TaxTech – July 9th, 2019
Portugal – E-invoicing rules postponed for foreign businesses
Portugal is one of the frontrunners when it comes to VAT reporting via SAF-T and in the area of electronic invoicing in the European Union. As of 1 July 2019, businesses in Portugal must use specific certified software for issuing electronic invoices. However, it was unclear whether these new rules would apply to foreign businesses as well.
On 27 June 2019, the Portuguese government published an order that granted extensions to the implementation deadlines.
Entities that are not established in Portugal, but are registered for VAT purposes in Portugal, were unsure of whether they wererequired to get their invoicing software certified. It is expected that the new requirements will apply to foreign business from 1 January 2020 onwards.
Norway – Deadline for 2018 VAT refunds extended
On 28 June 2019, the Norwegian tax authorities announced that the deadline for foreign businesses without a Norwegian VAT registration to reclaim 2018 VAT had been moved from 30 June 2019 to 30 September 2019.
For businesses that forgot or were unable to submit their refund request in time, this opens the opportunity to (still) prepare and submit the application.
Currently, it is not yet known whether the extended deadline will only apply this once, or will also apply to future refund requests. We expect further clarification to be published soon.
Global – Study into VAT/GST compliance burden
A recent study by KPMG and UNSW Sydney across 47 tax jurisdictions highlights that there is still a lot of work to be done to optimise VAT compliance processes, both by businesses and authorities.
The study focuses on the compliance requirements and administrative burden associated with VAT and GST. Various factors were reviewed, such as multiple VAT rate structures, the ease of registering for VAT, the ability to deal electronically with tax authorities for registration, filing, payment and information services, as well as the speed of filing and handling of VAT&GST returns.
Best in class is Singapore, which was ranked number 1, followed by Australia, Costa Rica, New Zealand and South Africa. Fifteen countries scored poorly, and four countries as very burdensome with Belgium and Luxembourg being assigned the same score as Brazil.
For VAT refunds, Australia, Denmark, Estonia, Finland, Norway andSlovenia scored best.
The study suggests reforms to reduce the compliance burden are needed, for example, by implementing technology solutions in order to help streamline processes.
The full report can be found HERE.
Singapore – GST on imported services from 1 January 2020
Effective from 1 January 2020, consumers and businesses in Singapore that purchase services from foreign vendors may have to pay GST on those ‘imported’ services.
The new rules apply to digital services, such as music and video streaming services, digital downloads, and online subscriptions. The definition of such services is “any services supplied over the Internet or other electronic network and the nature of which renders it supplies essentially automated with minimal or no human intervention, and impossible without the use of information technology.”
For digital B2B services, the reverse charge mechanism will apply, meaning that the GST-registered customers in Singapore will have to self-account for the GST. For digital services to non-GST registered customers, depending on whether a platform is used and if the platform exceeds a threshold, either the platform or the foreign vendor will be liable for fulfilling the GST obligations.
European Union – Overview ECJ case law
The European Court of Justice rendered two judgments in the past two weeks.
- The first case deals with the question of whether the management of a fund can be regarded as a taxable activity for VAT (case C-316/18 – University of Cambridge).
The University of Cambridge provides VAT exempt educational services to its undergraduate, master’s and PhD students. It also carries out several VAT taxable services, including providing management services to the Cambridge University Endowment Fund.
The investment activities carried out by this Fund out do not in themselves constitute economic activities. Thus, the VAT paid on the management fee was not deductible, according to the UK tax authorities (HMRC).
The European Court of Justice ruled that the investment fund is indeed not performing an economic activity and therefore input VAT paid is not deductible.
- The second case also deals with a VAT exemption. The Court considered if and when medical activities fall under the VAT exemption (case C-597/17 – Belgisch Syndicaat van Chiropraxie).
In Belgium, the activities of chiropractors, osteopaths, plastic surgeons and professional associations are not all treated equally. According to Belgian law, the VAT exemption for medical supplies is reserved without reasonable justification to the practitioners of a regulated medical or paramedical profession, whereby this statute under Belgian law does not apply to the professions of chiropractor and osteopath. In other words: only specific (certified) medical professions are exempt from VAT, and others are not.
For example, the plastic surgeons argue that, under Belgian law, an unjustified difference exists in treatment between medicinal products or medical devices provided as a result of an aesthetic intervention or treatment, and medicinal products or devices are provided as a result of surgery or treatment of a therapeutic nature, since only the latter is subject to a reduced VAT rate.
The European Court of Justice ruled that Member States cannot make arbitrary decisions.
The VAT exemption for medical activities is not reserved for services provided by practitioners of a medical or paramedical profession regulated by the legislation of the Member State concerned.
However, a Member State is allowed to set rules for the interpretation and application of the VAT exemptions, including ones that differentiate between medicinal products and medical devices provided as a result of surgery or treatment of a therapeutic nature on the one hand, and medicines and medical devices provided as a result of surgery or treatment of a purely aesthetic nature on the other the hand.
In short, this means that Belgium is allowed to treat (plastic) surgery differently, depending on whether the treatment is of a therapeutic nature or a purely aesthetic nature.
Russia – VAT on e-services
Russia implemented new rules for electronic services that are provided by foreign businesses to Russian customers. These rules prescribe that the foreign business must charge Russian VAT, which makes it necessary for this foreign business to register for VAT in Russia.
The Russian tax authorities have issued a Letter according to which they will accept the payment of VAT by Russian purchasers of B2B e-services from foreign e-service suppliers, i.e. the Russian customers will have to withhold or reverse charge the Russian VAT due on the electronic services. This will not, however, relieve the foreign e-service supplier from the formal obligation to register in Russia for VAT purposes and file “null” declarations in the country.
The Letter does not have any legal force of law, but its existence reduces the risk of a dispute with tax authorities. It does not exclude, however, the possibility of a negative outcome if such a dispute is brought before the Russian courts.
The Boardroom – CEOs must be aware of VAT
This article provides a view on the future of taxation, whereby CEOs are warned about the many changes that can be expected in the coming years.The article discusses digitalization, advanced (VAT) reporting, electronic invoicing and modernizing of audits, to name just some of the developments.
In the coming years, the tax policy landscape will undergo a major transformation. While much remains uncertain, CEOs must take proactive steps to prepare their businesses wherever possible.
VATBox can, of course, help you get ready for the future.
India – Is this the real life?
Or is this just fantasy? This question was asked in a court case in India. The case deals with the GST treatment of on online fantasy game, whereby the owner of the game argued that the game was a ‘game of chance,’ similar to gambling, and thus not subject to GST.
The court ruled that this interpretation was wrong: the players need substantial skill, and the results of the fantasy game contest on the platform is not at all dependent on winning or losing of any particular team in the real-world game. Thus, no betting or gambling is involved in fantasy games.
VAT is real, also in online gaming.
Be ready for the crisis – make your company resilient for a crisis
Crisis preparedness is a competitive advantage most companies need to adopt. PwC developed a test, where you can check whether you are prepared for a crisis.
Take the test here: PwC’s global crisis readiness test > https://www.pwc.com/gx/en/services/advisory/forensics/global-crisis-survey.html.
The survey uncovers some surprising findings that basically reverse-engineer a successful crisis response. They analysed companies that self-identified as having emerged stronger from their worst crisis – and compared them to those who did not fare as well.
KPMG took a different approach by researching how leadership prioritisation can create resilient organisations by adopting an agile approach. We invite you to explore KPMG’s report on Redefining Resilience: 2019 Global CEO Outlook.
To master resilience, CEOs are undertaking wholesale upskilling of their people and accelerating the adoption of advanced technologies. To learn how VATBox’s agile approach can help your company grow, please contact us.
Will the future VAT manager be a Data Architect?
VATBox’s Data Science team member, Joe Hyams, explores the value of well-managed data in the Tax & Finance environment.
The article provides insights into data management from a financial and operational perspective. Learn how a smart data strategy reveals greater business-relevant content and context, and what return on investment can be expected from creating such a role.
See you in two weeks!
Remco Dewaerheijt – VP Tax & Product Strategy