TaxTech – April 1st, 2019
2019 Forbes Digital Trends Report
Forbes recently released their predictions about significant digital transformation trends in the financial services industry for 2019. One upcoming trend is the need for banks and financial institutions to integrate machine learning tools in order to process data quickly and accurately so they can better compete and remain solvent. As our new CTO David Guedalia said in a recent interview, “The world of fin-tech has just starting to enter the data revolution. The things that are happening in our world are all information-based, and financial sectors like VAT are lagging behind. VATBox is bringing accounting into the Information Age. VATBox AI goes beyond just processing the data, it analyzes and extracts insights from the data, providing a level of understanding that was not possible before.”
VAT Return changes for the upcoming VAT quarterly submissions
Poland – SAF-T files replace VAT Return
Poland introduced a SAF-T (Standard Audit File for Tax) in 2016. Businesses have to report transactions on an invoice level to the tax authorities, using a specific format and layout.
This is working so well for the Polish tax authorities, that they have now decided that submitting the regular VAT Return separately will no longer be necessary. The planned ‘go-live’ date for this is 1 July 2019.
Businesses will no longer be required to submit the two separate reports: the SAF-T (JPK_VAT) file and the VAT Return, as is currently required. Instead, only one submission is required – in the form of a new SAF-T file containing both the data from the VAT register (the current SAF-T file) and the data from the current VAT Return. It will also no longer be required to enclose attachments to the submission. .
Requirements and timelines may still be further clarified, but you can already start preparing for this upcoming change.
More information on this change HERE
Bahrain – More information regarding VAT compliance
Slowly, more information is coming in on VAT set-up and compliance in Bahrain. The country implemented a new VAT system on 1 January 2019, and the time has come for companies to submit their first VAT Return.
The due date for this first Return is 30 April 2019 for the period of January-March 2019. This is applicable for businesses that have registered during the first phase of Bahrain VAT registration.
Businesses that want or need to review the VAT Return format can go HERE for more information.
Italy and Portugal – Deadlines on e-invoicing and VAT Return submission postponed
Both Italy and Portugal announced that they will extend the deadline regarding electronic invoicing.
In Italy, the filing deadline of the communication of data on invoices related to the last two quarters, or the last semester, of 2018 has been postponed to 30 April 2019. This also applies to the communication of data of transactions carried out with counterparts established abroad, for the periods January 2019 and February 2019, and to 31 May 2019 for the periods March 2019 and April 2019.
Italy also published an English version of the annual VAT Return for 2018, as well as the instructions for filling out this Annual return. Companies with taxable transactions in Italy must submit this annual VAT Return before the end of 30 April 2019.
Portugal also introduced some revisions to the rules for electronic invoicing, the Standard Audit File for Tax (SAF-T (PT)), issuance of invoices, and storage of both hardcopy and electronic invoices. Initially, businesses had to comply with the new rules as of 16 February 2019. The Portuguese government has now announced that businesses will be allowed more time to start complying with the new rules, which in some cases is postponed until 1 July 2019.
Portugal also published a circular letter to clarify the main changes introduced to its VAT Law by the Decree law. However, it remains to be confirmed whether non-resident companies that are VAT registered in Portugal must use an invoicing software system certified by the tax authorities to issue invoices or not.
VAT rate changes around the world
Besides the VAT rate cut in China that is planned for 1 April 2019, several other countries are changing their VAT rates. Here’s an overview of some of these planned changes.
- As of 1 January 2019, Portugal applies the reduced VAT rate to “books, newspapers, magazines and other periodical publications in electronic format, which topics are mainly scientific, education, literary, artistic, cultural, recreation and sports”. Furthermore, the reduced rate now also applies to “access to singing, dance, music, theatre, cinema, bullfighting and circus shows.”
- In Finland, effective as from 1 July 2019, the VAT rate on electronic publications and single copies of newspapers and magazines will be reduced from 24% to 10%.
- In Germany, there is no specific date set yet, but the German Finance Minister confirmed that also in Germany the reduced rate will start applying to electronic publications.
- The Russian government announced that they would like to apply the reduced VAT rate to fruits and berries. Nothing is certain yet though, but the Vice Prime-Minister announced that the he will be proposing
- Also in France, discussions are starting to see if food items can be zero-rated. – in particular organic food items.
Germany and India – VAT Return form changes
In Germany, the VAT Return form has slightly changed as of 1 January 2019. Instead of reporting purchases subject to the reverse charge in two separate lines, tax payers now have to report these transactions on a single line in both the preliminary and annual German VAT Return.
India envisaged a three-stage monthly return filing system when it implemented the new VAT rules on 1 July 2019: GSTR-1 (sales return), GSTR-2 (purchase return) and GSTR-3 (final returns based on GSTR-1 and two matching). India wanted to introduce a simplified VAT Return format for taxpayers who have no purchases, no output tax liability and no input tax credit in any quarter of the financial year. The implementation of this system has now been delayed.
United Kingdom – Brexit
We cannot avoid talking about the Brexit in our newsletter. The envisaged Brexit did not happen on 29 March 2019, 11 pm UK time. Instead, the United Kingdom was given slightly more time to decide if they can agree on a deal.
The European Union and most of the EU Member States have announced specific measures and provided guidelines to businesses to be ready for a no-deal Brexit.
A selection of items from the past weeks:
- Intrastat obligations after Brexit
Companies will no longer have to submit Intrastat reports after the United Kingdom leaves the European Union. However, how do you deal with transactions around the Brexit date? Information on that can be found HERE.
- Leaving the EU without a negotiated settlement is not the UK government’s preferred outcome, but if it happens, the UK government wants businesses to be prepared. Therefore, the United Kingdom published a document, assessing the consequences and impact of the Brexit for businesses.
- As indicated earlier, it is recommended to submit any VAT refund claims before the Brexit date. The UK tax authorities issued guidance on 18 March 2019 on the changes to IT systems in the event of the United Kingdom leaving the European Union without a deal. The guidance points out that it is not the date of application, which is relevant, but the date on which the EU country on whose portal the application was made sends the application to the competent UK authority.
Whatever will happen in the next coming weeks, just make sure you’re ready to deal with VAT.
E-commerce and sales tax
Many US States have implemented rules to collect sales tax from ‘remote sellers’. But similar to some other countries, States are now also looking at taxing the marketplace operators. More than 20 States are currently looking at ways to hold marketplace facilitators responsible for collecting and remitting Sales Tax on behalf of marketplace sellers. And ten other States have already adopted legislation requiring Sales Tax collection by marketplace facilitators.
On a global level, the OECD announced that delegates from over 100 jurisdictions unanimously endorsed measures proposed in an OECD report, ‘The Role of Digital Platforms in the Collection of VAT/GST on Online Sales’. The report offers governments tools to involve online marketplaces in the collection of VAT/GST by making them liable for the VAT/GST on sales that online traders make through their electronic platforms. The measures aim to “level the playing field” between traditional and online businesses and to increase the collection of VAT/GST revenue.
European Court of Justice – Overview of case-law
There have been two VAT judgments of the European Court of Justice in the past two weeks.
- Case C-201/18 (Mydibel) concerns the question if an one-time ‘sale and lease-back construction’ would affect the general input VAT deduction on the taxable activities of a business.Mydibel’s activities consist of the production of potato-based products and are, on that basis, subject to VAT. It owns several buildings, which it sells to a financial institution and subsequently leases back under specific conditions. This way, Mydibel wishes to improve its cash-flow and liquidity position.However, the Belgian tax authorities disallowed the initial deduction of VAT on the buildings, arguing that the buildings were no longer used for taxable purposes. Mydibel did not agree with this correction, arguing that a ‘sale-and-lease-back-transaction’, in itself may be a ‘financial transaction’, but the result is not changing the use and purpose of the building, or the taxable activities of Mydibel.The European Court of Justice decided that – under the specific conditions of this case – it is not necessary to adjust the VAT on a building which was initially deducted correctly, where that property was subject to a sale and lease back transaction not subject to VAT.For a summary of this case, see HERE. The full text of the judgment can be found HERE.
- If you export goods, the following case may be interesting for you: Case C-275/18 (Vins) deals with the question if the documents issued by the postal services are sufficient evidence for charging 0% VAT on export deliveries.Vins, a company established in the Czech Republic, sold and delivered goods by post to customers in non-EU countries. Vins treated these sales as exports, and charged 0% VAT.The Czech tax authorities did not agree with this, as they were of the opinion that Vins did not have sufficient evidence of the export transactions in its VAT bookkeeping.Vins claims that to fulfil the conditions of the VAT exemption for export does not require the goods to be placed under any of the customs procedures or that a customs document is necessary, but that it is sufficient to prove the export in alternative way, as long as it is clear that the goods have actually left the territory of the European Union. According to Vins, documents issued by postal services who transport these goods to third countries fulfilled the condition of such proof.The ECJ ruled that although Vins did not meet the formal requirements, this failure to comply with the formal requirement of placing the goods under the export customs procedure cannot lead to the exporter losing its right to the exemption on export, provided that it is established that the goods concerned have actually left the territory of the European Union.Thus, a Member State cannot require a taxable person to place goods under the export customs procedure, in a situation in which it is established that the substantive conditions of the exemption, in particular, the condition that the goods concerned actually left the territory of the European Union, are satisfied.A summary of the case can be found HERE.
The full text of the judgment can be found HERE.
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