TaxTech August 20, 2018

Belgium: draft legislation for optional VAT regime for leasing of business property. In a lot of countries, the lease of real estate is exempt from VAT, which does not allow the lessor to recover the VAT on its costs – even if the property is used for VAT taxable business purposes. Some countries therefore allow businesses to choose to apply VAT to the lease in such circumstances.  Belgium is considering to implement such an option starting 1 October, 2018. Also in Belgium, a new “circulaire” was released, explaining the VAT treatment of transportation services. It was already released in May 2018, but only recently many businesses start realising the effects of these ‘effective’ rules. Contrary to the main rule for services, all domestic transportation performed by a non-EU transportation company will be subject to Belgian VAT. When the entire freight transport service process takes place outside the EU, the place of service will be outside the EU. More can be read here.

Switzerland: charging foreign e-commerce firms VAT on deliveries in 2019. Currently, online purchases from abroad that attract less than CHF5 ($5.01) in VAT are exempt, but starting January 1, 2019, online purchases made from companies overseas will be subjected to Swiss value-added tax (VAT). All firms with a turnover of over CHF100,000 will be obliged to impose Swiss VAT for Swiss customers. The Swiss VAT rate is 7.7% for most goods and 2.5% for certain items like books. The move is designed to reduce the attractiveness of buying from foreign multinationals like Amazon, whose prices are very competitive compared with high-priced Switzerland. More here.

China: refund of excessive input VAT credit balances for certain industries. China’s Ministry of Finance and the State Administration of Taxation jointly released a circular.  Normally, VAT refunds are only allowed where a taxpayer has actually overpaid or qualifies for an export VAT refund, while refunds are not allowed where input VAT exceeds output VAT. However, accumulated uncredited input VAT balances, i.e., VAT receivables, for 18 industries including advanced manufacturing, and some of modern service industries as well as the power-grid enterprises may be refundable when this change has been implemented (expected by the end of September 2018).  More details here.

Croatia: VAT cut to 24% delayed. Previously Croatian Prime Minister Andrej Plenković announced plans for a reduction in the standard VAT rate from 25% to 24%. This reduction was  to be included as a part of a broader package of tax reform measures meant to improve revenue while reducing fiscal pressure on both individuals and companies. The change was intended to enter into force from 1 January 2019. However, recently the Croatian Government has announced that it will delay the planned one-percent value-added tax cut until 2020 but will still cut VAT on some basic commodities from the beginning of next year. See here.

Indonesia: new VAT refund rule for tourists expected to take effect during Asian Games. Normally, Indonesia does not allow VAT refunds to foreign companies and individuals.  However, during the Asian Games, which will take place from August 18 to September 2 in Jakarta and Palembang, the authorities allow an exception. The VAT refund will be implemented for tourists that shop in the five main Indonesian airports and is meant to boost sales in airports during the Games.  Read the article here.

Kuwait: VAT implementation sooner than expected? Together with 5 other GCC-countries, Kuwait agreed to implement a VAT system.  Saudi Arabia and the United Arab Emirates were the first two GCC countries to do so, and introduced VAT per 1 January 2018. Although previously we bumped into news that Kuwait was not expected to implement their VAT system until 2021, according to local newspaper sources, the government intends to prioritize the approval of the VAT regime during the next session of the National Assembly starting in October 2018.  More details here.

Luxembourg: VAT grouping introduced. On 31 July 2018, the Luxembourg parliament approved the introduction of a VAT group regime.  A Luxembourg VAT group means that all supplies of goods and services between members are ignored and a single VAT return is filed for the entire group. VAT groups may be formed by two or more Luxembourg companies (including Luxembourg branches of foreign companies) that are linked in a financial, economic, and organizational way. Group members are held jointly liable for the VAT liability default interest or penalties, and the VAT group can normally not be broken within two calendar years.  A feature that was removed from the draft legislation, was that the tax authorities could exclude companies from a VAT group where it would lead to a distortion of competition. Tax authorities may still exclude companies in cases of abuse. The regime is effective from 31 July 2018.  See more here.

European Court of Justice – Update. The European Court of Justice (ECJ) also had a Summer break. Even so, there were 2 judgments in VAT cases, and there are some new cases that will be interesting to follow:

  • Judgment of 7 August 2018 in In Case C‑16/17 (TGE Gas Engineering GmbH), dealt with cost recharged via branch, and the deduction of input VAT. For the full case, click here. A summary can be found here.
  • Judgment of 7 August 2018 in Case C‑475/17(Viking Motors and Others), dealt with the question is a local sales tax can be regarded a ‘turnover tax’. For the full case, click here. A summary can be found here.
  • On 8 June 2018, the ECJ received preliminary questions in Case C-275/18 (Vins) regarding the question if the documents issued by the postal services are sufficient evidence for charging 0% VAT on export deliveries.. More information here.
  • On 26 June 2018,  questions have been referred to the ECJ in Case C-329/18 (Altic), regarding the deduction of input VAT on purchases that have not been delivered, and whereby the customer acted in good faith. More information here.

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