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Tips on China VAT compliance

China is getting themselves organized around the implementation of the integrated VAT – business tax on services should be substantially gone by the end of next year.

As most of you know, China has been on the forefront of VAT compliance requirements – their Golden Tax system requires companies to submit VAT worksheets online. This system has been around for quite some time, and has picked up by other countries in Latin America. The EU is only now making babysteps in requiring such online submissions.

Stephane Rinkin of EY in China has published a helpful sheet of comments and tips on China VAT compliance. See his publication here:

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Spain wants to see your VAT worksheets

I mentioned earlier about the next big trend in the VAT world – online submission of your VAT accounts. The new rules only apply to large taxpayers – those who file on a monthly basis.

The “VAT worksheets” is rather loosely defined. It includes records that are directly related to VAT, such as import documents and calculations of input and output tax. In addition, the entire Accounts Payable and Accounts Receivable records must be submitted, i.e. all purchase and sales invoices, as well as inter-company charges and other sales/receipts that (for whatever reason) are not invoiced.

I don’t think that this is difficult to implement – the extra work comes from responding to questions raised by auditors that review the worksheets.

EY Spain has the details here:

Download (PDF, 86KB)


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EY: How to manage changes in global VAT

My regular readers have heard it many times before – be on top of your business, or your VAT liabilities will become showstoppers. Over the past 5 or so years, the VAT world has become incredibly complex, and even more recently global VAT reporting has ballooned into a onerous mess of requirements and filings.

On top of that, almost every multinational company is doing something in the digital world. Companies that focus on business-to-business sales are embracing electronic procurement, self-billing and electronic invoicing. The big global retailers do all that – and in addition have to deal with the VAT rules on digital sales of goods and services. That latter category has snowballed into regulatory disarray last year, and in the EU, Japan and other countries the current rules are unclear at best.

The UK firm of EY produced a comprehensive write-up of the current status of the VAT situation of digital businesses. Changes are ongoing, and EY has a couple of great tips to consider.

More is here:


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A new twist in Brazil VAT

Avalara writes:

“From the 1 January 2016, the rules on the calculation of ICMS changes on sales of goods to consumers across Brazilian internal states.

ICMS is the Brazilian indirect tax (VAT) on the sale of goods and services. Where goods are sold across internal Brazilian state borders, ICMS is due in the state of the seller – the origin principle. Many Brazilian states have campaigned to have this switched to the state where the consumer is located – the destination principle – which is the option recommended by the OECD and favored by the European Union and other VAT jurisdictions around the world.

From 2016, the destination principle will be phased in for B2C sales of goods and some services over 4 years, with 100% of the ICMS tax being due in the state of the consumer by 2019.  The rules apply to sales of goods and electronic services.”

See here:

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Kiwis start collecting GST on online sales

If you are in the online / cloud industry, now is a good time to get your act together and review your indirect tax liability. Enforcement of the e-commerce tax rules is difficult, but any venture capitalist worth his salt will ask for your tax strategy. Without one, you are likely overstating your net sales numbers…

New Zealand is joining the chorus of countries that attempt to collect tax from non-resident online sellers. Almost every major VAT/GST collecting country has now implemented rules that seek to collect these taxes from non-resident sellers.

The proposed new rules would come into force on 1 October 2016, following enactment of the bill.

See here for the official announcement:

In the meantime, the EU is talking about allowing a measly 5000 Euro registration threshold for resident sellers (i.e. not for U.S. based online businesses). Wow.

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Tax risk management – methodology

Richard Cornelisse published a slide deck on Youtube on Indirect Tax Risk Management.

Richard says:

In order to get buy-in from senior management it is often about setting the right priorities, understanding the root cause of underperforming and select a method for measurement that best fits. The deck explains what a tax function could do to get indirect tax higher on the priority list of senior management.

The video is slides-only and silent – you may want to use the pause button. Have a look at Richard’s website for more details and info:

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UK updates VAT return guidance document

Granted, the UK has one of the easier VAT return forms in the European Union, and consequently the manual that explains the various “boxes” on the return is comprehensive.

Nevertheless I would recommend that you have a look at the document in the link below. In addition to an explanation of what is expected for answers on the questions on the return form, it contains very useful explanations of common VAT definitions.

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