Archive for VAT news

Update on VAT in the Gulf countries

Deloitte recently reported on consequences of the introduction of VAT in the Gulf countries. Governments will see a stable source of revenue, the common man won’t feel much of the VAT implementation, and business should start preparing for the introduction.

“We will need a number of practitioners that understand not just VAT, but more particularly, the intricacies of the implementation process. For those businesses that do not act at an appropriate time, they will find resource constraints as there is a limit to the number of VAT specialists who have necessary skill sets.”

http://www.khaleejtimes.com/business/economy/vat-set-to-be-a-stable-revenue-source-in-gcc

More reporting on VAT in GCC is here:

http://www.khaleejtimes.com/business/economy/uae-businesses-must-gear-up-for-vat-regime

And a progress report on Oman:

http://timesofoman.com/article/90064/Business/Value-added-tax-framework-agreement-expected-in-October

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SAF-T: Poland is the first in the EU

On July 1, 2016, Poland was the first country to mandate monthly online VAT filings using the SAF-T protocol. A number of European countries will roll out this  “Standard Audit File for Tax” requirement over the next months and years. More on SAF-T in Poland is here: http://www.vatlive.com/european-news/poland-saf-t-guidance/.

Lithuania is next on October 1, 2016.

The idea behind SAF-T is that companies provide governments with full transparency towards the company’s business transactions.

In the SAF-T protocol, authorities require more than just all transactional data. There are six reporting requirements:

  1. The full general ledger and journals,
  2. Accounts payable, with vendor master data, payment ledgers and softcopy vendor invoices;
  3. Accounts receivable with client master data, payment ledgers and copies of customer invoices
  4. Warehouse inventory product master files, inventory movements
  5. Inbound and outbound flow of goods
  6. fixed assets ledgers, depreciation, amortizations

Companies now need to get ready for SAF-T, and tax, finance and IT staff need to be prepared to implement the data extraction frameworks. Businesses that currently have a Tax Control Framework (“TCF”), which supports and maintains a detailed overview of all business activities in an organization, will use the TCF to help identify the data sources on a country-by-country basis.

Richard Cornelisse and his team (see http://globalindirecttaxmanagement.com/) have been working with a number of companies to prepare them for the Polish SAF-T submissions, and are now testing SAF-T readiness in other countries, such as Portugal, Luxemburg and Austria. To facilitate data extraction and submission, Richard has developed an add-on to SAP.

Have a look at his website for more details.

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VAT on e-services: Taiwan is next

Countries are rapidly introducing legislation that compels non-resident sellers of online downloads to register and account for VAT.

Taiwan is next and will introduce laws that are similar to the EU e-commerce VAT laws by January 1, 2017. Area countries such as Japan and South Korea already have this legislation in place.

Let me know if your are selling subscriptions, video, apps, music, games etc. online.

Chances of getting caught in the long list of countries that require VAT registration may be slim, but at the time of due diligence (for an acquisition, for example), lack of tax compliance puts significant pressure on the value of the company…

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Post-Rio: input tax reclaim for professional athletes disputed

Since 1996 professional athletes are allowed to compete in the Olympic Games (because – hey – a number of contestants, particularly east of the Iron Curtain, were professionals anyway), and if you are a professional, you are in business. If you are in business, you are liable for VAT, unless an exemption applies.

And, typically, competing in a sport and earning prize money is VAT exempt.

But prize money is only a relatively small element of most professional athletes’ revenue. They are mostly paid for broad marketing and advertising services by big brands. The supply by the athlete of that kind of services is not VAT exempt, and therefore taxable.

So, following the input tax allocation rules in most countries, the VAT that is directly attributable to exempt revenue is not recoverable. VAT directly attributable to taxable supplies is entirely recoverable. And the VAT that is connected to “mixed” activities is creditable on a prorata basis. For example the VAT on the use of a car to travel to sports events, where prize money is collected and marketing services are provided.

Apparently, HMRC is

“increasingly arguing that enjoyment of a sports activity automatically equates to an element of ‘private use or enjoyment’, thereby justifying a restriction on the re-claiming of VAT on costs.”

That is just ridiculous. They say “if you enjoy your work, you can’t claim full VAT credit”. Did you enjoy drafting that VAT advice on your office laptop? Gotcha! No VAT credit on the laptop’s purchase VAT!

See more here: https://www.accountancyage.com/2016/08/09/sports-professionals-in-line-for-vat-clampdown-uhy-hacker-young-claims/

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Hamilton and customs duties

Avalara’s Amy Morgan is a leading customs talent – she is really good at explaining complex global supply chain issues in simple and practical terms. Inspired by the musical, she reports on Hamilton and international trade issues.

Amy writes:

“Whether you’re a small business just starting to export, a large company who imports goods from other countries, or somewhere in between, the next time you find yourself struggling with a stuck-in-customs issue or cursing the calculation of import duties, understand that there’s a bigger picture — one that goes back not just to the American Revolution and Alexander Hamilton, but to the foundations of currency and trade itself.”

Definitely worth your time:

https://www.avalara.com/blog/2016/07/12/hamilton-gives-context-customs-duty/

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In Qatar on July 25

I will be on a stopover in Qatar, on my way to Singapore on July 25. Let me know if you want to discuss the upcoming introduction of VAT in the region over coffee!

KPMG provided an update on the VAT developments there, see below:

Download (PDF, 2.81MB)

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VAT Expert Academy, October 4-6, Dusseldorf

Raymond Feen writes:

“A total of 13 workshops will be held from October 4 to October 6, 2016 in Dusseldorf, Germany. The aim of the academy is to bring together VAT experts from all over the world to discuss, in interactive and lively workshops, various issues that arise in the course of the day-to-day business activities of VAT experts.
The event is tailored to meet the needs of VAT managers, VAT consultants and officials dealing with VAT. Ideally participants should have in excess of four years VAT experience.
Please note that this event will be conducted in English and will have an international focus.”

The schedule and registration form is below.

I know that there are many VAT training sessions to choose from in Europe, both by Big 4 firms as well as by commercial providers. This VAT Expert Academy is brought to you by the most knowledgeable VAT practitioners – if you are in the market for an advanced VAT refresher, I would strongly suggest that you make your way to Germany in the first week of October.

Note however that the content of these sessions is for a VAT-mature audience only!

Download (PDF, 1.15MB)

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