TaxTech September 3, 2018
Life is starting to get busy again – with the deadline for cross border EU VAT refunds for EU traders approaching. Although some countries are more flexible, most EU countries require VAT reclaims relating to 2017 to be submitted at the latest September 30, 2018. We also noticed several tax authorities getting back to work again. In India the government will start to compare GST, income tax and transfer pricing filings to find leakage, while in Zambia the Revenue Authority is going to cross check domestic tax data with customs data. In Venezuela, which is experiencing hyperinflation, an emergency 4% VAT rise to 16% VAT just went live (from 1 September 2018). This increase will be temporary, and we will keep you updated on any changes when they occur.
United States: More states respond to the US Supreme Court’s ruling in South Dakota v. Wayfair. Following this revolutionary case that allows US states to collect sales tax from remote sellers, more and more states are publishing their approach. Most states only require sellers to collect sales tax from a threshold of $100.000 (although some use $500.000) or 200 or more separate transactions (although some use 100). Some states already go live per upcoming October, while others follow a bit later. Of course there have been many responses to the case, one of them is this article, where it is argued that the decision not only has an effect on the US, but also on the EU and the broader international effort to update international tax rules for the 21st century.
Malaysia: Sales and Service Tax legislation. On 1 September, 2018 the Sales Tax and Service Tax was introduced. Although some of the new rules were already published, the Lower House of the Malaysian Parliament has now passed the SST bills and the GST revocation bill.
Bahrain: VAT implementation in (early) 2019. As we wrote in our previous newsletter, of the 6 GCC-countries, only Saudi Arabia and the United Arab Emirates introduced a VAT system so far. Various sources indicate that Bahrain will also implement VAT, in (early) 2019.
United Kingdom: Hard Brexit? There has been quite some fuss after the ‘warning’ of the UK tax authorities that businesses should prepare for a hard Brexit. While HMRC argues that the likelihood of the UK leaving the EU without a deal is slim, they must prepare for all eventualities, including a ‘no deal’ Brexit. For the HMRC announcement, see here. More background information can be found here.
We stay with the UK for a moment, as HMRC launched a four-month study of UK and EU importers that aren’t registered for VAT. The study could help HMRC identify importers that aren’t aware they should be VAT-registered. The study’s aim is to understand the current trading activity and behaviour of UK businesses purchasing services from overseas. But it also shows that HMRC’s focus is still on VAT avoidance and VAT fraud.
Colombia: Tax registration for non-resident service providers. Colombia has published Decree No. 1415 of 3 August 2018 on the requirements for non-residents to register in the tax register when providing services to persons that are not obliged to withhold VAT through reverse charge (generally B2C supplies). Applying the destination principle, services rendered by foreign providers from abroad to Colombian tax residents are subject to VAT in Colombia. More details here.
Germany – Annual Tax Act 2018 approved. The German Federal Cabinet approved the Annual Tax Act 2018, effective from 1 January 2019, which includes the introduction of a VAT liability for operators of online marketplaces and the obligation to keep records regarding certain vendors without a German VAT number. It also includes a simplification for intra-EU telecommunication, broadcasting and electronically supplied services, that enables the application of the VAT rules of the seller’s home country, for taxpayers not exceeding an annual value of 10,000 EUR for such services. Update here.
Global VAT Rates: VAT Rate developments around the world. Venezuela is not the only country that is increasing its VAT rate. In Kenya, the tax authorities also decided to increase the VAT rate, despite a decision earlier in the week by the Kenyan lawmakers not to do so. The rate increased to 16% as of 1 September 2018 and applies to all petroleum products. For Russia, a VAT increase from 18% to 20% as per 1 January 2019 was already announced, but a study shows that there will be an effect on prices already in 2018. We also learned that Romania wants to decrease the VAT rate on tourist services from 9% to 5%, Austria is lowering the rates on hotel services again, to 10%, and Lithuania is considering cutting VAT on food products.
Digital Europe: Digitalization Should Support, Not Hinder Taxation. Governments have long recognized the need to reform burdensome tax compliance procedures, specifically the introduction of online systems. In Europe, governments have focused on VAT as a first step in implementing a system of digital taxation. Blog post here.
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