| 2015 meridianglobalservices.com vat trends | issue...
TRANSCRIPT
EUROPEAN UPDATES
INTERNATIONAL UPDATES
VAT COMPLIANCE
VAT TRENDS | ISSUE_16
VAT TRENDS INSIGHTS FOR GLOBAL BUSINESSES
MERIDIANGLOBALSERVICES.COM
VAT FRAUD: WILL EBAY & AMAZON BE LIABLE?See page 13
VAT RECOVERY: WHAT YOU NEED TO KNOW!See inside for details
from Meridian Global Services
WINTER ISSUE | 2015
FISCALIS CONFERENCE: DUBLIN SEPTEMBER 2015See page 15
ISSUE 16 | WINTER 2015VISIT MERIDIANGLOBALSERVICES.COM |
COMMON VAT MYTHS WITH ECOMMERCE SELLING by Chris O’Shea
SAP TRAVEL MANAGMENT ROADSHOWS 201605
PRESS RELEASE - VAT ADD-ON FOR SAP
15
WELCOME TO THE WINTER 2015 EDITION OF VAT TRENDS.WE HOPE YOU FIND THIS PUBLICATION USEFUL FOR YOUR BUSINESS.
GLOBAL SELLING FOR AMAZON SELLERS
18
16VIDEO AND PODCASTS SECTION
VAT RECOVERY -WHAT YOU NEED TO KNOW See page 5
DOCUMENT DOWNLOAD
UPDATES
EUROPE |2-8|2. Romania 2. Iceland 3. Poland 3. Albania3. Serbia3. France4. Norway4. Austria4. Spain6. United Kingdom6. Sweden6. Hungary 7. Germany7. The Netherlands7. Greece7. Italy8. Portugal 8. Cyprus
INSIDE VAT TRENDS
8. Belgium8. Ireland
REST OF THE WORLD |10-11|10. South Korea10. Australia10. Tunisia10. Brazil10. China11. New Zealand11. Israel11. India11. Egypt11. Saudi Arabia11. Japan
EUROPEAN COMMISSION |17-18|
FEATURESARTICLES13. Meridian’s Zdenek Vajnlich discusses
Internet tax issues with Video Age International
13. OECD: The outcomes of the Global Forum on VAT
13. VAT fraud: Will eBay & Amazon be liable?
14. Why Can I Not Recover All My VAT? #1
15. Crack Down on VAT Fraud - Extended Powers for HMRC
15. Fiscalis Conference – ‘Modernising VAT for cross-border E-Commerce’
VIDEOS AND PODCASTS16. VIDEO: Common VAT myths with
ecommerce selling
16. VIDEO: VAT Made Easy
16. VIDEO: What’s happening with non compliant ecommerce sellers?
16. PODCAST:Online Sales Tax
EUROPEAN NEWS
VISIT MERIDIANGLOBALSERVICES.COM VAT TRENDS_ 2
ROMANIAUPDATE TO ROMANIA VAT RATE CHANGES
The Romanian Government have made a number of changes to the standard and reduced VAT rates which will come into effect from 1 January 2016. These include the following:
• The standard rate of VAT will be reduced from 24% to 20%. It is also proposed that the standard rate will further reduce to 19% with effect from 1 January 2017.
• The cut in Romanian Value Added Tax will increase the Romanian deficit to 2% in 2016 compared to the forecast 2015 figure of 1.8% - although this may prove optimistic.
• The reduced VAT rate of 5% will apply to the following items (Currently these items are subject to VAT at 9%):
1. Access to castles, museums, historical monuments, zoos, fairs, exhibitions, cultural events and cinemas
2. Access to sports events
3. School manuals, books, newspapers and magazines, except for those produced mainly for advertising.
Romania raised its VAT rate from 19% to 24% in 2010 at the height of the global financial crisis.
CHANGE IN VAT RATE ON WATER
The Romanian Government has approved a reduction in the VAT for water supply from 24% to 9%. This will come into effect on 1 January 2016 and applies to both domestic and commercial consumers.
ICELANDICELAND IS SET TO RAISE VAT ON TOURISM
By 1 January 2016 Iceland will raise the VAT on various travel related services which are currently exempt from VAT. The following activities will be subjected to the reduced VAT of 11% from 2016:
• Spas, saunas, health facilities and sanitariums
• Travel agency services e.g. tour operators from within Iceland
• Transport for entertainment purposes
UPDATES REGARDING ANY CHANGES ACROSS EUROPE.
EUROPEAN NEWS
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FRANCENEW ELECTRONIC PAYMENT RULES FOR VAT IN FRANCE
From 28 October 2015 it is compulsory for French companies to pay VAT by direct debit. This new rule applies to foreign companies from 1 December 2015; they will be required to provide the French tax office with their foreign bank account
details. The penalty for not complying with the new rule will be a fine of 60 euros for each offence. French VAT registered businesses will be required to settle their monthly/quarterly VAT returns via direct debit. Banks will be taking the amount directly from company bank accounts on or after the 20th of each month/quarter, so it is necessary to make the appropriate account arrangements in advance.
Also as part of the latest French Budget for 2016, all VAT registered entrepreneurs will be required to use officially recognized accounting software, in particular with regard to recording sales. This new requirement will be phased in by 2018.
FRANCE TO LOWER DISTANCE SELLING VAT THRESHOLD TO €35,000
As part of the 2016 Finance Bill France is to lower its distance selling VAT threshold from €100,000 to €35,000 per annum from 1 January 2016. The aim of the reduction is “to avoid distortions of competition between established businesses in France and businesses established in the European Union”. It also follows hopes for the introduction of a €100,000 VAT threshold on digital services which has similarly brought many thousands of ‘micro-businesses’ into the foreign VAT net.
ALBANIAALBANIA TO CUT TOURISM VAT
Albania is discussing cutting the Value Added Tax rate on tourism from 20% to 5%. The plan was announced by the Ministry of the Economy and is seeking to replicate the successes of those who applied a reduced VAT rate in the EU such as Ireland. Ireland have successfully supported and boosted their tourism industries in recent years with VAT cuts. It is claimed that Ireland’s 9% tourism rate (standard VAT rate is 23%) has created up to 30,000 jobs in recent years.
SERBIANEW VAT RULES IN SERBIA FOR FOREIGN INVESTORS
Recent developments in Serbian law include the introduction of a VAT proxy for foreign investors. Companies will no longer be required to set up an establishment within the country in order to obtain a VAT registration. Foreign investors are now also required to appoint a tax representative in the country for this purpose. This is an important move in enticing investors to the Serbian market for business opportunities.
POLANDPOLISH COURT REQUESTS REVIEW ON E-BOOK VAT RULING
Poland’s Constitutional Court is challenging the ECJ in their decision to increase e-book VAT rates. The court had agreed, in March 2015, that e-books were electronically supplied services and not goods thus not being entitled to a reduced VAT rate. On 20 October the Polish court argued the unfair VAT differences between printed books and e-books.
We will update you as this case progresses.
EUROPEAN NEWS
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AUSTRIAAUSTRIA TO INTRODUCE A NEW REDUCED VAT RATE IN 2016
The Austrian Government announced the introduction of a new reduced VAT rate of 13% to come into effect in 2016. Most goods currently under the reduced VAT rate of 10% will increase to the new 13% VAT rate, however, food and pharmaceuticals will remain at the current rate of 10%.
The new reduced VAT rate will be introduced in two stages:
• Livestock, seeds, artists and cinemas will increase to the 13% VAT rate from 1 January 2016
• Cultural services e.g. theatre, museums, zoos and accommodation will increase to 13% VAT rate from 1 May 2016
AUSTRIA EXTENDS TOMS VAT
From 1 January 2016 Austria is to extend the application of its Tour Operator Margin Scheme (TOMS) to apply to VAT registered customers. TOMS is a smooth process for tour operators as they only pay the full VAT amount of their profits rather than registering in each country in which they sell holiday packages. The current Austrian version of TOMS only permits the use of the scheme for sales of packages to consumers i.e. B2C.
NORWAY
NORWAY: BUDGET 2016
The 2016 budget was presented to the parliament on 7 October 2015 with the intention to promote employment, growth and structural adjustment in the Norwegian economy; it will come into effect as of 1 January 2016. Norway’s 8% VAT rate will rise to 10% and will apply to transport services and products related to entertainment. In order to boost investment and employment the Government will cut its corporate tax from 27% to 25% with a second stage seeing the rate drop to 22% in 2018.
NORWAY TO SCRAP VAT ON DIGITAL NEWS
The Norwegian Government will remove the current VAT imposed on digital news from 2016. This will in effect cost the country around NOK350m. The government has announced they will boost funding for the VAT compensation scheme for sports activities and also increase the reduced 8% VAT rate to 10% from 1 January 2016.
NORWAY TO RAISE TRANSPORT AND HOTEL VAT IN 2016
Norway has reported that from 1 January 2016 it will raise its 8% VAT rate to 10%. The new VAT rate will apply to hotels, holiday homes, public transport, state TV licences and cinema tickets.
The goal of the VAT rise is to help plan a cut in the corporate income tax from 27% to 22%, this is to be spread out over two stages with the end 22% being implemented in 2018.
SPAIN
SPAIN: BUDGET 2016
Details of the 2016 Spanish budget have been published and include significant VAT exemptions and limits. Exemption for export-related services will now include freight forwarders and collectors and goods intended for tax free shops. For application of the simplified regime the turnover of the preceding year may not exceed certain amounts i.e. if in 2016 and 2017 you did not exceed €250,000 then from 2018 this amount will be €150,000 (except agriculture, livestock & forestry), this also relates to imports of goods and services.
SPANISH S.I.I SYSTEM TO BE EFFECTIVE BY 2017
Following on from our previous blog post there still remains around 10 million euro in VAT that has been paid and VAT that remains to be paid in Spain. The Spanish Government has created a new modern way to stop Spanish VAT sneaking through the financial system. The new ‘Immediate Supply of Information’ (S.I.I) system is still at draft Royal Decree stage and pending approval but the Spanish authorities hope to have this fully implemented by 2017. This system allows taxpayers to provide VAT information from issued or received invoices within a four day period or where third-party billing or customer self-billing is involved, the deadline has now been extended to eight days.
EUROPEAN NEWS
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UNITED KINGDOMUK VAT CHANGES RESULTING FROM THE ECJ JUDGMENT IN SKANDIA
From 1 January 2016 an overseas establishment of a UK established entity will be treated as part of a separate taxable person if the overseas establishment is VAT grouped in a Member State that operates similar ‘establishment only’ grouping provisions to those in Sweden which were considered on Skandia. All VAT changes resulting from the judgement can be found on the HMRC website.
HMRC ISSUES BRIEF REGARDING VAT ON DIRECT MARKETING SERVICES USING PRINTED MATTER
The HMRC’s brief 10/2015 confirms the VAT treatment on supplies of direct marketing services on printed matter after many affected businesses misunderstood the previous notices and zero rated the supplies.
The brief confirms that direct marketing services using printed matter should have VAT applied at the standard rate. The brief also states that those businesses that wrongly zero-rated the supplies will be able to avail of a transitional arrangement and HMRC will not take any action on previous errors.
For further information or to read the brief in full: Revenue and Customs Brief 10 (2015): VAT - direct marketing services using printed matter
HMRC EXTEND PENSION FUND TRANSITIONAL PERIOD
HMRC had previously announced the transitional period was to end 31 December 2015. There has been a further 12 months extension granted to allow for businesses to adapt to changes regarding the deductibility of VAT incurred on pension fund management costs.
HMRC VAT RULES FOR CLOUD
Under the new ‘Contracting Out Services guidance’ published this week, cloud services are eligible for VAT reclaim. This means such services will cost 20% less for NHS bodies and government departments. The new rules also make provision for IT to have various hosting and network suppliers.
HUNGARY NEW HUNGARIAN REGULATION ON INVOICING
As of 1 January 2016 there will be a new Hungarian regulation on invoicing, this new invoicing software will have to contain a new modification which allows data to be exported by the Hungarian tax authority. This will also let the tax authority export reports of invoices at any given time. The new rules must be applied by Hungarian VAT registrations of foreign companies also; if the new rule is not met there may be a penalty of up to €1700.
SWEDENVAT GROUP RELIEF TO BE ABOLISHED IN SWEDEN
As of 1 January 2016 Sweden’s VAT group relief will be eradicated as it conflicts with EU law. The VAT group allowed group companies to deduct input VAT on another group company’s goods and services.
NAVIGATING THE COMPLEXITIES OF EU VAT TRIANGULATION
Legal and practical considerations
EUROPEAN NEWS
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GREECEGREEK ISLAND VAT RATES INCREASE FROM OCTOBER 1, 2015
From October 1, 2015, Greek islands began losing the value added tax privileges that they have enjoyed for years. Previous VAT rates on Greek islands were 5%, 9% and 16%. These rates increased to continental Greece’s 6%, 13% and 23% rates, respectively. The first islands to feel these taxation spikes are the islands of Milos, Mykonos, Naxos, Paros, Syros, Tinos in the Cyclades as well as the Dodecanese island of Santorini. The rest of the islands are set to follow on June 1, 2016.
GERMANYFOREIGN ELECTRONIC CONFIRMATION OF EXPORT IN GERMANY
The German Ministry of Finance have outlined the conditions on which the German tax authorities will accept, for VAT purposes, an electronic proof of export issued by the customs authorities of another EU member state. Electronic proof of export issued by the customs authorities of another EU member state will be accepted by the German tax authorities with the understanding that complete documentation is available confirming that the goods have been exported. Complete documentation is extremely important in circumstances where the customs authorities of the other EU member state only issue an electronic message confirming the proper termination, rather than also providing a document of confirmation as a pdf file. In situations such as this the following additional conditions must be met:
• Proof that the goods physically left the EU must be provided, as evidenced by the electronic message issued by the foreign customs authorities.
• Documentary evidence must be made available by the taxable person of the receipt of the electronic message issued by the foreign customs authorities.
• Documentary evidence of the link between the electronic message issued by the foreign customs authorities and the relevant export declaration must be available.
• There must be no doubt that the goods left the EU in the correct manner.
GERMANY ISSUED WITH REASONED OPINION TO CHANGE TOUR OPERATOR VAT
The European Commission has issued Germany with a reasoned opinion to amend its value-added tax (VAT) legislation on the application of a special “price margin” scheme for travel agents. The Tour Operators Margin Scheme allows tour operators, buying and selling holiday packages to declare VAT only on the profit margin element of their trade. The price margin is the difference between the actual cost to the agent and the total amount, exclusive of VAT, to be paid by the traveller. This simplification helps to eliminate the need to VAT register across all the countries where they operate.
The request for a change is based on the 2013 European Court of Justice’s ruling against Spain which decided that such schemes must apply to businesses customers, as well as private individuals. In the absence of a satisfactory response within two months, the Commission may refer Germany to the European Court of Justice.
GERMANY INTRASTAT THRESHOLD TO RISE TO €800,000
The Intrastat threshold for intra-community purchases of goods (arrivals) will be increased from €500,000 to €800,000 with effect from 1 January 2016. The threshold for intra-community supplies (dispatches) will remain at €500,000.
ITALYITALY’S REVERSE CHARGE VAT TO BE EXTENDED
On 6 November 2015 the Italian Government approved a draft decree that will extend the reverse charge VAT to include the sales of laptops, tablets and gaming consoles, until 31 December 2018. The reverse charge system puts the liability on the recipient to account for VAT instead of the supplier.
THE NETHERLANDS NETHERLANDS THRESHOLD FOR EC SALES LISTINGS TO CHANGE IN 2016
As of 1 January 2016 the Dutch tax authorities will reduce the quarterly €100,000 Sales Listings threshold value to €50,000. VAT registered businesses can submit monthly EC Sales Lists, EU member states can opt for quarterly returns when such transactions are under the €50,000 mark from 1 January 2016.
EUROPEAN NEWS
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BELGIUM BELGIUM TO UPDATE TAX POINT RULE FROM 2016
Belgium changed its tax point rules in line with most EU countries when it introduced the new invoicing directive in January 2013. Since then, due to a difficulty for businesses to apply new tax point rules, the Belgian Authorities has tolerated transitional regimes. Taxpayers could still opt to use the former tax point rules i.e. invoice date, except for intra-community supplies of goods or services. This transitory regime has been in place since January 2013 and will be until 31st December 2015. The new rules that will apply from 1 January 2016 will include the following:
• Prime tax point when VAT becomes due at the moment of the supply or completion of the service
• By derogation, VAT becomes due when the invoice is issued
• VAT becomes due in any case on 15th day of the month following the supply if no invoice issued by then
• VAT due when a payment is received before the supply in the absence of an invoice at that time
POSSIBLE INCREASE TO THE VAT REGISTRATION THRESHOLD
The Belgium Government have requested an increase to the VAT registration threshold from €15,000 to €25,000. If approved by Parliament this could come into effect from 1 January 2016.
We will keep you updated as this develops.
2016 BELGIAN BUDGET RAISES SUGARY DRINKS TAX
Belgium will introduce a new tax on sugary drinks and other fattening produce from 1 January 2016. Employer contributions will also be reduced from 33% to 25%.
CYPRUS CYPRUS: REDUCED VAT FOR HOME RENOVATIONS
Cyprus President Nicos Anastasiades has announced the news for a reduced VAT rate on renovating housing units from 19% to 5%. From this reduced VAT the government hopes the public will gain more accessible upgrades to their homes and invest in energy efficiency.
IRELANDIRELAND’S TOURISM VAT RATE TO REMAIN AT 9%
There will be no changes to the 9% tourism VAT rate as mentioned by the Minister for Finance Michael Noonan in the 2016 Irish budget.
It was previously recommended by the Organisation for Economic Co-operation & Development (OECD) that Ireland increase its reduced tourism VAT rate from 9% to the standard rate of 23%.
PORTUGALPORTUGAL TO DECREASE VAT ON RESTAURANT FOOD
Portugal’s new Prime Minister, Antonio Costa, has promised to try and undo the austerity tax which was introduced by his predecessor. Food supplied in restaurants is currently at a 23% VAT rate, Costa hopes to bring this to a reduced rate of 13%.
INTERNATIONAL NEWS
VAT TRENDS_ 10VISIT MERIDIANGLOBALSERVICES.COM
UPDATES REGARDING ANY CHANGES ACROSS THE GLOBE.
AUSTRALIAAUSTRALIA DRAFT $75,000 GST THRESHOLD ON DIGITAL SERVICES
Australia has recently drafted a potential $75,000 GST registration threshold to be put in place on digital services sold to consumers by foreign providers.
We will keep you updated as this develops.
CHINAVAT REFORM IN MEDI-CARE
China is to replace turnover tax with VAT in medi-care and old age care fields; this is set to help encourage consumption. The consumption tax reform is to optimise policies on import duties for retail B2B transactions in cross border ecommerce. It also aims to further simplify policies on pre-tax deduction of enterprise income tax in order to ease the corporate tax burden.
BRAZILBRAZIL TO INCREASE ICMS TAXATION ON SOFTWARE FOR 2016
From 1 January 2016, where goods are sold across internal Brazilian borders, ICMS is now due in the state of the seller. ICMS is the Brazilian indirect VAT on the sale of goods and services and currently belongs to where the consumer is located. As off-the-shelf software has the character of goods it will therefore be subject to the new ICMS VAT rules.
SOUTH KOREASOUTH KOREA: FOREIGN TOURISTS TO RECEIVE ON THE SPOT TAX REFUNDS
South Koreas Ministry of Finance has announced that from 1 January 2016 all foreign tourists shall receive immediate tax refunds at local duty-free shops. The new tax refund will be eligible for goods up to $172. This will see reduced queues at the tax refund desks in airports.
TUNISIA TUNISIA PLAN TAX REFORMS
The IMF has acknowledged Tunisia’s plans for a tax reform. This tax reform is to simplify tax rules and ultimately boost revenue. Tunisia plan to introduce just two VAT rates, 6% and 18%. The personal income tax regime, which will commence 1 January 2017 and not 2016 as previously thought, will increase from TND 1,500 to TND 5,000. These changes hope to increase the economy by 1.5%.
INTERNATIONAL NEWS
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FEATURES
COMING UP NEXT...
NEW ZEALAND NEW ZEALAND E-SERVICES GST SET AT 15% FROM OCTOBER 2016
New Zealand’s e-services are set to raise to a 15% GST rate from 1 October 2016 for non-resident providers. This will include the downloading of music, online software, e-books, video and games. Non-resident providers will now need to register with the New Zealand Revenue and complete quarterly GST filings online.
JAPANNEW CONSUMPTION TAX NOW APPLICABLE TO FOREIGN E-SELLERS
In an effort to remove a price advantage enjoyed by foreign e-sellers and to level competition among foreign and domestic e-sellers, the Japanese government have amended the Japanese Consumption Tax (JCT) bill and now requires foreign e-sellers to charge the 8% consumption tax.
This came into effect on 1 October 2015 and in April 2017 the consumption tax will rise to 10%.
For further information please follow this link: The Japan Times
ISRAEL ISRAEL: VAT RATE REDUCED TO 17%
Following on from Meridian’s September information it is now confirmed that Israel has reduced its VAT rate to 17% from the old rate of 18% from 1 October 2015. The reduced rate is reflected by the countries strong growth in tax collections.
SAUDI ARABIA IMF RECOMMENDS VAT FOR SAUDI ARABIA
With dropping oil prices, the International Monetary Fund (IMF) is urging Saudi Arabia to follow in the footsteps of the United Arab Emirates in preparing to introduce a VAT system. The IMF also recommended a land tax to try help with lowering the fiscal deficit, which is growing due to the decline in oil prices. Saudi Arabia is also considering imposing a VAT on unhealthy goods e.g. cigarettes and sugary drinks to help with the countries falling oil prices. Low oil prices and deficits in Saudi Arabia over recent years has put a new focus on diversifying the countries dependence on crude revenue.
ISRAEL TO IMPLEMENT 0% VAT RATE ON BASICS FOR 2016
The Israeli government is set to implement a zero VAT rate on public transport and basic foods e.g. bread and milk. This will commence 1 January 2016 and is ultimately set to help Israel’s disadvantaged.
INDIA NEW GST SYSTEM NOT LIKELY TO BE IMPLEMENTED IN 2016
As we previously reported in July, it was hoped that the landmark bill that would allow for a new GST system in India would be passed by parliament and therefore introduced in 2016, however, due to delays within the parliament it looks set to be delayed until 2017.
We will keep you updated as this develops.
EGYPT EGYPT’S VAT INTRODUCTION TO BE APPROVED IN WEEKS
According to Egypt’s finance minister, Hany Qadry, the VAT law will be brought to cabinet in a matter of weeks. The introduction of VAT is expected to raise revenues in the hope to reduce the country’s growing deficit.
We will keep you informed as this develops.
FEATURED ARTICLES
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1. Meridian’s Zdenek Vajnlich discusses Internet tax issues with Video Age International
2. OECD: The outcomes of the Global Forum on VAT
3. VAT fraud: Will eBay & Amazon be liable?
4. Why Can I Not Recover All My VAT? #1
5. Crack Down on VAT Fraud - Extended Powers for HMRC
6. Fiscalis Conference – ‘Modernising VAT for cross-border E-Commerce’
PODCASTS1. Online sales tax
VIDEOS
1. Common VAT myths with eCommerce selling
2. What is VAT Compliance all about for online Sellers?
3. VAT Made Easy
ARTICLES
WINTER FEATURESGo straight to your desired section by selecting and clicking on one of the images below.
VIDEOS & PODCASTS
VIDEOS & PODCASTS
FEATURE ARTICLES
EUROPEAN NEWS
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FEATURE ARTICLES
MERIDIAN’S ZDENEK VAJNLICH DISCUSSES INTERNET TAX ISSUES WITH VIDEO AGE INTERNATIONALMeridian’s Zdenek Vajnlich discusses Internet tax issues with Video Age International, keeping in mind companies VAT compliance obligations and regulations.
“According to Vajnlich, U.S. companies are often not aware that there are VAT compliance obligations resulting from the provision of electronically supplied services. Whether or not U.S. Incos register for VAT and remit the VAT to the respective VAT authority is another matter entirely. Vajnlich further explained that, in respect to the sale of physical products, U.S. exporting companies may not necessarily run into a liability to remit the VAT to the respective countries, as import VAT imposed on the goods shipped directly from the U.S. to the consumer in the E.U. has to be paid by the customer upon arrival in the E.U. However, when goods from a U.S. company are imported into the E.U. into a distribution center and from there distributed to customers in the E.U., VAT registration liabilities and related VAT compliance obligations arise.”
For the full interview please click here.Zdenek Vajnlick Meridian Global Services
OECD: THE OUTCOMES OF THE GLOBAL FORUM ON VATOn the 5th and 6th of November 2015 at the 3rd Global Forum in Paris, 104 Jurisdictions approved the International VAT/GST Guidelines for cross border services and intangibles. These guidelines act as global standards for the VAT/GST treatment of international trade in services and intangibles and serve as a reference point for designing and implementing legislation with a view to minimising for unintended non taxation or double taxation.
The overarching purpose of VAT/GST is as a levy on final consumption and to
VAT FRAUD: WILL EBAY & AMAZON BE LIABLE?It is estimated that small packages being imported into Europe has grown from ‘approximately 30 million in 1999 to approximately 115 million in 2013, a total increase of 286%.’ A report from the EC estimates that more than €500m a year is being lost as non EU sellers ship into the EU and sell at a low value VAT rate or even offering VAT-free prices.
Online marketplaces such as Amazon and eBay can be legally required to check for VAT fraud being committed by overseas sellers and Rita de la Feria, a professor in tax law at Durham University mentions “if you knew that fraud was being committed you are liable, if you should have known that fraud was being committed, you are liable as well.” Rita also mentions that these third parties create the conditions for VAT fraud to take place; this can be heard in her interview with BBC here at **1 hr 52min 13secs**
be taxed at the place of destination for both B2B and B2C supplies, with the revenues accruing to the jurisdiction where the supply to the final consumer occurs. The application of the destination principle in VAT achieves neutrality in international trade.
Meridian played an active role in the developments of these guidelines,
and attended; as part of the BIAC delegation; making a presentation on further work to be undertaken to The CFA , through its Working Party No 9 (WP9) in order to advise on further work that should be undertaken in this area.
For more on this news you can visit the OECD website here.
FEATURED ARTICLES
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WHY CAN I NOT RECOVER ALL MY VAT? #1 Something we see quite a lot of, is the tendency for staff to go outside travel policy when booking. Often they believe they can get much better deals on aggregator sites like Travel Republic, Expedia and Booking.com etc. They can sometimes get the same hotel on these sites for less than going through the correct company booking procedure via TMC, OBT or Concur Travel.
Happy days, they think! The traveller is making an effort to keep within the budget and, where possible, getting a bargain at the same time and saving the company money. Everyone wins, right?
Unfortunately not! And here is one of the reasons why!
• The opportunity for VAT recovery is lost on the accommodation due to the way in which aggregators pay for hotel rooms.*
CASE STUDY
Let me give you a real life example from a recent situation with one of our customers. Their employee knew that he had to stay within a particular chain of hotels as per the policy and that it should be booked via the TMC. He was travelling to Switzerland and identified the hotel that he wanted to stay in. He checked the rate for the hotel with the TMC and then just to be sure he was getting the best rate he looked up the same hotel on an aggregator site. He found that he could get the same room on the same dates cheaper if he booked via the aggregator site.
He booked with the aggregator and paid online and got a confirmation email with total amount along with a hotel voucher. He was all set. He was doing a great job;
• Saving the company money as far as he could see
• Staying in the right hotel
• Within policy (he thought)
What he didn’t realise, was that he actually cost his company money. Apart from any other savings the company had secured via the TMC relationship (which were now lost
because he had booked outside of policy) the opportunity to recover the VAT on this transaction was also lost.
As a client of Meridian, the traveller knew to provide the company details on checking in to ensure that the right name and address was on the invoice. He provided them with a business card to ensure that there were no problems. He checked in and ate dinner with his colleagues in the hotel that evening.
When checking out the next day he noticed that the hotel had put the aggregators name as the booking address and that the invoice was marked “duplicate”. He explained that he needed to have the address “fixed” and an original invoice provided. He also noticed that the accommodation portion of the invoice was removed meaning that it did not show the VAT for the room. The desk clerk changed the address to the company as requested; however he could not provide an invoice for the accommodation with VAT.
The reason he could not get an invoice with VAT on it is because when booking and paying for his accommodation through the aggregator site he was no longer buying the room from the hotel.
The aggregator was buying the room from the hotel and then selling it on to the traveller. In this case the aggregator was using a scheme called TOMS (Tour Operators Margin Scheme), which means that the traveller no longer has the opportunity to recover the VAT on his stay.
EXPOSURE TO RISK
• Incorrect VAT Calculation within your EMS
O When your employee adds their accommodation expense into the EMS, an assumption will be made automatically that VAT is included – this will be then included in the VAT Calculation which will make this figure incorrect. Hence over calculating recoverable / deductible VAT.
• You will not be able to recover the VAT
O No VAT is recoverable on the accommodation due to transaction going through TOMS.
Fully utilising Concur to ensure policy control will ultimately help stop this kind of rogue spend and benefit the entire organisation while leading to greater VAT recoverability and deductibility
FEATURED ARTICLES
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CRACK DOWN ON VAT FRAUD - EXTENDED POWERS FOR HMRCTo improve VAT compliance among small business, the UK government is driving ahead with legislation to tackle the issue. Specifically, HMRC are moving ahead with their crack down on companies who sell goods online in the UK but who are not VAT compliant.
HMRC estimates that for 2012/2013, the tax gap due to what they have named ‘the hidden economy’ stood at £5.9bn or 17% of the total tax gap. VAT non-compliance makes a substantial portion of this.
HMRC wants to ensure a level playing field between those businesses and individuals who comply with their tax obligations and those that do not. One area of particular scrutiny by HMRC is that of sellers based outside Europe who hold stock in the UK, but sell goods online without having a registered UK VAT number. This is causing major problems with traders who are facing grossly unfair competition in these situations.
In its summer budget, the UK government was clear about a number of new measures to help HMRC in their efforts. The UK government are extending powers to HMRC which will give them help to identify non-compliant traders. This will include having legal powers to acquire data
from ‘intermediaries’ and electronic payment providers in order to identify the names of sellers.
A multitude of e-payment service providers and intermediaries will be subject to this new legislation including payment gateways, processors, banks, credit card companies, e-marketplaces and others. Effectively these new data gathering powers mean HMRC will have the authority to electronically receive data and identify non-established traders in the B2C sector who are not VAT compliant.
It is worth keeping in mind also that a mutual assistance programme exists between the tax authorities of EU Member States. Each assists the other to identify non VAT compliant traders. Recently there has been a major increase in mutual assistance leading to substantial tax intakes.
In addition, all EU Member States are reviewing domestic legislation to have similar powers to those being extended to HMRC. Denmark is bringing in this legislation from January 2016.
It’s clear the UK government are not delaying with extended powers for HMRC. With a tax gap of billions to address we can expect many more developments from the UK government in their crack down on the ‘hidden economy’ and non-VAT compliant cross border sellers.
By Chris O’Shea, Meridian Global Services, @ChrisOMeridian
FISCALIS CONFERENCE – ‘MODERNISING VAT FOR CROSS-BORDER E-COMMERCE’The fiscalis conference was held in Dublin, Ireland from Sept 7 – 9. Member States Finance Ministries and selected businesses were represented at this conference, including Meridian Global Services who participated fully.
The feedback showed the European Commission is positive on MOSS so far. According to Donato Raponi, Head of Unit (VAT) European Commission, ‘this Fiscalis seminar is a very important step in the Commission’s preparatory work for the future proposal, whereby not only will we be looking at the future policy options but also assessing the implementation of the 2015 changes. As you are aware, both Member States and the business community were integrally involved in making these 2015 changes work. It is notable that we now have in excess of 11,000 businesses registered for the MOSS and we expect that EUR 3 billion will be paid through the system in 2015 representing up to EUR 18 billion in turnover.’
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EU Commission launches consultation on ‘Modernising VAT for Cross-Border eCommerce’
As part of the Digital Single Market strategy and before legislation drafts are proposed in 2016, the EU Commission have launched a consultation regarding simplifying VAT on cross-border EU transactions.
This consultation is to gain feedback on areas such as Mini-One Stop Shop (MOSS) and also to assess the new VAT rules surrounding cross-border electronic services, which came into effect in January 2015.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said: “This consultation presents a real opportunity to ensure that future VAT revenues from the digital economy are distributed fairly and effectively. At the same time, we want to make it as easy as possible to comply with the rules. We also have an interest in ensuring that future legislation reflects the reality for businesses across the EU.”
The consultation will run for 12 weeks.
For further information or to participate in the consultation, please follow this link:
Consultation on Modernising VAT for cross-border eCommerce
EU VAT committee agrees guidelines on crowdfunding
Crowdfunding is generally performed via the internet and its platform is currently valued at over €25 billion and forecasted to reach around €300 billion by 2025. The EC referred this matter to the EU VAT committee to consider VAT implications
of crowdfunding in April 2015. The EU VAT committee has stated “where platforms provide services free of charge they remain outside the scope of application of the VAT Directive”. Where services generate a fee, such services are subject to VAT. More on this can be found in the EC guidelines here.
European Commission releases report on VAT revenue collection
The European Commission has released a report analysing the difference between expected VAT revenue and the actual amount collected, known as the ‘VAT Gap’. The report is based on VAT data from 2013 and shows no improvement on 2012. It also estimated that the EU VAT loss was €168 billion.
The Commission is urging Member States to take precautions to reduce tax evasion and fraud, stating it ‘remains a burning issue and is top of this Commission’s agenda.’
The report shows Member States VAT gaps varied from between 4% in Finland, the Netherlands and Sweden to 41% in Romania.
Please follow this link to read the full report: European Commission VAT Revenue Collection Report
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EU to withdraw Low Value Consignment Stock Relief Scheme
The EC and member states are working to withdraw the LVCR scheme as it is estimated to cost the EU around €500m per year. The EC has announced that it will make official proposals in 2016 to remove this VAT exemption.
European Commission to drop plans for a uniform VAT return
The European Commission has announced it plans to drop its initial concept for a uniform VAT return. The concept was initially proposed in 2013 with a start date for 2017 but it has gained little support from all 28 member states.
ECJ rules Bitcoin VAT exempt
On 22 October 2015 the European Court of Justice ruled that Bitcoin is exempt from VAT. The ECJ said that bitcoin transactions “are exempt from VAT under the provision concerning transactions relating to currency, bank notes and coins used as legal tender.”
European Commission approves Italian ‘Split Payment’ VAT System
The EU has approved Italy’s request to implement a “split payment” VAT system which involves public service bodies paying VAT on supplier invoices directly to the Italian Treasury instead of to the supplier. The approval has been granted with retrospective effect from 1 January 2015 and it will run until 31 December 2017. Italy implemented this regime in order to cut down on the level of fraud it was experiencing in this sector. It was estimated that Italy was losing €900 million per annum on public body VAT payments.
European Commission consider VAT MOSS threshold
After the UK appealed for a VAT threshold, stating the current rules are extremely burdensome for small businesses and sole traders, it was discussed at the latest Fiscalis meeting in Dublin and the European Commission agree the introduction of a threshold would be practical.
However, it is not known when this will be passed through the European Parliament and could take some time to be agreed upon among Member States.
We will keep you updated as this develops.
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For more information about our organisation, please visit www.meridianglobalservices.com Meridian Global Services Tallaght Business Park, Tallaght, Dublin 24, Ireland Tel: +353 (0)1 4590 500 | Fax: +353 (0)1 4590 540 Editorial Committee: [email protected] [email protected] [email protected] The information contained within this publication is and shall remain the property of Meridian Global Services group of companies. Contents of this publication must not be re-produced in whole or in part, used in tendering, or given/communicated to any third party, or for any other purposes without the prior written consent of Meridian Global Services.
© 2015 Meridian Global Services. Published in Ireland. All rights reserved. 1038.indd(Ireland) 12/15. Issue 16. Artwork by marketing department (SC).
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