Archive for VAT news

EU VAT rates

The new list of VAT rates in the EU as per January 13, 2014 is now available.

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Malaysia calling…!

Many of you will shrug at the prospect of Malaysia introducing a GST, but for Malaysia-resident companies the accounting and tax implications are huge.

Because Malaysia is big on (palm)oil, fruits / vegetables and also e-services (think Cyberjaya – the Silicon Valley of Malaysia) there are plenty multinationals who will need to prepare for the GST implementation – Accounts Payable, Accounts Receivable, GST sales and purchase invoicing, self-billing, tax codes, testing scenarios, you name it.

The big tax software companies (Vertex, Avalara, Thomson Reuters) are all over it, but the onus is on the businesses to make it work.

What a great time to be a global VAT adviser!

With the Goods and Services Tax (GST) looming ahead next year, financial consultancy firms are wasting no time to reach out to engage experts to provide support in terms of technical and industry expertise.

The GST, which may have raised hackles in many quarters, promises more business for these firms who could build on their human capital to service swelling requests from clients to get “GST ready”.

Scramble on to engage GST experts | Free Malaysia Today.

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“Google VAT” in Italy?

Once again, there is something going on in Italy – they have come up with a VAT registration requirement for non-resident online advertisers, if I read the news correctly.

I don’t quite get it – even if these companies (read: Google) would register, the reverse charge would still apply on their advertising sales to Italian businesses (because the Googles are not resident in Italy). Only when there is an online sale to individuals, VAT would be due. But that rule already applies under the current Directive for non-EU online sellers, and will expand to EU e-sellers by 1/1/15.

So what is the fuss about? I will let you know if / when I find out.

Italy Imposes €1bn Google Tax, then Quickly Delays for 6 Months – Tech News Plus | Tech News Plus.

Also see below for rather loudly written articles on this subject in Forbes:
I Didn’t Think It Possible But Italy’s Google Tax Law Just Got Even Worse – Forbes.
A Short Note To Francesco Boccia – Forbes.
Italy Passes The Illegal Google Tax – Forbes.

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EU: 90 days for export

As a longstanding rule, supplies that are taxed with the zero rate for export have to physically leave the EU within 90 days.

And if they don’t, “the supply of those goods is definitively taxed, even if those goods actually left the European Union after expiry of” the 90 day period.

However, “merely exceeding that time-limit results in the definitive loss for the taxable person of the right to exemption in relation to that supply” according to the European Court of Justice. Providing export evidence after the 90 days is not tax evasion.

Pretty straight-forward I think, but always good to have export rules such as this one confirmed. See below for the ruling.

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South Africa: VAT on e-commerce on April 1, 2014

If you are a e-business selling e-services (like downloads of music, software, games etc.) to shoppers in the EU, you already know that you must charge VAT at the rate of the shopper’s country, and remit the VAT to the tax man.

Outside the EU there are a handful of countries that have similar rules; Norway, Switzerland and Iceland spring to mind. From April 1 2014 South Africa should be added to that list.

“The obligation on the foreign supplier to register for Vat arises where the total value of taxable electronic supplies made exceeds R50 000 within a 12 month period.” 

via South Africa: with effect from 1 April 2014 VAT registration will be required for foreign suppliers of e-commerce services – Lexology.

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Mexican Tax Reforms Gazetted reports on developments in the Mexican VAT reform – in particular on the VAT rate in the border provinces, which will be brought in line with the 16% standard rate in the rest of the country. There is also news for maquiladoras – see the extract below. Do click the link for more detailed information. 

“Many of the Government’s VAT reform proposals failed to make the final draft. The most significant change that withstood parliamentary debate is to the VAT rate levied in border provinces, which is to rise from 11 percent to equal the headline VAT rate levied in the remainder of the country, 16 percent, from January 1, 2014.”

“Important changes are also made to Mexico’s maquiladora tax regime. Maquiladoras are Mexican companies that process, transform, assemble or repair imported materials, parts and components into finished goods that are subsequently exported out of the country. So long as they meet certain requirements, these companies have been permitted to import the goods needed to carry out their production activities free of customs duty or import value-added tax and pay lower rates of corporate tax. They are also exempt from Mexico’s permanent establishment rules.”

“In a last-minute u-turn, it was agreed that goods produced within maquiladoras that are sold to non-residents would remain exempt from VAT. Temporary imports to maquiladoras, used by companies to make taxable supplies, will newly incur input VAT. However, this input VAT will be fully and immediately refunded through a 100 percent tax credit. It had previously been proposed that input VAT be recoverable only after the relevant consignment is exported. Instead, the Government has committed to up oversight of companies based in maquilas.”

via Mexican Tax Reforms Gazetted.

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Bitcoin trades – exempt from VAT? UPDATED

Bitcoin is crazy hot these days, but I must admit that I still don’t completely understand the mechanics behind it. Perhaps that is exactly why Bitcoin is so popular. I wrote earlier about Bitcoin here, here and here. My lack of understanding aside, if Bitcoin is indeed the new currently that we are lead to believe it is, then I would expect that for tax purposes the currency is treated as such. Under article 135, 1, e of the EU VAT Directive, trading, selling and brokering / negotiation would all be VAT exempt – as long a Bitcoin is a “legal tender”. But if Bitcoin is not a legal tender, can it then be considered as a credit guarantee as under art. 135, 1, c of the VAT Directive? Apparently things work differently in Canada. The below article suggests that the commission for Bitcoin sales is subject to sales tax. I copied the sales tax-relevant paragraph here for your easy reference. In the meantime, I will dig deeper into Bitcoin mining and seek a better understanding of this trend…

“Again, this is a very tricky situation. We all know that sales tax needs to be charged on sales and remitted back to the government, but what part of the transaction is liable for sales tax? If you are in the business of selling bitcoins, do you charge sales tax on the entire transaction or simply on the commission? I know some that are charging just on the commission while others are charging on the bitcoin itself plus the commission. Arguments can be made for both tax treatments however there seems to be a consensus among many, at this point in time, that charging simply on the commission itself is the most appropriate way to handle this. The argument here is that those buying and selling bitcoins are a broker and are simply facilitating the sale of bitcoins for a commission, as such, only the commission is looked upon as subject to sales tax. Does this mean this is how the government will view it? Not necessarily. So beware.”

Tax: The Messy Side of Digital Currency – Hat tip to Peter Devlin.

UPDATE: David Kitchen shares a link that indicates that the UK tax authorities may come around to accepting Bitcoin as a currency.

“The general feeling I got from the meeting was that they don’t think VAT should be levied on the bitcoin value itself,” Robinson added.

via UK Tax Authority HMRC Rethinks Stance on Bitcoin.

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