TaxTech October 1, 2018
VAT is a very interesting tax. Some of you may find it a Very Annoying Tax, as there are many requirements that you have to comply with, such as invoicing, submitting VAT returns and keeping an administration. But because it is a transaction tax, you can find VAT everywhere around you, all day long.
European Union: Implementation VAT Action Plan. The EU Commission adopted its VAT Action Plan more than two and half years ago on 7 April, 2016. After several amendments, the implementation of the plan is now set to start in January 2019. There are some considerations for companies to consider already. The VAT action plan aims at replacing the transitional regime of intra-community supplies, which was introduced in 1992, whereby the B2B supplies of goods under conditions are subject to 0%/VAT exempt. It also includes a series of measures to eliminate the VAT obstacles concerning cross-border e-commerce transactions, as part of the digital single market strategy. One of the main concerns of the EU Commission is the significant “VAT gap” that currently exists, according to which the EU countries are losing almost EUR 150 billion caused by VAT fraud. An article about the VAT Gap can be found here. The progress of the VAT Action Plan can be found here.
United Kingdom: Making tax digital. Besides the question if there will be a hard or soft Brexit, companies will also have to prepare for the digitalisation of tax in the UK. Making Tax Digital is a large project that the UK tax authorities are working on, and although a lot of details are not known yet, HMRC has published guidance for businesses on preparing for the upcoming digital record-keeping requirements. The document can be found here. But you may expect changes and more specific requirements to follow at a later stage.
The Netherlands: Budget 2019. The increase of the reduced VAT rate per 1 January, 2019 was already announced, and is now confirmed in the 2019 budget plan. The reduced VAT rate applies to a variety of common products or services, such as food and drink, medicines, books, daily newspapers and magazines. Payments received in 2018 remain subject to the 6% rate, but if you have an existing contract, the supplier will have to charge an additional 3% VAT as of January 1, 2019. The budget plan contains a couple of more VAT items, such as the extension of the VAT sports exemption and changes in the ‘small entrepreneur scheme’. Furthermore, the VAT obligations for small businesses performing B2C digital services will be simplified as of 2019, as part of the partial implementation of the EU e-commerce VAT Directive. Read more here.
Romania: VAT rate cut to 5% in Tourism sector. The Romanian Ministry of Tourism has confirmed that the VAT rate for certain tourism services will be reduced to 5% rate by the end of 2018. Currently, these supplies of services are taxed at either the 9% reduced rate of VAT, or in the case of entertainment, sporting and recreational activities at the 19% standard rate. The 5% rate of VAT is expected to apply to hotel accommodation and similar services, renting of campsites, restaurant and catering services excluding alcoholic beverages other than beer; and sports, recreational activities and entertainment. More here.
United States: Centralized approach for (Wayfair) remote sellers. As we mentioned in our previous newsletter, the Wayfair case resulted in an unharmonized approach, each state implementing its own rules to levy sales tax from remote sellers. On 13 September 2018, however, the Online Sales Simplicity and Small Business Relief Act of 2018 was introduced in the US Congress. This bill is meant to provide for the orderly implementation of state sales tax on online sales. In short, it arranges a ban on retroactive taxation, a phase-in of compliance obligations, and a small business remote seller exemption. If a sale is made by a small business remote seller, whose gross annual receipts in the US during the preceding calendar year did not exceed USD 10 million, sales tax should be collected from purchaser. Of course, it remains to be seen if the bill will pass.
Nigeria: Lower court overruled, reverse charge for imported services. The Federal High Court of Nigeria overruled a decision of the Tax Appeal Tribunal regarding a Nigerian taxpayer that received consultancy and advisory services from foreign/non- resident companies. The Tax Appeal Tribunal argued no VAT was due, as the services were wholly performed outside Nigeria. However, the Federal High Court decided that Nigeria applies the ‘destination principle’, even though it is not a concept that is defined in the law in its currently form, and that in the event that VAT is not included, the Nigerian taxpayer will be liable to self-assess VAT as the consumer of the service. Read more about it here.
United Arabic Emirates: No refund of VAT on entertaining staff. The Federal Tax Authority issued a clarification about input VAT recovery, and explained entertainment services supplied to employees, such as staff parties and retirement gifts, should not be exempt from VAT. As such, the VAT on such costs is blocked from recovery. VAT on costs that an employee incurs for business purposes in the course of performing his/her role, for example VAT on hotel costs relating to a domestic business trip, will continue to be recoverable. See this article.
Oman: Plans to implement VAT in September 2019. So far, of the 6 GCC-countries, only Saudi Arabia and the United Arab Emirates introduced a VAT system. During a recent Oman Chamber of Commerce and Industry seminar, it was announced that the authorities are targeting September 2019 to implement VAT in Oman. See this update.
Costa Rica: Thousands protest against reform of Sales Tax to a VAT system. Referring to our “Very Annoying Tax” comment above, thousands of Costa Ricans have been protesting against a proposed fiscal plan. One of the key elements of the reform would convert the current 13% Sales Tax on goods to a VAT system, applied both to goods and services. Read more about it here.
How company travel impacts your VAT reclaim. You may be surprised to find that your travel policy is impacting your VAT recovery. Travel and Entertainment (T&E) policies may seem simple at a high level, but when you did into travel policy and the travel-related processes, you’ll find there is much to be considered. Read more here.
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