noticed that some businesses are trying to gain a tax advantage by making VAT adjustments for reductions in price without refunding their customers. In addition, some businesses were processing errors as price adjustments to avoid deadlines. The UK Tax Authorities, therefore introduced a new policy, effective 1 September 2019.

Under the new rules, an increase in price is considered to take place when the change is agreed by both the supplier and the customer. A debit note must be issued no later than 14 days after that moment. A decrease in price is considered to take place when a supplier performs a refund. The credit note can be issued sooner, but should ultimately be issued within 14 days after the refund.

India and Malaysia– Protests against late VAT refunds

In some countries, VAT refunds are paid fairly quickly, while in other countries, businesses may have to wait a long time. This can be for various reasons. 

  • Tax authorities do not have sufficient capacity to process the VAT refund requests. 
  • The local VAT rules only allow a VAT refund after a VAT audit has been performed. 
  • Refund positions have to be offset against future payable positions.
  • Or simply because the government does not have enough money…

In India, businesses have been protesting against the late payment of VAT refunds. According to these businesses, the Indian local tax officials are not following the correct procedures, and they are now seeking support from the central GST department. Perhaps a small advantage is that if the VAT refunds are paid too late, the businesses are entitled to receive interest.

In Malaysia, the protests were even stronger, since the government had used the VAT refund fund for paying public expenditures, which resulted in the tax authorities not being able to pay the VAT refunds to businesses. The Malaysian Finance Minister has promised that this will not happen anymore in the future.

Switzerland – No more paper VAT Returns

Switzerland has announced that it wants to get rid of the paper version of the VAT return. It is already possible to submit the VAT return electronically in Switzerland, and more than half of the Swiss taxpayers are doing so. However, the Swiss tax authorities want to oblige all taxpayers to do so as of 2020 and make the other half also move to electronic filing. Information on the Swiss VAT return can be found HERE.

Italy – First  reporting for remote ‘distance sellers’

The Italian tax authorities issued an implementing decree regarding the tax reporting requirements for remote (distance) sales. The decree is addressed to all taxable persons, including all persons who facilitate through the use of electronic interfaces—including marketplaces, platforms, portals, or similar devices—remote sales into the EC or remote sales of imported goods. 

The deadline for submitting the report is 31 October 2019, so businesses don’t have much time left to ensure that they have all the data necessary to submit.

EU 2018 VAT Refunds – September 30th deadline

If your business paid foreign EU VAT in 2018 on Travel & Entertainment expenses or foreign EU VAT through Accounts Payable, this VAT would become a full write-off after September 30, 2019. Before then, thousands of Euros in foreign VAT for intercompany meetings, intercompany recharges, trade fairs, tooling, spare parts, customer events, etc. are, in most cases fully recoverable.

Contact us to discover how we can help you determine eligible expenses, painlessly extract data from your ERP, Travel Expense Systems,  and other internal data sources, and ensure compliance with all relevant rules and regulations in the country of refund. 

We invite you to schedule a demo to learn more about how VATBox uses artificial intelligence and machine learning to optimise your VAT refund position, while at the same time providing you with a broad spectrum of data to benchmark your organisation’s performance.

Don’t delay! September 30, 2019, is the last possible date to submit your EU VAT refunds for 2018 expenses. Read more about the deadline and optimising the audit and refund process in our latest published article.

Hungary – new reimbursement rules for incorrectly charged VAT

On 11 April 2019, the European Court of Justice gave its judgment in Case C691/17 (PORR Építési Kft.). The case deals with the right to deduct value-added tax (VAT) paid as input tax when a wrong invoice is used, i.e. where a supplier did not apply the reverse charge where it should have done so. From 1 January 2020, a special rule on VAT reimbursement will take effect in Hungary. Taxpayers will have the opportunity to claim reimbursement of such input VAT in writing, no later than six months prior to the expiry of the limitation period. The VAT authorities will only approve the reimbursement if the vendor has paid the output VAT to the authorities. Read more about this HERE.

Kenya – VAT Refund process updated

Kenya has introduced a simplified VAT refund process for VAT registered businesses. This procedure is based on a green channel framework whose overall objective is to expedite the payment process of VAT refund claims from the low-risk sectors of the economy.

What this means is that the Kenyan tax authorities have identified certain sectors as ‘low risk’, and as such will process any VAT refund requests from businesses that operate in these sectors more quickly. The sectors and products categorised as low risk include horticulture, floriculture, fish products, millers, bakers, dairy products and pharmaceutical companies. Other examples of sectors and products falling under the low-risk category include sales to Export Processing Zone (EPZ) enterprises, transport, mining companies, and the transportation of passengers by air carriers.

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