TaxTech October 15, 2018

European Union: Quick fixes and more. Combating VAT fraud is one of the key actions of the European Commission. The VAT Gap, which is the gap between the expected VAT income and the VAT actually received by Member States, is almost EUR 150 billion. See also our previous newsletter. But, the European Member States just made an important step forward by accepting the quick fixes proposed by the European Commission. These quick fixes focus mainly on cross-border transactions within the European Union involving goods, and the application of the VAT zero-rate. The latter is only possible if both the supplier and the customer have a valid EU VAT registration number, and if the supplier has sufficient evidence of the transportation of the goods. These requirements may not seem new, but the new rules that have been agreed are more precise and leave less room for interpretation by both tax payers and tax authorities. More information about the quick fixes can be found here. But even without these quick fixes, the European Union is trying to find VAT fraud criminals, and with success. Recently a criminal group was exposed and arrested for a large-scale VAT fraud. More can be found here.

European Union: VAT rate on E-books and reverse charge mechanism. The European Commission also had some good news for publishers and authors: e-books and e-magazines can be subject to lower VAT rates, similar to paper versions. The discussions has been going on for some time, and for many people this decision makes sense. Nowadays, it does not matter if you read digital books and newspaper or printed versions. If the content is the same, why is the VAT rate different? It shows though, that VAT rules are very slowly adjusting to the modern technology. Meanwhile, Norway is also aligning its VAT for e-books and electronic publications to the VAT rate on paper books and (specific) printed publications.  As of July 1st, 2019, also the digital format will be exempt from VAT. Another important new option for EU Member States is that they can choose to implement a general reverse charge mechanism. I.e. all domestic sales will be subject to the reverse charge in B2B situations. More information about these two changes can be found here.

Bahrain & Oman: Formal announcement  VAT intentions. In our previous newsletter we already mentioned that Oman will implement VAT in September 2019. Last week Bahrain formally announced that the VAT Law will come into force on January 1, 2019. VAT rules in Arabic have already been released, and an unofficial English translation can be found here.

Angola: Delay of VAT implementation to July 2019. Angola also intended to launch VAT at a 14% rate per January 1, 2019, replacing the exiting consumption tax of 10%.  However, due to the readiness of the new e-invoice clearing system, this has been delayed to July 2019.  More information in this Newsletter.

Australia and India: Taxation and digital economy. Following the Wayfair-decision discussions in the US and the taxation on e-services in Russia, Australia also started to check the best way to tax e-commerce businesses. The Australian government released a paper in which they consider different options for taxing digital businesses which are interacting with Australian users and customers. More here. India is also trying to collect money from online sales. Since 1st of October 2018 e-commerce operators/platforms are required to collect 1% TCS  (0.5 percent CGST plus 0.5 percent SGST) on the value of the taxable supplies made by other registered suppliers through them. These provisions were initially deferred until 30 September, 2018. However, the Indian Government has quite suddenly notified these provisions to be effective from 1 October 2018.

European Union:  ECJ case law C-547/18 -Dong Yang Electronic. The European Court of Justice received a very interesting question regarding whether or not a Korean company has a fixed establishment in Poland or not. The case (C-547/18 -Dong Yang Electronics) is an example of how the tax authorities are approaching foreign companies nowadays. We recommend you follow this case if you have activities abroad, especially if these activities are conducted via or through a local group company, or even a local service provider or customer. The tax authorities (in this case in Poland) are arguing that, if the local company is providing assistance to the Korean HQ office in any way, it may be regarded as an extension of the foreign company’s business activities.

Italy: SAP solution for e-invoicing. For those of you that use SAP and are preparing the upcoming obligation in Italy to send and receive e-invoices to and from Italian residents per 1 January 2019, SAP released more details about its solution.  For more information, we refer to this Seminar.

The changing role of Indirect Tax management. Forward-thinking companies are increasingly recognizing the value of integrating the tax function with day-to-day business operations as a strategic partner to the business, as the indirect tax function owns a veritable treasure trove of information – data on every aspect of the business. Where does your company stand? More here.


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