Oct 29, 2018

TaxTech October 29, 2018

United Kingdom: Brexit, Making Tax Digital (MTD) and Budget 2019. On Monday, 29 October 2018, the UK will announce its budget plans for 2019. There are no significant changes expected in the VAT rates and rules. And while the Brexit negotiations are still going on, the Making Tax Digital requirements, starting April 1, 2019, seem to be slightly easier than expected. The UK tax authorities has provided additional updates and information on their website

Greece: #1 In Indirect Taxation in the EU. While Hungary implements the highest VAT rate in the European Union (27%), Greece  has actually the highest percentage of indirect taxation in the EU. According to Greece’s 2019 draft budget, the total income from VAT and excise duties amounts to 17.3 % of Greece’s gross domestic product, placing the country in the top position in the eurozone, ahead of France and Cyprus.

The Greek Finance minister has also announced his intentions on lowering the VAT rate on cultural activities, such as concerts and music events, from 24 % to 6 percent. Last week also saw the Greek Minister of Shipping pledge to resolve the, by the EU imposed, VAT rate of 24% on recreational craft, boats and watercraft, and go back to the earlier applied VAT exempt rate.

Philippines: e-Invoicing by 2010. The Philippines is looking to introduce e-invoicing by 2020. The implementation of an Electronic Receipt, Invoice and Sales Reporting System will help the Philippines to improve its revenue-monitoring mechanisms and  would allow for the implementation of a VAT refund system for tourists visiting the country.

Poland: Reduced VAT rate. Poland has announced the introduction of new classifications for the application of the reduced VAT rate. It is already obligatory in Poland to mention the Polish Classification of Goods and Services number (PKWiU) on your sales invoices, in order to easily verify if if the reduced VAT rate applies. Starting January 1, 2019, the PKWiU number will be replaced by the more common Combined Nomenclature (CN) number. More here.

Slovakia: Reduced VAT rate of 10% for accommodation services. The Slovak Parliament passed legislation reducing VAT from 20% to 10% on accommodation services effective as of January 1, 2019. Based on positive experiences from other member countries of the European Union, it is assumed that the lower VAT and recreational vouchers would increase demand for accommodation services in Slovakia and thus propel further development of Slovak tourism. More here.

European Union – ECJ case law. There were several interesting cases in the last few weeks.

  • ECJ Case C‑249/17 (Ryanair Ltd)
    In this case, the ECJ decided that input VAT can be recovered on costs relating to acquisition of shares. That in itself is not new, but the deal between RyanAir and AirLingus didn’t go through. Even so, the ECJ decided that it is possible to deduct the input VAT.
    Find here some reactions to the decision of the ECJ. Find the case here.
  • ECJ Case C-153/17 (Volkswagen)
    The question in this case was if Volkswagen could deduct the input VAT on various overhead costs, where it’s activities consisted of making supplies that are taxable but also supplies that are exempt from VAT. According to the ECJ, Volkswagen can partially deduct the VAT on the overhead costs. There is a direct and immediate link between those costs and both the taxable and exempt supplies. Find the case here.
  • ECJ Case C-528/17 (Milan Bozicevic Jezovnik)
    This case deals with imported bananas that were exempt from VAT, as the bananas were to be brought to another EU country right after the importation. When the bananas were not brought to another Eu country, the tax authorities raised an assessment with the importer.
    The ECJ decided that the importer had acted in good faith. One of the arguments was that the importer had used a specific customs license, which means that the customs authorities where aware of all the import procedure, and the importer therefore could rely on this. More here.
  • ECJ Case C‑165/17 (Morgan Stanley)
    The last case we want to mention this week is the opinion in the Morgan Stanley case. In this opinion, the Advocate General provides his thoughts on the deduction of input VAT by a fixed establishment and the application of the pro rata.
    More specifically, the question in this case is which pro rata must be applied: the pro rata of the branch office itself, or the pro rata of the head office? This can be an interesting case to follow.

Data analytics and its impact on Indirect Tax. While uncovering the insights hidden within Big Data is the goal of every enterprise, doing so presents a significant challenge for the Indirect tax function. The sheer volume of complex transactional data produced at tremendous speed by global digitization, as well as its structured and unstructured formats, puts the value out of the reach of many enterprises. Blog post here.


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