Archive for VAT news

Scandia – supplies to a branch

In a wholly unsurprising ruling the European Court of Justice ruled last week that supplies by a head-office to a branch are within the scope of VAT if the branch is part of a VAT group / fiscal unity.

The Netherlands at least has had this rule in their regulations for decennia, but see here at LinkedIn for the UK view, which is rather different.

I pdf’d the ECJ ruling below. Like all ECJ rulings, this one is not very easy on the eyes…

Download (PDF, 518KB)

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OECD news: BEPS

“Base Erosion & Profit Shifting” sounds like something that has nothing to do with VAT. VAT expert James Robinson penned his thoughts on this OECD initiative – well worth a read.

Download (PDF, 386KB)

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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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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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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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Tax authorities suffer from budget cuts

A letter to the editor in this morning’s Dutch daily “De Telegraaf” pretty much sums up what tax authorities world-wide have been suffering from: lack of money.

An auditor with a 40-year track record at the Dutch revenue service says that the operations of midsize and larger companies have become so complex, that with the current budget a thorough tax audit is almost impossible. The politicians want a smaller revenue service, but the number of companies has only increased.

The auditor also mentions that  the current population of tax inspectors is simply not up to the task of ensuring that the correct amount of tax is collected.

From my perspective, these thoughts are spot on. Where I am involved with VAT audits, inspectors hardly take the time to get to understand how the company’s operations work, and are solely focused on “denying as much input tax credit as possible”, or “rejecting as many zero-rated exports as possible”. Sometimes it seems like indirect taxes are too “embedded” in the company’s complex global operations for a tax auditor to really understand. Direct taxes are a bit more removed from the supply chain and seem easier to review.

This structural complexity, but also the lack of audit risk, may be among the reasons why VAT is not very visible to a company’s CFO and even the tax department, even though an average MNC’s VAT risk is easily 25%-45% of its global sales.

Also, the much-heralded initiative of the Dutch revenue service to agree on a “tax covenant” with large companies does not seem to have taken off. This is an on-going agreement where the tax man agrees not to bother a company too much, provided that the company voluntarily discloses all potential tax issues.

Unfortunately I don’t have an English translation of the letter – Dutchies can refer to this link:

http://www.telegraaf.nl/watuzegt/22270056/___Belasting_innen_raakt_uit_zicht___.html

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South Africa kicks off VAT on online sales

Last week the tax man in South Africa published draft legislation that taxes online sales to South-African residents. Although the rules look pretty straight-forward, there are lots of open ends. A couple of initial thoughts:

  • How do they want a U.S. online seller to register in South Africa? There is currently no mechanism to register, file returns and pay taxes for non-resident businesses.
  • This applies to sale to both South-African resident individuals as well as businesses. A reverse charge for the latter would be much simpler.
  • In the EU only “automated” online sales (f.e. downloads of software) are covered by the e-commerce VAT rules. Non-resident sellers of for example one-on-one teaching (say via Skype) are not required to account for VAT. The South African rules include this type of services, which can be challenging if an exemption applies for classroom teaching.

The rules are slated to take effect from April 1, 2014.

Have a look here for more info:

http://www.bdlive.co.za/business/2014/01/31/government-wants-to-levy-vat-on-foreign-e-commerce-firms

http://www.news24.com/Technology/News/SA-eyes-VAT-on-e-books-apps-games-20140131

The document is here:

Download (PDF, 217KB)

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