All the latest stories from the world of international and cross-border VAT.
The Swedish Tax Authorities have updated their VAT guidance on services related to investment funds, essentially stating that providing management services to investment funds that deal with unit linked insurance plans are not exempt from VAT.
Full guidance can be consulted on the Swedish Tax Authorities’ website, although there is no English version currently available.
The Italian Tax Authorities have released revised list of companies that qualify for the revised split payment VAT system.
As a reminder, the VAT spilt payment system is designed to act as a measure aimed at curbing VAT fraud by obligating the taxable person acquiring goods or services to pay the VAT due directly to the tax authorities rather than to the supplier.
Currently, the following categories of companies are impacted by the application of the split payment system:
Spain has revised the wording of two points of Article 91 of Spanish VAT law.
This update broadens the scope of the reduced rate of 10% to include it applying to several cultural activities, including concerts, theatre performance, bull fights and discotheques as well as other live performances.
This is also applicable to hotel and hospitality services where the provision of catering is accompanied by recreational services or entertainment, which had been excluded from the reduced rate since 2012. However, how the rules are applied in practice is complicated and advice should be sought to ensure that any change of VAT treatment to enjoy this adjustment is correct.
Denmark has updated its guidance on the VAT treatment applied to private use of business assets by staff. The Danish Tax Authorities have essentially stated that should a taxable person acquire assets for both private and personal use, then the private use by an employee should be treated as a supply of goods / services from a VAT perspective.
Consequently, output VAT will need to be accounted for in relation to the private use of the asset.
On 24th September 2017, the Swiss taxpayers rejected the proposal regarding the additional funding of the 2020 pension system through the increase of the VAT rates.
As a result, the standard VAT rate and the special rate for the hospitality sector will be decreased from 1st January 2018 as follows:
As of 1 August 2017 Greece is the latest EU Member State to use the extended reverse charge in a bid to tackle tax evasion in the electronics sector.
The measure is aimed at transactions that involve the domestic supply of laptops, tablet PC’s, mobile phones and game consoles.
Based on this new provision the liability to account for VAT in relation to such supplies will be borne with the buyer of the goods, who will account for both input and output tax.
Greece has decided to introduce an accelerated VAT refund procedure for certain types of businesses.
As such, according to a Circular (Circular 1103/2017) published recently VAT refund claims will be processed with priority and refunds will be made without a prior audit for businesses that are:
Following the trend of Poland and Italy, the Romanian Ministry of Finance has published new legislation introducing the Split Payments of VAT, having the purpose of reducing VAT fraud.
According to the new tax provisions, this split payment mechanism will be implemented with an optional starting date of 1 October 2017 and mandatory starting date of 1st January 2018.
All taxable persons, (including non-established companies, but excluding private individuals) will be required to open distinctive and secure bank accounts which are to be used to receive VAT amounts from their clients and for paying VAT amounts to their suppliers. The non-VAT portion of income received or payments made will be paid to or from any regular bank account. Hence, all payments with VAT on them will have to be “split” and the appropriate different parts paid to the relevant bank account.
The European Court of Justice (“ECJ”) has reaffirmed its position on chain transactions in a new case (C-386/16 UAB ‘Toridas’) that deals with such types of supplies.
At the same time the case is also a reminder of how important it is to understand the full extent of the supply chain you are part.
Toridas is a Lithuanian based and VAT registered company that was selling frozen fish to Megalain, an Estonian based and VAT registered company. The two companies had a cooperation agreement in place, stating that Megalain undertook to transport the goods outside of Lithuania no later than 30 days after the date of the sale by Toridas. The process usually followed by Megalain once it had purchased the fish was to immediately resell it and transport to its final customers in other EU Member States. However, it was noted that in some cases the goods were sent for grading and packing in a Lithuanian facility first.
The President of the UAE has issued Federal Law No. (8) of 2017 on Value Added Tax, which sets the foundations for the VAT system by regulating the administration and collection of taxes and clearly defining the role of the Federal Tax Authority (FTA).
As with Saudi Arabia, the UAE is due to introduce the VAT system on 1 January 2018, with the headline VAT rate being set at 5%. It appears there will be a mandatory registration threshold of AED 375,000, whilst voluntary registration will be an option for those businesses making supplies with a value of 50% or more of this figure (AED 187,500). Businesses making primarily exempt supplies will not be liable to register for VAT.