December 2013 www.meridianglobalservices.com
08ISSUE
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PRINCIPAL STRUCTURESTop 5 practical tips when switching to a Commissionaire or Limited Risk Distributor Model
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TELECOMS AND ELECTRONIC SERVICESThe EC has published guidelines for businesses on new VAT rules (2015)
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PG 30-35
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EUROPEAN NEWS
EUROPEAN COMMISSION
REST OF THE WORLD
contents
SECTIONONE
Meridian,
VATeuropean
changes ofmapping the
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1. Austria2. Denmark3. France4. Germany5. Hungary6. UK7. Italy8. Italy9. Ireland10. Latvia11. Luxembourg12. Malta13. Moldova14. Norway15. Poland16. Poland17. Portugal18. Portugal19. Romania20. Serbia21. Slovakia22. Sweden23. Switzerland24. The Netherlands25. Turkey26. Ukraine
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December 2013 | © 2013 Meridian Global Services 7 6 VT Magazine
Feature 01 | European News Issue 08
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December 2013 | © 2013 Meridian Global Services 9 8 VT Magazine
Feature 01 | European News
EuropeThe below articles are updates regarding VAT changes across Europe.
Austria | 1
Austria implements reverse charge on certain goods
Austria is planning to implement a reverse charge on particular items which is to fight against VAT fraud. Austria’s finance minister, Maria Fekter stated that the list of goods will include supplies which are prone to fraud. These items include video games consoles, laptops, tablets, raw materials, supplies of gas and electricity to taxable person for resale. According to Fekter, it is the only way to avoid sales tax losses and tax fraud and will also stop frauds from rooting in Austria.
The potential for fraud is revoked by putting the liability for account of VAT on the person acquiring the items or supplies. That person is also responsible for the account of both input and output tax. This reduces the capability of fraudsters perpetrating MTIC, where supplies are sold across borders in the EU without VAT, and then sold at a discount price in the EU domestic market.
Denmark | 2
Denmark change import VAT rules
Denmark have changed the rules for non- EU companies importing into the country. They will no longer be allowed to register for Danish VAT unless they are making intra-community supply of goods to other EU states. They will also have to mention these dispatched supplies in the EU VAT system. This will mean that by the end of 2013, any non- EU importers will be forced to de-register their Danish VAT registration. The Danish import VAT will only be able to be recovered by means of a VAT recovery claim and permission for this will only be granted if the company has made an agreement with Denmark on this.
France | 3
France has a number of VAT rate changes in January 2014
There will be a number of VAT rate changes occurring in France in January 2014. The Standard rate of VAT will rise from 19.6% to 20%. As well as this, there will be a rise in the VAT on restaurant food and similar services from 7% to 10%. The planned current rate of VAT will remain at 5.5% and will not decrease to 5%, and social housing will be now subjected to the decreased 5.5% rate.
Germany | 4
Certificate of Entry (“Gelangensbestätigung“)
The new Certificate of Entry has officially come into effect as of 1 October 2013. It follows an amendment to §17a UstDV (German Tax Implementing Regulation).
The new requirement applies to all intra-community supplies of goods irrespective of the means of transport and whether the goods are transported by the supplier, recipient, or third party.
The document can be submitted in German, English or French. If the Entry Certificate is in any other language, an official translation must be obtained and presented to the German Tax authorities.
This new document will have to be completed by the customer receiving the goods to provide evidence of the intra-Community supply, containing certain information:
• Name and address of supplier;
• Amount and customary description of the goods supplied;
• Transport by the supplier and/or dispatch: place and date of receipt in the Member State of destination;
• Transport by the customer: destination in another Member State and the date the transport ended;
• Vehicle identification number in the case of supplies of new vehicles under Art. 2 Para 2 lit. b) EC VAT Directive;
• Issuance date; and
• Signature by the recipient.
A transitional period (“Übergangsfrist”) will be effective until 31 December 2013. This means that the former invoicing requirements can be used until this time.
Hungary | 5
Hungary changes plan for VAT introduction on luxury goods and VAT cut on meat
Hungary has reversed its plan to implement a higher VAT rate on luxury items and decrease its VAT on meat products. After weeks of continuous debating over the issue, it was decided against introduction. A VAT cut would not be endurable for the government because they are trying to keep their deficit below 3% of GDP. The government does not want to risk returning to the EU’s excessive deficit procedure, which Hungry has only abrogated in 2013 after 9 years.
UK | 6
HMRC receives 1.44 billion from collecting VAT evasion
HMRC received a total of 1.44 billion pounds last year from collecting VAT evasion by large companies. New restrictions were brought about, which instilled stricter penalties. Last year’s revenues were three times greater than those in 2009-2010. Since then HMRC has been granted more power which means they are now able to charge additional fees to companies who are not compliant with their examinations.
Because of companies like Starbucks who have been condemned for paying low taxes, there have been added pressures on the department to increase its receipts through compliance activities. The government has taken a much firmer position on tax avoidance. VAT in business is being targeted by HMRC. For example they are targeting traders who import VAT free products and who charge tax on their side but do not provide the HRMC with the available funds.
Under the current system HMRC can refuse to pay back companies the VAT charges if they believe they were involved in a dishonest activity. However, it is believed that businesses who are not attempting any fraudulent activity are also being targeted and refused the reclaim of VAT payments.
Issue 08
December 2013 | © 2013 Meridian Global Services 11
Issue 08
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Feature 01 | European News
Europe
Italy | 7
Italy given an extension on annual VAT filing for 2012
Italy has been given a further extension of its annual VAT filing for 2012. The new filing date has been pushed back to the 31 January 2014. Usually the annual returns are due on September 30th of the year following the calendar year of reporting. Italian companies can file their VAT returns using Entratel or Finconline electronic systems.
As well as filing on an annual basis, Italian companies are also expected to make cash transfers on a monthly/quarterly basis during the year. Summary annual return of taxable items and black list reports are also some other requirements that Italian companies must provide.
Italy | 8
Italian Government has made €1 billion available in VAT refunds
€1 Billion has been put aside by the Italian Government for VAT repayments to large businesses. This is because of EC refraction proceedings due to its failure to repay VAT rebates within the time limits set by European law. This means businesses will receive the money they are owed.
Gary Harly, the head of Indirect Tax at KPMG in the UK said: “Following the European Commission’s announcement last month that it is to launch infraction proceedings against the Italian government for its habitual failure to repay legitimate VAT refunds due to businesses, it appears that the Italian government are seeking to appease the Commission by setting aside funds to meet these obligations. Taxpayers are likely to be in similar positions so, collectively, there is likely to be several billion Euros owing.
To be clear, this is Italian VAT that the businesses involved have paid to their suppliers, who in turn have paid across the VAT to the Italian authorities. The affected businesses are due this VAT back in the form of a refund as they are in a net VAT repayment position. Taxpayers are currently suffering a significant cash flow penalty through Italy failing to refund VAT receivables for many years. The Italian authorities are not disputing that the refunds are owed but they impose onerous audit processes and bank guarantee requirements upon taxpayers that are seeking approval for repayments of VAT. It seems that pressure from the EC will prompt a number of the refunds due, but we would encourage businesses to proactively seek their refunds now.”
*Source taken from KPMG
(cont’d)
DID YOU KNOW...?VAT rates are increasing globally with the average currently hovering at around 20%
December 2013 | © 2013 Meridian Global Services 13
Issue 08
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Feature 01 | European News
Europe
Ireland | 9
VAT not affected in Ireland’s 2014 budget
There is no increase in VAT rates this year. Tourism related activities, such as hotels, cinema, restaurant dining, hairdressing and newspapers will remain at 9 per cent. Fuel, electricity, entertainment (such as concerts), cleaning services will remain at 13.5 per cent and all goods and services such as electronics, jewellery, alcohol, washing machines, toys will stay the same at 23 per cent.
Latvia | 10
Amendments to Cabinet Regulation No. 17 of 3 January 2013
With effect from 6th June 2013, amendments were made to regulations relating to imports of goods at 0% VAT into Latvia, and to VAT refunds made to non-EU individuals. Imports
Goods imported into Latvia may be exempted from Latvian VAT if the importer of the goods (either a VAT registered company, or a Latvian fiscal representative acting on behalf of a company in another EU Member State or a Third Country) can show that goods will leave Latvian territory within 30 days of arrival. The goods must be dispatched to a VAT registered company in another EU Member State within the framework of an intra-community supply of goods. This is governed in Section 45 (1–2) of the Latvian VAT Act and was already in place prior to the new amendments being implemented.
Luxembourg | 11
Luxembourg granted exemption from EU VAT Directive
Luxembourg has been granted derogation from the EU VAT Directive by the European Commission. This will allow it to increase the annual VAT registration threshold from 10,000 to 25,000 euro. The exemption will last until the end of 2016. However Companies who do not reach the sales threshold will still be able to apply for VAT registration.
(cont’d)
Malta | 12
Malta includes invoices in VAT Directive
Invoices are now being included in Malta’s VAT Directive and have to be raised by the 15th of each month, after the supply or payment has been made. As well as this, guidance around simplified invoicing should be given, along with directions on electronic invoicing, storage and cost accounting.
In order to facilitate the supplier in applying the VAT exemption on the import into Latvia, paragraph 6.1 has been added to Section 45 (1–2). This new paragraph states that in such a case where the goods are cleared for circulation in an EU Member State other than that noted on the consignment paperwork, the exemption may still be given, provided that the supplier receives proof that the goods have indeed been sent on to the consignee (who must be registered for VAT in a second EU Member State) VAT refunds for individuals in Third Countries
Clarification has also been provided in relation to Latvian VAT refunds to non-EU individuals, who purchase goods in Latvia, which are subsequently exported out of the European Community.
Whereby the minimum amount for VAT reclaim was previously 50 Lats, this has now been reduced down to 25 Lats. The VAT Act shall be updated accordingly in 2014.
Moldova | 13
Moldovan Government to reintroduce reduced VAT rate
The Moldovan Government has decided to approve a draft law which will reintroduce the reduced VAT rate of 8%. The draft was approved on November 13th and applies to imported and supplied beet sugar into Moldova and horticulture and livestock production that is supplied into Moldova. If the draft is accepted, the amendments will come into place on 1 January 2014.
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Feature 01 | European News
Europe(cont’d)
Norway | 14
New Figures show Norway’s VAT is one of the highest worldwide
The OECD (Organisation for Economic Cooperation and Development) has confirmed that Norway has one of the highest rates of VAT in the world. The new figures show that they come second only to Hungary. The 25 per cent VAT is part of many listed goods and services in Norway which is a notable reason for the county’s high prices. There is also a 15 per cent VAT on food which may be raised to 16 per cent by the new conservative government. Over the years Norway’s VAT has steadily increased instead of raising income and corporate tax. It is thought by State tax collectors that a higher VAT will reduce the amount of tax lost though tax evasion or legal tax avoidance schemes.
Poland | 15
Changes to Polish VAT Act coming into force from 2014
With effect from 1 January 2014 a set of significant changes will come into force in Poland. The majority of the amendments have been implemented with a view to bringing the Polish VAT legislation in line with Council Directive 2006/112/EC. Some other changes are only editorial.
The changes will affect some of the basic principles governing the Polish VAT system therefore businesses performing taxable activities in Poland are advised to carefully revise their tax accounting and IT procedures which are currently in place with a view to making the necessary adjustments by 1 January 2014. 1.TAX POINT
Basic rule
Currently, the basic rule states that the tax point arises on the date when an invoice documenting a supply is issued (provided an invoice should be issued in respect of a given supply, like in most B2B cases) however not later than on the 7th day from the date when the supply took place.
According to the new basic rule, the tax point will arise when the goods are supplied or the services are performed. The tax point will not any longer (with only few exceptions) be related to the date when an invoice is issued.
Services supplied in parts will be regarded as performed when a part of the service, for which a payment has been defined, is completed.
Continuous services, i.e. services for which successive statements of account or successive payments has been defined, are regarded as performed on expiry of the periods to which such statements of account or payments relate until such time as the supply comes to an end. Services which are supplied continuously over a period of more than one year and which do not give rise to statements of account or payments during that period, will be regarded as performed on expiry of each tax year until such time as the supply comes to an end. This rule will
Poland | 16
Poland referred to ECJ for noncompliance with the Principal VAT Directive
Poland has been referred to the ECJ by the European Commission for failure to adhere to the Principal VAT directive by applying a decreased VAT rate to medical equipment of general use and fire safety goods. These goods are outside the sphere listed in the VAT Directive. EU members are only granted permission to implement a reduced VAT rate if they are normally intended to pacify or treat disability and if they are for the private, exclusive use of the disabled.
The press release with information on the Commission’s decision can be found on the Europa website.
December 2013 | © 2013 Meridian Global Services 15 14 VT Magazine
Issue 08
DID YOU KNOW...?This year the EC created an expert team to change the EU approach on taxation on the digital economy
also apply to a supply of goods, other than that consisting in the hire of goods for a certain period or the sale of goods on deferred terms.
When a payment (in full or only part) is made before the goods or services are supplied, the tax point will arise on receipt of the payment and on the amount received.
Special rules
The list of the exceptions to the main tax point rule will become shorter and simplified, as follows: > Tax point will arise when an invoice is issued in respect to the following types of supplies:
• Construction services or construction and installation services;
• Supply of printed books (excluding maps and leaflets), newspapers, periodicals and magazines;
• Supply of printing the books (excluding maps and leaflets), newspapers, periodicals and magazines, excluding the services to which art. 44 & 196 of the EU Directive applies (i.e. the so-called ‘importation of services’ in Poland) only if there was an obligation to issue the invoice.
In case the invoice was not issued (and should have been issued) or was issued late, the tax point arises on the expiry of the time limit to issue the invoice.
> Tax point will arise when an invoice is issued (however not later than the expiry of the date when the payment is due) in respect to the following types of supplies:
• Supply of electricity, gas and heat or cooling energy;
• Supply of following services: Telecommunication and radio communication; Certain waste-services listed in positions 140-153, 174 and 175 of annex 3 to Polish VAT Act; Rental, leasing and similar type of services; Security of persons and services of security, supervision and storage of property; Permanent (continuous) legal and office service;
excluding the services to which art. 44 & 196 of the EU Directive applies (i.e. the so-called ‘importation of services’ in Poland)
> Tax point will arise when a full or part payment is received in a list of few very specific cases, like the transfer of goods pursuant to a contract under which a commission is payable or the transfer by order made by or in the name of a public authority of the ownership of goods against payment of compensation etc, on the amount received;
> Tax point will arise when grants, subsidies and other similar payments are received on the amount received
As a result of the above, some current special tax point rules for certain types of supplies will be abandoned, e.g. transport services or licenses. 2. TAXABLE AMOUNT
The amendments relating to the taxable amount are more of an editorial nature, i.e. the regulations have been re-worded in such a way as to more closely reflect the provisions of Council Directive 2006/112/EC concerning the taxable amount, in particular art. 78 and 79, explicitly listing the elements the taxable amount should and should not include.
Moreover, further to the European Court of Justice judgement in the Polish case C-588/10, the conditions concerning the requirement for the supplier to obtain from its customer the acknowledgement of receipt of a correction invoice in a case when a taxable amount gets reduced will become more relaxed. 3. INPUT VAT DEDUCTION
According to the current basic rule, the right to deduct input VAT arises in the period in which a taxpayer received an invoice or customs document.
The new basic rule says that the right to deduct input VAT will arise in the period in which tax becomes chargeable (i.e. the tax point arises for the supplier) in respect of the domestic purchases of goods or services and imported goods; however not earlier than in the period in which an invoice or
customs document is received.
For intra-Community acquisitions of goods – right to deduct of input VAT arises in the period in which tax becomes chargeable, however provided that:
• The respective invoice documenting the transaction is received within 3 months following the end of the month in which the tax point arose; and
• The output VAT on IC-acquisitions is timely reported.
If an invoice documenting IC-acquisition of goods is not received within the stated deadline, the principle of VAT neutrality of IC-transactions will temporarily be breached because a taxpayer will be obliged to amend (in the 3rd month following the end of the month in which the tax point arose) the previously deducted input VAT. This input VAT may then only be deducted in the period in which the relevant invoice is received. 4. TIME TO ISSUE AN INVOICE
Currently, invoice should be issued not later than on the 7th day from the date when goods or services were supplied.
From 2014, invoice will have to be issued not later than on the 15th day of the month following the month in which goods or services were supplied. Taxpayers will also have a right to issue invoices up to 30 days prior to when the goods or services are supplied.
• Correlative numbering.
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Feature 01 | European News
September 2013 | © 2013 Meridian Global Services 17
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Europe(cont’d)
Portugal | 17
Portugal hopes to reduce restaurant VAT in 2014
Portugal is considering decreasing the VAT rate for restaurants from 23% to 13% in its 2014 budget. The working party report on this matter disclosed on Friday October 18th by the government, said that putting restaurant VAT back down to 13% would be beneficial for the economy, but said additional measures would have to be found to make up the loss in tax revenue.
Portugal wants to follow countries like Greece, where restaurant VAT was reduced to 13% and Ireland where the 9% VAT on entertainment has been retained in the recent budget.
This VAT reduction would need permission from the EC, IMF and the ECB if it is to go ahead. A review of Portugal’s progression towards exiting the bail-out will be dealt with in the summer of 2014.
Portugal | 18
New transport document required as of 1 July 2013
With effect as of 1 July 2013 the Portuguese Tax Authorities require being provided with new “transport documents” related to the movement of goods within the territory of Portugal. The new rules only apply to B2B transactions and not B2C transactions e.g. distance sellers.
Although the Portuguese Tax Authorities are expected to clarify the piece of legislation supporting this new measure, please find below some brief lines on the information currently available: Who does it affect?
Only taxable persons which:
• Exceed previous year turnover of EUR 100,000
• Move goods within territory of Portugal (Not affecting IC transactions)
• Issue paper invoices ( does not apply to e invoices)
What does it imply?
The obligation to issue a “transport document” meeting the following general formalities in advance to the corresponding transport of goods:
• Correlative numbering.
• Name, address and tax number of the issuer.
• Name, address of the recipient.
• Also the tax number of the recipient in case of taxable transactions.
• The wording “final consumer” in case the recipient is not a taxable person, only in relation to some supplies (such as construction materials, furniture items, electrical machinery, machines or sculling receivers, recorders or reproducers etc.)
• Trade name of the goods also mentioning the quantities.
• Loading and unloading locations, dates and time of commencement of the transportation.
Any changes on the above would imply the necessity of issuing a new transport document.
How such transport document can be issued?
• Electronically. The Portuguese Tax Authorities must be informed in advance.
• Through an IT program certified by the Portuguese Tax Authorities. Three copies needed.
• Through a different IT program granting the authenticity of the origin and integrity of the information transmitted. Three copies needed.
• Through the Portuguese Tax Authorities’ website. Three copies needed.
• In paper format using Portuguese authorized printers. Three copies needed. The Portuguese Tax Authorities must be informed in advance.
December 2013 | © 2013 Meridian Global Services 17 16 VT Magazine
18 VT Magazine
Feature 01 | European News
December 2013 | © 2013 Meridian Global Services 19
Issue 08
Europe
Romania | 19
Amendments approved on VAT act
The Romanian Government has approved amendments to their VAT legislation. These changes will come into place on 1 January 2014. From this date, in order to adhere to the 8th and 13th VAT Directives, taxable persons in another EU country or non EU country will no longer have to submit proof of the VAT payment made to the tax authorities when applying for a VAT refund.
As well as this, the cost of insurance of hired items will now be exempt from the taxable amount where VAT is chargeable for the supply of leasing services when such costs are re-invoiced to the person who holds the lease.
No alteration of the reclaimed VAT can be made in case a theft is proved. With the current system, an adaptation must be made when the item is discovered missing or stolen. And the taxable person is able to cancel the alteration when theft is proved by court ruling.
Technical measures will also be brought about to align national provisions with the EU VAT Directive with respect to excluded intra-Community obtaining of items and exempt supply of items for the fuelling and furnishing of vehicles.
Serbia | 20
Serbian reduced VAT rate to increase from 8-10 per cent
It was announced on the 14th of October that the lower rate of VAT in Serbia will increase from 8-10 per cent. Many of the goods will also be reassigned from the lower to the increased VAT rate. The Serbian minister of Finance, Lazar Krstic declared that this will fight against the gray economy. This includes the smuggling of tobacco and petroleum products. He also aims to introduce four more specific projects put in place by the Tax Administration in 2014. These include tax forms, online control of invoices, augmented online site control and thorough reorganization of IRS. This rate change will come into effect on 1 January 2014 Note: Personal computers and components which were subject to the reduced VAT rate will now be liable to VAT at the standard rate of 20 per cent.
Slovakia | 21
VAT act changes
The Slovak VAT act will be going through numerous different changes which have been brought before parliament. These changes will include the new report which lists local VAT supplies to other Slovak VAT registered businesses. The Slovak tax authorities are also planning to implement a new filing requirement on VAT registered business which will be put in place at the beginning of 2014.
The new filing would be submitted with the VAT return and would include:
1. Supplies of taxable goods or services to other Slovak VAT registered businesses.
2. Acquisitions of goods or services with input VAT that is claimed as a deduction.
3. Invoice numbers of above customers and supplies
4. The date of supply and payments for goods or services.
5. Gross values, Vat amount, net values and Customs codes of goods will also be included.
This will all be done through the electronic VAT return system. As well as the proposed new filing, the Act will also include the following amendments:
1. The application for the use of the reverse charge on the supply of mobile phones and high value metals.
2. Withdrawal of the obligation on foreign importers of goods into Slovakia to VAT registers if their goods are for onward supply to another EU member state
3. The new provision for the deductibility of VAT.
Sweden | 22
Sweden referred to ECJ over VAT on postal services
Sweden has been referred to the ECJ by the European Commission due to its application of VAT on postal services. According to the EU Policy this service should be exempt from VAT along with the sale of stamps. The ECJ has said that the excluding of VAT on postal services must be provided to any universal social provider whether or not the provider is a public or private operator. However it must be limited to the universal service. Services which have been negotiated will not be allowed benefit from the VAT exemption.
Sweden has not excluded VAT from postal services. All operators including the one which provides the universal service are required to charge VAT. Sweden has therefore failed to apply an exemption needed to fit in with EU legislation.
Switzerland | 23
Switzerland rejects replacing VAT with energy levy
The council of Switzerland has ruled against the replacement of VAT with a tax on energy. Although it supported the aims of the drive, at the same time the council did not agree with getting rid of the VAT system in Switzerland. VAT is the Confederation’s main source of income and is an imperative financial source for the country’s social insurance system. As well as this the council said that VAT is helping the development of the Confederation’s income tax.
The initiative was put forward by the Green Liberal Party of 2012. The change would involve the introduction of a tax on non-renewable energy in Switzerland, including oil, natural gas and uranium, to allow the Confederation to reach its climate objectives.
The council also argued that in order to abolish VAT, the rate of the energy tax would have to be very high, far above a justified level according to the energy and climate policy. They added that abolishing VAT would add to the financial burden on companies. Because VAT is mostly neutral when it comes to external trade, a tax on energy would therefore be a disadvantage to domestic companies in comparison to their foreign competitors. The council stated that low-income households would be badly affected by these changes and those individuals and businesses do not have the time to prepare for this major tax reform.
Switzerland at the moment has a rate of 8% VAT and a reduced rate of 2.5% along with a special 3.5% rate for hoteliers. Although the Swiss Federal Council remains committed to maintaining its primary source of income, attempts to simplify and change the existing system have been blocked by lawmakers. This includes plans to unify the two reduced rates of VAT.
The Netherlands | 24
The Netherlands introduce a new VAT filing system in 2014
The Netherlands is changing its VAT registering system to a new Standard Business Reporting (SBR) filing system at the start of 2014. The Government plans for this Standard Business Reporting system to ease the difficulty on Dutch VAT filings and tax reports.
The advantages of this for companies is that they are able to upload their information from their Electronic resource planning system which means they will spend less time filling paper returns or forms online. They will also be able to fill out Intra-community supply declarations.
An application for a safe electronic line to the Dutch tax office is required for companies who wish to use this path.
(cont’d)
DID YOU KNOW...?That the Italian government made €1 billion available in VAT refunds to large businesses in 2013?
In addition to Turkey’s country reciprocity limitations, a refund is only allowed where Turkish VAT is incurred on:
• goods and services regarding transportation activities in Turkey,
• and/or goods and services regarding fairs and exhibitions held in Turkey
18% VAT is expected to be charged on these activities, and is 100% reclaimable for those who qualify.
In application of the refund specific rules apply, and original invoices are required along with other supporting documentation. For these goods and a services related to transportation activities and fairs or exhibitions, the company must apply in writing to the local Turkish tax office for a refund.
Deadline for submission claims in the end of the year (i.e. deadline for 2012 issues is the 25th of December 2013). For the number of claims, Turkey prefers one claim offer per year, although a company is free to offer more than one claim per year. It is possible to apply up to the last 5 years of invoices to for VAT reclaim until the end of 2013.
Please note that the Turkish VAT law will be changing at the end of 2013 in this respect, and will only accept the last year’s invoices as an annual submission. A technical update will then be published in due course.
Ukraine | 26
Ukraine changes plans on decreasing VAT
Ukraine had planned to decrease its VAT rate along with lowering its corporation tax rate. However, the economy has worsened as state revenues have fallen by 3 per cent since last year, leading the IMF questioning whether or not it is the right thing to do. Failure to deliver on this promise will cause added political hostility in the Ukraine as the country’s goal is to gain membership in the EU and move away from Russian trade influence.
20 VT Magazine
Feature 01 | European News
December 2013 | © 2013 Meridian Global Services 21
Issue 08
Turkey | 25
VAT reclaim opportunities and regulations
Turkey’s VAT reclaim rules offer limited opportunity for a non-established company to recover Turkish VAT incurred.
A refund of Turkish input VAT is only permitted through a Turkish VAT registration, and subsequently Turkish VAT returns. In order to qualify for a Turkish VAT registration, there must be taxable sales made in Turkey, and a non - resident business must have a permanent establishment in Turkey. Further, the input VAT is only deductible if it is in relation to its taxable sales (including zero-rated sales) in Turkey.
Where the input VAT amount is a greater amount than the output VAT amount and a refund is in order, the Turkish VAT law states that the excess input VAT amount is carried over to the following period(s) and not refunded. However, refunds of excess input VAT are available for only VAT related to supplies of goods subject to a reduced rate, and VAT related to supplies of goods and services that are exempt with credit.
According to Turkish VAT law, only the below listed countries of a non-resident business can recover input VAT incurred in Turkey. Otherwise, a non-resident business must have a permanent establishment and have taxable activities in order to register and recover VAT in Turkey.
Countries which Turkey has agreed reciprocity on VAT reclaiming are: Bosnia and Herzegovina, Denmark, Bulgaria, Finland, France, Holland, Ireland, Switzerland, Italy, Malta, Norway, Portugal, Romania, Slovakia, Slovenia, UK, Austria, Belgium, Sweden, and Canada.
Europe(cont’d)
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SECTIONTWO
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December 2013 | © 2013 Meridian Global Services 25 24 VT Magazine
Feature 02 | European Commission
European CommissionThe below articles are updates regarding any changes by the European Commission
Romania | 1
European Commission request Romania change VAT refund delays The European Commission has requested that Romania change its process for refunding VAT. The request comes in the form of a reasoned opinion which is the second step of a violation policy. At present, Romania allocates a notable amount of time for VAT refunds to be settled, up to 180 days. However, EU VAT rules enforce a time restriction on when VAT refund claims can be settled. If the EC are not happy with Romania’s solution within two months, they will refer Romania to the ECJ.
Italy | 2
The EC has decided to initiate infringement proceedings against Italy.
The EC has chosen to initiate infringement proceedings against Italy. It believes that Italy’s VAT refund procedure is in breach of the code of neutrality and proportionality. According to Italy’s VAT refund system, a financial guarantee is frequently needed to receive a VAT refund. A non-established taxpayer must have a bank or insurance guarantee covering the full amount of the VAT refund that is requested. This needs to be presented for every request and be kept for three years, even after the person has been refunded. Businesses who meet specific standards may be excluded from this.
The EC believe that there is a needless delay in making the refunds when they are due. Taxpayers are exposed to financial endangerment when trying to recover input VAT, because of the long period of time they are left waiting for the annual VAT refund. As well as this, the need to provide a guarantee to shorten the VAT refund period is too inflexible and demanding.
Telecoms and Electronic Services | 3
The EC has published guidelines for businesses on new VAT rules
The European commission has released guidelines for businesses to provide information on the new VAT rules for telecoms and electronic services which will come into place in 2015. These guidelines aim to help businesses gain the necessary knowledge for when the VAT will be charged where the customer is based instead of where the seller is. It will allow telecoms, broadcasting and e-services businesses abide by their VAT obligations. This is coherent to the Commission’s plan of diminishing tax barriers and administrative concerns for cross-border companies in the Single Market.
The guidelines will focus on the information requested to register and account for VAT, the formats it will be requested in, the submissions deadlines and the details of payments. More guidelines will be produced next year in relation to the new place of supply rules.
Click here to read the published guidelines.
Digital Taxation | 4
Expert team created to change the approach on digital taxation in the EU
The European Commission has created a highly advanced expert team to change the EU approach on taxation for the digital economy. The group will discuss and decide the implications and the solutions of implying such a tax from an EU point of view. There will be 7 members in the team who are international experts in the fields of taxation and the digital economy. It will be chaired by a person with a political profile.
It is important to develop a strategy for digital taxation, as the digital economy is growing at such an accelerated pace. The team should be showing results to the commission in the first half of 2014. As the digital economy is an important resource for jobs, the tax structure that will be put in place needs to help rather than hinder the advancement of the digital sector. However, it must also contribute equally and fairly to public finances. As corporate tax avoidance is prevalent within the digital economy, an extensive resolution to tax the digital economy needs to be developed to assure the principal of fair taxation is carried out in the EU.
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Feature 02 | European Commission
European Commission
EU Corporate Tax Legislation | 7
Corporate tax rules toughened by European Commission
In order to decrease and prevent tax avoidance in Europe, the EC has decided that they may introduce amendments to the EU corporate tax legislation. The proposal will rid the loopholes in the Parent-subsidiary Directive, which have been used by some companies as means of escaping taxation.
Companies will now no longer be able to take advantage of the alternative ways intra-group payments are taxed in the EU to avert making tax payments at all.
For more information about the proposal see the press release here
(cont’d)
DID YOU KNOW...?In 2013 the Maltese government decided to include invoices in their VAT directive
France | 5
The EC has referred France to the European Court of Justice for reduced VAT on eBooks
France has been referred to the ECJ by the European Commission because of its reduced VAT rate charge on the sale of eBooks. This is due to the failure of the EU to reach an agreement on lowering the VAT on eBooks in October.
According to the EU VAT Directive printed books have a reduced or nil VAT rate which was prior to the introduction of eBooks. Countries differ on their application of VAT on eBooks. Germany and the UK apply their full VAT rates, whereas France and Luxembourg have charged reduced rates.
This has been going on for several years, as the UK has been demanding that Luxembourg and France abide by the same rules as other EU states. France and Luxembourg were given 30 days to change their eBook VAT rates in 2012. The most recent announcement, which came about at the start of November, affirms a full preliminary ruling being sought for France. If this is successful France will be forced to change its treatment of VAT on eBooks.
Belgium | 6
The EC has taken Belgium to court over its refusal to apply tax exemptions to Union Institutions
The European Commission has taken Belgium to court in order to force the country to apply tax exemptions granted to Union Institutions. Under the requirements in the Union’s protocol on Privileges and Immunities, the institutions are not obligated to pay these taxes.
According to the protocol, these institutions are excluded from indirect taxes or sales taxes by the government of the member states in which they are in, when they acquire purchases for official use. In February 2012 the EC sent Belgium a reasoned opinion on the issue. Belgium have still refused to apply the tax exemptions, which is why the matter has been referred to the European Court of Justice by the EC.
SECTIONTHREE
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Issue 08Feature 03 | World News
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1. China2. China3. China4. Egypt5. Japan6. Malaysia7. USA8. USA
Meridian,
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changes ofmapping the
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Feature 03 | World News
Rest of the WorldThe below articles are updates regarding any changes across the globe.
China | 1
China amends VAT rules for 2014/2015 China has begun implementing VAT reforms in Shanghai since 2012 and since then it has developed nationally in 2013. The next step for China is to get rid of the Chinese Business Tax and replace it with VAT. The VAT rate in China for its newest services is 11%. The current Business and tax rates are 3% and 5 %.
Telecoms will be the first new service scheduled for 2014. It is thought that a VAT rate of 11% will be implemented. This is lower than the standard rate of VAT on sales to customers of mobile phones which is 17%. The real estate and property sectors will come into place after Telecoms with a rate of 11%. Real estate is currently excluded from paying VAT in the EU. China also plans to implement VAT on financial services, which is also exempt in the EU, as it is difficult to verify the value added points of sale.
China | 2
China plans to implement fiscal reform The Chinese government are in discussions over reforming the country’s fiscal system, replacing the turnover tax with VAT in the transportation industry and six other service sectors. There will be lesser tax on smaller businesses reducing taxes by over 50 billion Yuan in pilot regions in the first half year. There will also be more backing for local government. Billions in tax cut backs are anticipated when the reform develops nationwide. ‘Over-reliance on land sales for fiscal revenue and poor real estate market control are at the heart of changes to the tax system’, said a researcher at the Institute of Finance and Trade Economics of the Chinese Academy of Social Sciences (CASS). Fiscal reform is imperative for China’s economic improvements.
China | 3
China’s VAT reform decreases taxes by 15 billion U.S. dollars China’s growing VAT reform has resulted in a tax reduction of 93.97 billion yuan (15.31 billion U.S. dollars) for businesses. The State administration of Taxation (SAT) reported that this reduction happened in the first ten months of the year. As well as the development of VAT reform China has also replaced its turnover tax with a VAT in the transportation industry and six service sectors since 1 August 2013.
The Administration of Taxation has said that this VAT reform has assisted 2.47 million taxpayers as of October. The SAT is expecting to expand the changes to railway transport, postal services and telecommunications industries by next year. It is expected that the tax reduction for the entire year will surmount to 120 billion yuan.
Egypt | 4
Egypt restarts discussions on VAT introduction
Egypt has decided to restart discussions on replacing its existing Sales tax system with a VAT regime. The Egyptian system at the moment can lead to compound taxation and is extremely complicated. The principle tax rate is 10%, however other rates stretch from 5% to 45% on items such as cars and supplies for the construction industry. There is permission for some deductions for input tax suffered, however this applies on the sale of goods only. Exporters can claim refunds on sales tax as well.
Egypt wants to obtain a 4 billion loan from the IMF and the IMF want a reform of their tax system in return. The IMF believes that Egypt’s current system is inhibiting trade and creating inequality among the tax systems. A team of VAT experts has been sent over in the first week of November to advise the Finance Ministry on an introduction arrangement and timetable.
Japan | 5
Japanese Government places consumption tax on digital goods purchased abroad
It has been decided by a Japanese government tax panel that they will contemplate levying a consumption tax on digital products that are distributed online from abroad and purchased by consumers in Japan. These items include music software and digital e-books. This decision was made on October 7th. Businesses in Japan have complained, as at present the consumption tax is only levied on digital goods and services distributed by Japanese companies.
Under the current government, Japan’s consumption tax is levied on domestic transactions and imports of goods. The sales tax is placed on digital products, however if the goods are purchased online via Amazon.com for example, the sales tax will be avoided for Japanese consumers. The government’s Tax commission has decided to raise the consumption tax from 5 per cent to 8 per cent from April 2014.
Malaysia | 6
Malaysia misses deadline to introduce goods and services tax
Malaysia had planned to update its indirect consumption tax and introduce a goods and service tax of 4% in the budget 2014. This is to replace the Sales and Service Tax of 10% and 6 %. However, it is not likely to meet the deadline, as the budget will be submitted to parliament in the second week of November.
At present Malaysia’s tax system is extremely complex and can result in double taxation. It has missed out on many attempts at improving the system, for a more OECD like system, similar to Europe, Australia and Canada. It was first announced for implementation in 2005, for the budget in 2007 but it was pushed back in 2006 as the government wanted to hear more from public opinion.
Economists predict that the GST will be introduced in 2015. If implemented, foods such as rice, sugar and flour will all be listed as zero tax items and services such as healthcare could be tax exempt. This would ease the hardship greatly on the poor in Malaysia. This is part of the fiscal rejuvenation by the government, to guide Malaysia to develop into a high income economy, as well as to attain a developed nation status.
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Rest of the World(cont’d)
USA | 7
Impact of Small Seller Exemption online US sales tax bill
The US Senate passed the Marketplace Fairness Act in the Spring which would allow states to require remote sellers to collect sales tax in the destination state. An element of the bill that has brought much contention is the small seller exemption (SSE). The Senate version of the bill exempts companies with US annual online sales under $1m. The bill is currently in the House of Representatives where there is discussion of eliminating the exemption, with the argument being that compliance should be so easy that it would not be a significant burden on any company regardless of size.
The Small Business Administration in the US released a study titled “Taxation and the Small Seller Exemption” in November, which examines the potential impacts of the various SSE policies. The study estimated that approximately 1,800 online sellers are above the SSE threshold of $1m. This represents only .06% of the total of 5 million online sellers. The firms with sales over $1m account for 57% of national online sales.
It is important to note that a lot of the larger online retailers are already collecting sales taxes for a number of states. The Marketplace Fairness Act would only expand a collection responsibility in those states where affected firms do not currently have nexus. So, the $1m exemption will result in significantly less revenue than the states may anticipate when you consider the small number of firms over the threshold and that these firms are already collecting sales tax in many states.
The study also looks at the economic efficiency considerations of the SSE. The SSE could affect business decisions about where to locate and how to structure their operations, as well as, how large to allow their sales to grow. An SSE would also drive consumers away from non-exempt firms and towards exempt retailers. The conclusion drawn is that business operations would be more efficient (and thus less costly) and consumer welfare would be greater in the presence of more uniform taxation.
A major argument for having the exemption is to prevent undue burden on small online retailers, since compliance cost are relatively fixed and thus represent a larger share of revenues or profits for smaller firms. However, sales tax compliance costs would be mitigated under the Marketplace Fairness Act because it requires states to provide compliance software to retailers at no charge. Evidence suggests that total compliance costs are about 3 percent of taxes collected on average, and third-party companies, such as Meridian Global Services, are available to provide sales tax compliance software and assistance.
USA | 8
Internet sales tax is a huge incentive for Tax software providers
According to the National Conference of State Legislatures, $23 billion in sales tax is unpaid every year, as retailers are making sales in other states through the internet. The “Marketplace Fairness Act”, was passed by the senate in May and is awaiting House confirmation. According to one estimate, as much as six million retailers in the U.S could owe sales taxes and services sold in other states. Multinational and large corporations have always used sophisticated tax-compliance software, however smaller companies without tax-planning procedures have done the sales tax function manually. With the constant changing of sales tax laws, even the sales tax software companies cannot agree on how many different rates exist nationwide.
There are only six tax software companies that are certified service providers; these include Avalara, CCH, Eactor, Taxware, Accurate Tax and Fed Tax. If the Marketplace Fairness Act passes, it will give the states authority to begin forcing retailers to collect sales tax, starting as soon as next year. For software providers this means they would have to provide basic software for retailers, so they could calculate the taxes. Retailers would have to pay a usage and licensing fee, along with other company fees for the states that opt for the collection of sales tax. Adopting this service for smaller companies is one of the fastest growing areas in the tax space, according to Diane Yetter, the founder of the Sales Tax Institute.
DID YOU KNOW...?The HMRC received a total of 1.44 billion pounds last year collecting VAT evasion from large companies
VAT for SAP Workshops
We have had a very successful year with our workshops. In 2013 we visited 9 cities in 7 countries including Dublin, Amsterdam, Frankfurt, Copenhagen, Brussels, Zurich, Paris, Manchester and Munich, with over 250 people attending. These workshops let companies discover how to achieve automated and compliant VAT processes directly in SAP. The workshops are ideal for both SAP and VAT professionals.
The numbers for these workshops are kept very small and we are very selective with who attends. This means we can create a very relaxed, personable atmosphere where everyone can get involved and leave feeling informed and with a greater insight of the topics at hand. These are free events and so they fill up very quickly when new dates are released. Lunch and refreshments are provided throughout the day for our delegates.
VAT for SAP Workshops
December 2013 | © 2013 Meridian Global Services 37
Issue 08
2013 Review
Interesting workshop, an eye opener, learn
other ways of solving similar challenges, and
re-think your company’s own set up
Ana Cristina V.C Jenson, Maersk“ ”
Very good opportunity to understand SAP
functions and how VAT is determined in SAP
Diana Kluen, Thyssen Krupp
“”
A clear and well prepared workshop that provides insight in SAP Frank Vanog, Danone
“”
You guys have a great understanding of the VAT regulations all over the globe and
how to automate these within SAP Martin Roelofsen, KLM
“”
Experienced consultants with profound
VAT expertise presented relevant scenarios using an interesting tool
Michalea Hoepfer, HB Fuller“ ”
Excellent overview and geared totally to real life issue Conor Mc Garrity, Glanbia“ ”
It was well run, packed full of
content and very informative
Michael Atkins, Tyco International “ ”
We are going to run more
workshops early next year.
There will be new content and
new topics discussed. Details
will be released soon so keep
an eye on our pages here:
Find us on:
or join our groups in Linkedin: VAT for SAP or The European Refund Directive Group
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