Archive for VAT news

Taiwan next to implement VAT on e-services

If you are selling electronic services from the U.S. to individuals overseas, your global compliance requirements are about to increase.

We are talking about game and software developers, sellers of online music, video and the like – Taiwan will be added soon to the list of countries where these traders have to register for tax.

Tax-news.com writes:

“Foreign online suppliers selling cross-border goods and electronic services to end consumers will have to register for tax in Taiwan through a permanent establishment, or appoint a VAT or turnover tax representative. The permanent establishment or agent will be required to file the necessary tax returns. Significant penalties are to be imposed for non-compliance.”

See more at: http://www.tax-news.com/news/Taiwans_Parliament_Approves_VAT_On_Online_Retailers____72961.html

PS: Don’t forget: 18% VAT on B2C e-services in Russia starting January 1, 2017!

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2021: No tax exemption for low value imports into the EU

The European Union announced that they plan on removing the exemption for imports of low value by 2021.

The exact amount of the threshold for imports of low value currently depends on the country where the import takes place, and is around US$25.

By and large, this exemption is the most popular way to forego import taxes (VAT and customs duties). Major e-retailers, particularly from the U.S. and China, but also from Switzerland, use this mechanism to import goods into the EU without paying any tax.

From my own experience, non-EU companies also use this exemption to bring bulk goods in an EU port, re-package the goods under customs bond, and then send small packages to individual buyers out of the bonded warehouse. On the small shipments out of the bonded warehouse no import taxes are due.

From 2021, these shippers must register for VAT in the country where the import takes place, and account for import VAT and customs duties at the time of import of the goods. Alternatively, they must let the customer import the goods. In both cases, the seller will want to know exactly the amount of the VAT and customs duties – either to calculate the final cost of the goods, or to communicate to the buyer that delivery can only take place if he pays amount x to the customs authorities.

By that time, it is likely that the seller must account for the VAT rate of the customer’s country. Importing the goods into a low-rate country (like Luxembourg) will probably not be helpful.

And err… by 2021 the UK will be well on its way to be a non-EU country. For UK based e-retailers the same rules will apply as for any non-EU seller.

More compliance and more calculations – add the upcoming, BEPS-inspired transparency rules (“SAF-T”) to  this mix, and you will find out soon that data is king. Managing tax data will no longer be a nice-to-have element of your ERP implementation, but rather a strict requirement.

More here – with a hat-tip to Avalara: http://www.vatlive.com/vat-news/non-eu-e-retail-faces-40-eu-vat-customs-hikes/.

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More on India e-commerce service tax changes

Radha Arun has more on the upcoming changes in e-commerce taxation in India. Radha is a leading India indirect tax consultant, with a background in the Union Internal Revenue Service.

She summarizes the changes in the article below. One of the main takeaways for U.S. e-businesses that sell online downloads to individuals in India is that they must appoint a local agent, who is liable for filing and payment of the Service Tax.

https://www.linkedin.com/pulse/service-tax-reverse-charge-downloads-radha-arun

(you don’t need to be signed-in to LinkedIn to access the article)

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Urgent: India taxing B2C online sales

Aside from their ongoing GST implementation news, India announced a new service tax on online sales to individuals. Start date is December 1 (!).

U.S.-based e-commerce vendors should take heed: compliance rules are likely to be onerous.

From the details that I have obtained, the new service tax rules look very similar to the EU VAT rules that govern online sales to individuals. The scope, filing requirements and impact all look similar. A simplified tax filing process for non-residents, however, does not seem to be in the cards.

I am still digesting the practical impact of this news. The link to the government website with more details is below.

Do drop a note (mark@us-vat.com) if you would like me to help out. My e-commerce clients are all over it.

http://www.cbec.gov.in/htdocs-servicetax/st-circulars/st-circulars-2016/st-circ-202-2016

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Update on Trump and the anti-VAT proposals

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Brazil: States must return excess ICMS

Indirect taxes in Brazil are widely considered as difficult, confusing and costly. Bloomberg BNA now reports that overpaid ICMS on estimated profit margins must be refunded:

“Brazil’s supreme court [on] Oct. 24 ruled that states must return excess tax collected when companies prove their products sold for less than prices the state estimated in setting the VAT (ICMS).

The decision goes further than the court’s previous position that permitted reimbursements only when sales weren’t completed. The court stated that its ruling is binding and applies to the 1,300 lawsuits now before lower courts on this question.

Brazilian states set ICMS taxes for selected sectors on estimated profit margins at the final point of sale set by states rather than having the VAT charged on real prices at every stop along the product chain. The states charge companies VAT on these estimates at the point of manufacture before the final sale price is known leading to complaints that the state sales estimates are unrealistically high and lead to inflated taxes.

The ruling primarily affects sectors with long production and delivery chains such as the auto industry, pharmaceutical and beverage manufacturers, sectors dominated by multinational firms in Brazil. At present only two of Brazil’s 27 states permit the reimbursement of ICMS taxes paid in excess by companies.”

See the entire Bloomberg BNA article here: http://www.bna.com/brazil-supreme-court-n57982079209/

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Designing an indirect tax function: KPMG

KPMG published a brochure that describes the process of “Designing an indirect tax function that is fit for the future”.

They say:

“The components of the indirect tax operating model include three strategic components and three enabling components:

— Strategic components

1. Governance and risk

2. People and capabilities

3. Organizational model

— Enabling components

4. Process and responsibility

5. Data and information

6. Systems and technology”

KPMG’s process is, of course, based on Big Data and KPIs, and I have attached another KPMG publication that provides (a bit) more detail on their approach.

Download (PDF, 202KB)

 

Download (PDF, 135KB)

 

 

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