When to register for VAT in the EU

Maora provides a comprehensive overview of the situations when VAT registration is required in the EU.

They say:

“For every other business without a permanent establishment, these are some of the transactions that will oblige you to register for VAT in a country:

  • Imports: If you import goods into a country, you need to register and pay VAT and customs duties at the border. There are many simplifications around importation, but as a general rule you will need a VAT number if you want to import goods and sell them in any given EU country.

  • Exports: Exporting goods will also oblige you to register and comply with all documentation requirements in order to zero rate your supply.

  • Domestic sales of goods: Selling goods within a country would normally oblige you to register and pay VAT to the tax authorities on those sales. However, foreign companies need to consider reverse charge rules. When reverse charge applies, you do not charge VAT on the supply and the customer manually calculates the VAT in its VAT return. In those cases, a domestic sales of goods does not require you to register. Contact us if you want to know if reverse charge applies in any country (or if this whole paragraph sounds like Chinese).

  • Intra-Community movements: When you supply goods from one EU country to another or when you receive goods sent from another EU country, you need to get a VAT number. You also need to get registered in the VIES system, which is automatic in some countries but it can take time and efforts in other member states.”

More information is here: http://marosavat.com/hot_vat_topics/when-do-you-need-an-eu-vat-number-vat-registration-requirements-in-europe

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Cash is king: Import VAT in Spain deferred

A couple of years ago Spain introduced a rule that allows for importers to skip payment of VAT at the time of import, but rather defer that payment to the next VAT return.

The beauty of such an arrangement is that the import VAT can be reported and reclaimed at the same return, so no cash is due.

The Spanish authorities have now clarified that this arrangement also applies to non-resident businesses that are registered for VAT in Spain.

If the non-resident is not an EU resident, fiscal representation is often still required.

See here for more: http://diligens.es/?p=1129&lang=en

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Dutch courts on webcam sessions and VAT

The Advocate-General at the Dutch Supreme Court has announced that she has asked clarification of the European Court of Justice of the VAT implications of erotic webcam sessions.

The issue is whether these entertainment services are taxable at the place where the services are consumed (the place of residence of the customer), or at the place where the services are performed (in this particular case: the Philippines).

Importantly, the Advocate-General and the two lower Dutch Courts that have reviewed this case, all agree that these services are not “electronic services” – and therefore the simplified registration rules for non-residents does not apply.

The ruling is only available in Dutch, unfortunately. Let me know if you want to discuss.

http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:PHR:2016:754

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Pharma on the VAT radar

There is an interesting development in Romania concerning an unnamed pharma multinational. The Romanian tax authorities allege that the company has illegally underpaid VAT on drugs that were provided for free – as samples – to doctors and hospitals.

“In this way the collection of VAT was avoided drugs given for free as donations towards hospitals, shelters, foundations or as samples for doctors, which were actually designed to generate orders for pharma distributors”

It is difficult to get to the bottom of the matter reading the attached article – apparently it has something to do with a much broader bribery investigation.

It looks to me however as a common way of doing business in the pharma industry and in others as well.

http://www.business-review.eu/news/anaf-blames-pharma-multinational-for-eur-10-mln-loss-to-romanias-budget-116238

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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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