Nov 26, 2018

TaxTech November 26, 2018

Norway: VAT and E-commerce. Norway has announced new rules for web-shops trading with Norwegian customers. Norway is following several other countries that are implementing new rules in order to safeguard that no VAT is ‘leaking out’. Barbados, Australia and South Korea are some examples of other countries. On a European level, the European Commission has been looking at a Digital Services Tax for some time. This tax is a 3 percent levy on the revenue earned from e-commerce activities in the European Union. More information can be found on the European Commission website.

United Kingdom: Making Tax Digital to be postponed? The United Kingdom wishes tax payers to submit their VAT Returns in a more automated way. This Making Tax Digital programme is to be introduced on 1 April 2019. However, the UK Economic Affairs Committee has now recommended that the government’s introduction of mandatory Making Tax Digital for VAT be delayed by “at least one year.” If this advice is followed, it will give businesses more time to prepare.

United Kingdom: Brexit update. The withdrawal agreement has been agreed upon. Still, this does not provide certainty for tax payers in and doing business with the United Kingdom. The 585-page withdrawal agreement contains only 7 pages about free trade. The latest news is that the United Kingdom may be a part of the European Customs Union, at least until the end of 2019. This should smoothen the delays at the borders a bit, although businesses should not forget that with the EU formally leaving the EU, cross-border transactions with the UK will be treated slightly differently from a VAT point of view. The full agreement must now be agreed upon by the British parliament, which will be the next difficult task for the prime-minister.

Poland: SAF-T replacing VAT Return. Poland has announced plans to withdraw the requirement for the submission of monthly VAT returns, and replace the VAT Return with the mandatory updated version of the Standard Audit File for Tax (SAF-T). The changes require all businesses to review their current accounting data in their ERP system to make sure that VAT numbers are also included in the SAF-T reports generated to comply with Polish reporting requirements. The tax authorities are rather strict on formal requisites and do apply penalties on any missing obligation.

European Union: ECJ Case law

  • Case C-664/16 (Vadan) Regards the case where a Romanian business exceeded the VAT registration threshold at a certain point in time. He wanted to claim back input VAT, also for the pre-registration period, but was not in possession of valid VAT invoices. The ECJ decided that it is not possible to claim back input VAT without a valid VAT invoice. For a summary of the case is available here and the full verdict is available here.
  • C-648/16 (Fontana) deals with the question if the tax authorities may extrapolate data in order to calculate a VAT assessment. Specifically, in this case the tax authorities used a report that was written for a specific branch of businesses and compared this information with the data provided by Mrs. Fontana. The ECJ ruled that it is allowed for the tax authorities to extrapolate data and information, unless the rights and defence of the tax payer are endangered. This question comes up during many audits, and tax authorities are often using these methods/calculations. Although here the tax payer lost the case, it is always good to check if your tax inspector is following the rules. A summary can be found here. The full case can be found here.

India: VAT refunds delayed & VAT on overseas services. India, where new GST rules were introduced on 1 July 2017, businesses are still waiting for their VAT refunds since the introduction date. At the same time, a ruling has been published in which the Indian authorities states that “back-office services” provided to overseas customers are subject to 18% Indian VAT. Although the ruling is given in a specific case, the decision could have implications for companies with significant back office and support functions located in India.

Brazil: VAT consolidation? The new to be established government has announced some big plans for changing the Corporate Tax rules, with a proposal to reduce the CIT rate to 20%. The money has to come from somewhere, and therefore there is a VAT reform bill currently under analysis before the Brazilian Congress. It is likely that the VAT Bill will also introduce a VAT in order to streamline the existing ICMS, ICI and other complex indirect taxes. More updates will follow soon.

United States: Ripples of the Wayfair decision. The Wayfair decision has caused many US States to change or reconsider that sales tax legislation. We have mentioned this case and some responses of various states before in our newsletters. The latest update and developments can be found in an article here.

Business Travel News: And for some lighter news. Five trends in Business Travel that have begun to arise in the travel process itself when it comes to booking flights or hotels, interacting on social media, price checking, and cyber security. Check them out here.

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