Ask me anything about VAT

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You can send an email to mark@us-vat.com, or give me a call on 646-397-5855. You can use Skype – my skype name is markhoutzager.

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Portugal – VAT rate up to 23.5%?

Just when you thought that VAT rate increases have died down, Portugal announced plans to increase their VAT rate from 23% to 23.5%…

From January 1, 2015, or so they say now.

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US sales tax: the Marketplace Fairness Act

When Amazon Collects Sales Tax, Some Shoppers Head Elsewhere

In other words, even without knowing how much or even whether small businesses benefited from Amazon’s collection of sales tax, Mr. Baugh says the trend is clear: Money that had been spent at Amazon is mostly being redistributed to other online giants — and that will very likely intensify if Congress allows broad taxation of Internet sales. “This legislation is being pushed as a kind of savior to brick-and-mortar stores and a boon to local economies,” he said of the Marketplace Fairness Act, “and it doesn’t appear to be the case to me.”

Even for VAT specialists, an interesting article in this week’s New York Times.

See http://nyti.ms/1nyx0Ne.

 

 

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VAT and online sales of software

I had an email conversation recently about a very typical VAT question for U.S. based sellers of software. I am reprinting it here – apologies for the longish post, which has been edited for easy reading.

Finance person:

We are a small software company that manufactures a product called “X” that we sell to design professionals (not typically individuals).  We are expanding our business to the UK and plan on selling online and shipping to the UK as well as doing a few trade shows in there and plan on selling the software on site. The price of the software in the US is $1495, so I’m guessing we will sell it for a comparable price in £. 

From what we have read online, it appears that we do not have to register for VAT if we sell less than £81,000?  Obviously, this may take us a little while to establish this.  Is there no need to register for a VAT number until we reach that amount?  Therefore, we do not charge VAT until that time?  We are also not sure if there are differences in how VAT is collected whether the software is delivered via courier service (DHL/UPS), electronic download, or in person (at a trade show).”  

Mark:

“This is actually fairly straight-forward, as long as you only sell to businesses.

For online sales, no VAT is due because the recipient is required to self-assess VAT – this is somewhat similar to self-assessing use tax here in the US.

For sales of the software on a CD via courier, you will need to make sure that you instruct the courier that the recipient is the so-called importer, which means that the recipient is responsible for import duties, fees and also for the VAT that is due on imports. If you fail to do that, the courier will assume that you are the importer, and he will send the VAT bill to you (which is at least a 20% additional cost!). This applies to all countries outside the US, not just the UK.

For sales on trade shows, VAT would be chargeable. The registration threshold only applies to EU-resident sellers – so you can’t use that facility.

If you think that the sales on trade shows will be significant, you could register for VAT in the UK and account for the VAT on the local (trade show) sales. You could also refer trade show attendees to your website and limit your sales to online downloads with potentially shipments from the US of the CDs.

VAT wise I would recommend against selling CDs on tradeshows – you could hand out demo / trial CDs where the customer needs to download a license code online and avoid the compliance / invoicing burden of VAT.

Entirely separate from this, some of the VAT on expenses that you incur while in Europe may be refunded. Happy to provide you with referrals to service providers that can help you with that.” 

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VAT invoice lottery is the way to go

“When Jozef Lazarcik, a 35-year-old factory worker, heard his number called on national television here recently, he pumped his fists, hardly believing his luck.

He had registered only nine receipts with Slovakia’s new tax lottery, and yet he had just won a new car. “It’s a heavenly feeling,” he said before leaving the studio, ready to encourage all of his friends to register their receipts, too — which is exactly what Slovakian officials were hoping for.”

Love it! Whether it is a fa piao in China and Taiwan, or the invoice lottery in Slovakia, this is how countries make the fight against tax fraud popular. It’s cheap and entertaining!

See more in today’s NY Times here: http://nyti.ms/1r7iqJL (subscription may be required)

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Bloomberg BNA webinar: Sales tax and VAT

Another BNA webinar is coming up for April 29, 12-1pm Eastern.

During this live webinar, Fruchtman and Houtzager will cover:

  • Sales Tax and VAT – what are the main similarities and differences; how does VAT work, and how do indirect taxes affect a global organization’s tax structure
  • Tax Presence Issues: “nexus” vs. “permanent establishment” – direct vs. indirect tax presence; when is a VAT registration required or optional; what are the consequences of registering for state sales taxes; what are the impacts on the company’s tax footprint and tax accounting
  • Taxable base: taxable and non-taxable sales of goods and services; characterization planning; input tax credit in VAT, VAT exemptions vs. zero-rates

Register here:

State Sales Taxes and Foreign Value Added Taxes: Common Issues and Planning Considerations | Bloomberg BNA.

Tips and tricks for registering:

You have a promotion code MHDF01 that generates a $100 savings off the $249 price of attending the webinar.  Plus additional registrants within a firm can register on the same form as the initial registrant and pay just $49 each and earn CE credit.  But they must all register on the same registration form on bna.com.

Here’s how it works:

1.       Go to www.bna.com

2.       Click on the Continuing Education and Training tab at the top of the page

3.       Click on the Tax and Accounting View All Programs link

4.       Click on Webinars under View Programs to Date

5.       Click on the webinar name and complete the Registration form.  You will be prompted for a promocode while registering.

6.       Enter the promocode MHDF01.  This will reduce the cost of the webinar from $249 to $149 in the shopping basket.

7.       Information for joining the webinar will be provided in a follow-up email

If up to 10 people in the same firm want to watch from their own computers (and thereby earn CE credit), then the first registrant pays $149 (after the application of the promocode) and each additional registrant will pay just $49.

State Sales Taxes and Foreign Value Added Taxes: Common Issues and Planning Considerations | Bloomberg BNA.

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Italy – Web Tax, but not for VAT.

Michaela Merz is PWC’s Global VAT leader, and I recommend that you bookmark her blog – see http://michaelamerz.wordpress.com/.

Michaela writes about the new (and very odd) “Web Tax” legislation in Italy. I wrote about this plan earlier here.

No one has been able to explain this law in a comprehensive way, and Michaela smartly quotes Luca Lavazza from PWC Italy. From what I understand, the gist of the new law is that companies that sell of online advertising to Italian businesses must be VAT registered in Italy.

But the most recent development, Luca writes, is that this VAT part of the proposed law is repealed. That makes total sense to me, as there is nothing in the VAT part of this proposal that meets the requirements of the EU VAT Directive. This Directive – a set of European VAT rules – applies to all 28 EU member states, including Italy.

It seems that the corporate income tax element of the Web Tax law is still alive. This relates to transfer pricing and payments methods. Have a look at the blog posting here, and don’t hesitate to reach out to Luca directly if you need more info. http://michaelamerz.wordpress.com/2014/03/27/italy-web-tax-legislation-as-from-1-of-july-2014-2/.

 

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Global VAT guides for 2014

Spring is in the air here on the US East Coast, and that means that the big accounting firms are publishing their global VAT reference guides. These popular guides are the most-clicked through VAT blog postings!

Thus far I received guides from EY and Grant Thornton – see below. If I receive more, I will add them to the blog.

EY:

Download (PDF, 3.94MB)

Grant Thornton:

Download (PDF, 4.29MB)

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