TaxTech – May 28th, 2019
European Union – ECOFIN discusses digital taxation
In many countries around the globe, governments are looking at efficient and effective ways to tax the modern way of doing business. This includes e-commerce sales via platforms and the supply of electronic services. The proposals and discussions around a digital tax have similarities to taxation through value-added tax or sales tax. Although the policymakers are busy with the new rules for digital taxation, don’t forget that the EU countries will also have to implement the new VAT e-commerce rules as per January 1, 2021.
On May 17 2019, the Council of the European Union discussed digital taxation and also published the updated list of non-cooperative tax jurisdictions. The Council discussed current international tax reforms to prepare for the upcoming OECD and G20 leaders’ meetings.
More information on this ECOFIN meeting can be found HERE.
Poland – Split payments for VAT
In several countries, a split payment mechanism for VAT has already been introduced. Such a mechanism means that the VAT mentioned on an invoice is paid into a separate bank account, which account is only to be used to make payments to the tax authorities. This way, governments aim to avoid VAT fraud by receiving the VAT directly.
Setting up such a system is not easy, as the Romanian attempt proved. Romania had to withdraw its obligatory split payment regime following an order from the European Commission because the regime was found to be disproportionate to legitimate businesses.
Poland will introduce the system as of September 1, 2019. To ‘encourage’ to be compliant with the new system, penalties can be up imposed up to 100% of the VAT amount, and also penalties can be imposed for issuing non-compliant invoices.
European Court of Justice – Vega International – Fuel cards
There has been one judgment of the European Court of Justice since the last TaxTech. Case C-235/18 (Vega International) deals with the question if the supply of a fuel card is a financial service.
Vega International is a transportation company, which transports vehicles (trucks and buses) that are owned by its customers from the factory to the customer (e.g. a car dealership or rental station). The vehicles transported are refuelled by Vega International.
The actual transportation is performed by subsidiaries of Vega International. Vega International provides these subsidiaries with fuel cards from different suppliers. Vega International recharges the expenses incurred on these cards to its affiliates within the Vega group.
The European Court of Justice considers that Vega International is not only recharging all the fuel costs but is also adding a 2% surcharge. It is mainly because of this surcharge that the ECJ decides that Vega International (thus) receives a payment for a financial service performed to its subsidiaries, since it is pre-financing the purchase of the fuel and therefore acts, for that purpose, in the same way as an ordinary financial or credit institution.
Therefore, the ECJ rules that the provision of fuel cards by a parent company to its subsidiaries, allowing the latter to refuel their vehicles, may be qualified as a VAT exempt financial service.
United Arab Emirates – VAT refunds
Good news for businesses that incur VAT in the Middle-East. The United Arab Emirates announced that they are processing over 8,000 VAT refunds per day. It seems that the UAE tax authorities are getting used to the VAT system that was introduced on 1 January 2018, and the refund process for foreign businesses that are in place since 2 April 2019.
As part of the GCC also, in Saudi Arabia, it is possible to claim back the VAT as a non-established business. For Saudi Arabia, the deadline for claiming back 2018 incurred VAT, is 30 June 2019.
VATBox is happy to assist you in the VAT refund process. Please contact us for more information.
European Union – New VAT Fraud tool to help EU Member States
The European Union introduced a new tool to fight VAT fraud. The so-called ‘carousel fraud’ is costing the EU approximately EUR 50 billion per year. The tool will allow EU Member States to rapidly exchange and jointly process VAT data, which should lead to earlier detection of suspicious networks.
The launch of the Transaction Network Analysis (TNA) tool comes as recent media investigations once again laid bare the huge costs of VAT fraud for public finances, with criminal organisations profiting at the expense of honest taxpayers. It is part of the Commission’s sustained effort to put in place a modern and fraud-proof VAT system.
VAT fraud can take place in the blink of an eye, making it even more important that the Member States have tools to allow them to act as quickly and efficiently as possible. The TNA, which the Member States started using today, will allow tax authorities fast and easy access to cross-border transaction information, leading to quick action when potential VAT fraud is flagged.
The TNA, developed through close collaboration between the Member States and the Commission, will also allow much closer cooperation between the EU’s network of anti-fraud experts (‘Eurofisc’) when it comes to jointly analyse information so that VAT carousel fraud can be detected and intercepted as fast and effectively as possible. It will also boost cooperation and information exchange between national tax officials, allowing Eurofisc officials to cross-check information with criminal records, databases and information held by Europol and OLAF, the EU’s anti-fraud agency, and to coordinate cross-border investigations.
The importance of VAT to the European Member State’s Budgets
The VAT system plays an important role in Europe’s Single Market. It is a major and growing source of revenue for the EU Member States, raising over €1 trillion in 2015, corresponding to 7% of EU GDP. One of the EU’s own resources is also based on VAT. As a consumption tax, it is one of the most growth-friendly forms of taxation.
The Commission has consistently pressed for the reform of the VAT system to make it more fraud-proof. Progress has been made with new rules agreed on VAT for online sales and more efficient rules for the exchange of information and cooperation between the Member States. However, progress has been slow on the Commission’s proposals to put in place a business-friendly and more fraud-proof definitive EU VAT system. A fundamental overhaul of the current system was proposed in October 2017.
Building the tax function of tomorrow, today
As the pressure mounts, the tax office sits at the confluence of change.
The tax function is no longer all about reporting the right number in the right box in a form. Cognitive technologies and new digital models are driving changes in how tax leaders are looking to the future, aiming to add both value and transparency.
The (digitisation or digitalisation) of business is making tax more complicated while, at the same time, making the world a little smaller. Consider, for example, how (digitisation or digitalisation) has allowed businesses to reach into new markets without requiring massive investment. This, along with tax authorities introducing new digital taxes, is undeniably complicating tax leaders’ lives. But at the same time, the world is becoming smaller through the availability of data and analytics, granting tax directors visibility into their data at a granular level.
While tax functions may be somewhat slow to adopt digitised processes, tax authorities appear to be increasingly embracing the value of digital as they look for more real-time reporting. In fact, for perhaps the first time in history, we have entered an era in which all tax authorities agree on the same position: The (digitisation or digitalisation) of tax is good for everyone.
This report does not advocate for a specific operating model or technology for tax. Rather, it draws on Deloitte professionals’ experiences to look at some of the pressures for change, cognitive technologies and their application in the tax function, and practical steps to establishing the tax function of tomorrow, today.
If you are interested in learning more on the opportunities of digitising/digitalising your VAT or finance organisation using VATBox solutions, then don’t hesitate to reach out to us.
Below is a list of our upcoming events
Tuesday, May 28 – Frankfurt – SAP Concur Fusion Exchange
Our German audience is welcome to meet our team today, at the SAP Concur Fusion Exchange in Frankfurt. We’ll be waiting for you.
Meanwhile, you are welcome to Read @Angelina Rigby’s blog on SAP Concur’s newsroom. To book a face to face team with Angelina or one of her team members please contact us today!
Thursday, June 6 – Maarssen – Dutch National VAT Conference
VATBox is the proud sponsor of the 2019 Dutch ‘National VAT Conference’ (‘Nationaal BTW Congres’). The event will take place on the 6th of June in Maarssen, The Netherlands.
It will be a full day on national and international indirect tax topics with a combination of plenary and breakout sessions. Amongst the speakers are representatives of the Dutch tax authorities, advisors, scholars and business. The conference language is Dutch.
For our readers of TaxTech, we can offer an exclusive 20% discount on the conference fee.
For more information and enjoying the exclusive VATBox Taxtech 20% discount on the conference fee, click here. Be quick as discounted seats are limited.
June 18 & 19 – London – SAP Concur Fusion EMEA
SAP Concur Fusion EMEA is a conference that brings together the entire community of the current SAP Concur network and customers. As one of the leading SAP Concur, partners and sponsor, we would love to meet you to help you to gain insight in and streamline your VAT refund process across all your entities and jurisdictions.
The event will take place in London on June 18 and 19, 2019. Contact us to schedule a meeting.
See you in two weeks!
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