New VAT Smart Brief: Benefits of VAT Automation in Shared Service Centres.
Medium to large-sized businesses, as well as multinationals, need to continuously focus on building an efficient,
compliant, and accurate tax reporting process. A thorough tax reporting process does not only pull from tax data, or even only financial data.
There are many other business data sources that drive tax determination, such as procurement, vendor/customer management, inter-company settlements as well as the inbound and outbound logistics.
These data flows often originate from multiple internal systems in different formats and currencies.
They need to be managed and sometimes reformulated as a part of the ongoing tax management process.
For more information about ways to streamline that process check out our new SmartBrief, Benefits of VAT Automation in Shared Service Centres.
VAT Compliance Updates
European Union: EU Commission to Propose Exemption from the VAT Mini One Stop Shop Rules for Small Businesses
Following the recent EU Fiscalis Summit in Dublin, Ireland, the European Commission intends to propose the introduction of a threshold which would remove small businesses from the MOSS requirements that became effective January 1, 2015.
The rules, as they currently apply, require that sellers charge VAT for e-services at the rate of the country where the consumer is located rather than at the rate of the country where the seller is located.
While the MOSS mechanism was intended to make meeting this requirement less burdensome, existing reports indicate that small businesses have been struggling to be compliant.
However, relief is neither certain or immediate.
Despite the announcement of a proposed threshold, reports suggest that it may not be discussed until 2016, with potential implementation taking even more time.
Belgium: Reduced Rate on Residential Electricity Eliminated
On August 23, 2015, Royal Decree No.
20 of 20 July 1970 was amended so as to repeal the reduced rate on electricity for residential use. Beginning on September 1, 2015, the reduced rate of 6% has been increased to the standard rate of 21%.
Control Report Obligation from 2016 – XML File Structure Published
From January 1, 2016, most entities registered for VAT in the Czech Republic will be required to provide data on tax receipts by submitting a Control Report.
This reporting obligation is a special tax claim and is entirely separate from the regular VAT return obligation.
The Control Report will be filed only in electronic format based on the XML file structure published during August, 2015 on the Czech Financial Administration website.
Proposed Second Reduced Rate for Newspapers and Magazines
On September 16, 2015, draft bill 596/0 was in introduced in the Parliament of the Czech Republic.
Under the proposal, effective January 1, 2016, the VAT rate for newspapers and magazines would decrease from the reduced rate of 15% to the second reduced rate of 10%.
The proposal states that the intent of the rate reduction is to increase the marketability of these products.
Finland: Application of VAT to Subscriptions of Newspapers and Magazines
The Finnish Tax Administration issued English-language guidance on the application of VAT to subscriptions for newspapers and magazines. Prior to 2012, subscriptions to magazines and newspapers were exempt from VAT. From January 1, 2012 to December 31,
2012, a VAT rate of 9% was imposed on all subscriptions of newspapers and magazines. From January 1, 2013 to present, a VAT rate of 10% has been imposed on all subscriptions of newspapers and magazines.
The new guidance clarifies that a subscription must be longer than one month in order to be properly subject to the reduced rate of 10%. Further, newspapers and magazines must be issued in a series of at least four per year, must have an editor-in-chief with certain specified
responsibilities, and the format and structure of the paper-bound publication must be generally identifiable in the public eye as a newspaper or a magazine. The guidance also notes that as of January 1, 2015, the sale of magazines and periodicals transported from the Åland Islands to
mainland Finland is properly subject to the 10% VAT rate.
Germany: Intrastat Threshold Increase for Intra-Community Purchases of Goods
Effective January 1, 2016, the Intrastat reporting threshold for intra-community purchases of goods (arrivals) in Germany will be increased from €500,000 to €800,000.
The threshold for intra-community supplies (dispatches) will remain unchanged at €500,000
Greece: Statement of Transition - Deadline Postponed
The Greek tax authority released Circular Letter 1199 postponing, until October 16, 2015, the submission of the statement of transition required from all private educational and training institutions that became subject to VAT upon the approval of Law 4336/2015.
The requirement had been previously postponed pursuant to Circular letter 1193.
Hungary: The Concept of Taxable Person
On June 3, 2015, the Supreme Court of Hungary (Kúria) submitted a request to the Court of Justice of the European Union (ECJ) for a preliminary ruling in the case Lajvér (Case C-263/15).
The request focuses on the interpretation of the term “taxable person” and on what constitutes a supply of services under the EU VAT Directive.
Specifically, the following four questions have been raised:
- In the circumstances of the present case, are the applicants acting as taxable persons in view of the fact that the interpretation of Article 9(1) of the VAT Directive does not exclude activities carried out by companies from the scope of the term ‘economic
activity’, even when those companies can only engage in commercial activities on an ancillary basis?
- Should the fact that the applicants receive a significant share of their funding from State aid and the fact that, in the context of the management of their operation, the applicants obtain income from charging modest fees, be taken into account for the purposes
of considering whether the applicants are ‘taxable persons’?
- If the answer to Question 2 is in the negative, must it be considered that that ‘fee’ represents consideration for a service and that there is a direct link between the service rendered and the payment of the consideration?
- Does the management of the investment constitute a supply of services by the applicants, within the meaning of Article 24 of the VAT Directive, or can that management not be regarded as a supply of services on account of the fact that its performance is a legal
Latvia - DNB Banka'AS v.
Valsts ieņēmumu dienests (Case C-326/15)
On July 1, 2015, reference was made to the Court of Justice of the European Union (ECJ) by the Regional Administrative Court of Latvia for a preliminary ruling in the case DNB Banka (C-326/15) which deals with the proper application of the rules related to VAT
The Administrative Court requested the ECJ to answer the following seven questions:
- Is it possible for an independent group of persons to exist for the purposes of article 132(1)(f) of the EU VAT Directive (2006/112) if the members of such group are established in separate Member States of the European Union, with the above article having been
transposed into the national laws of the Member States subject to different requirements which are not compatible?
- Can a Member State restrict the right of a taxable person to apply the exemption provided for in article 132(1)(f) of the EU VAT Directive (2006/112) if that taxable person has satisfied all the requirements for the application of the exemption in its Member
State, but that provision of the Directive has been transposed into the national laws of the Member States of other members of the group with restrictions which limit the possibility for taxable persons of other Member States of applying in their own Member State the corresponding exemption from
- Is it allowed to apply the exemption in article 132(1)(f) of the EU VAT Directive (2006/112) to services provided in the Member State of the recipient of those services, being a taxable person for VAT purposes, if the provider of the services, also a taxable
person for VAT purposes, has applied, in another Member State, VAT to those services in accordance with general arrangements, that is, considering that VAT on those services was payable in the Member State of the recipient of those services, in accordance with article 196 of the EU VAT Directive
- Must the term "independent group of persons", for the purposes of article 132(1)(f) of the EU VAT Directive (2006/112), be understood to mean a separate legal person whose existence has to be demonstrated by way of a specific agreement creating that independent
group of persons?
- If the reply to the previous question is that an independent group of persons need not necessarily be understood to mean a separate entity, is an independent group of persons to be regarded as a group of related undertakings in which, in the course of their usual
economic activities, those undertakings provide each other with support services for carrying out their commercial activities, and may the existence of that group be demonstrated through the contracts for services concluded or through documentation available on transfer prices?
- Can a Member State restrict the right of a taxable person to apply the VAT exemption in article 132(1)(f) of the EU VAT Directive (2006/112), if that taxable person has applied an uplift to the transactions, as required under the legislation on direct taxation of
the Member State in which the taxable person is established?
- Does the exemption in article 132(1)(f) of the EU VAT Directive (2006/112) apply to services received from third countries? In other words, where a member of an independent group of persons, as referred to in article 132(1)(f) of the EU VAT Directive (2006/112),
provides, within that group, services to other members of the group, can that person be a taxable person from a third country?
Lithuania - ECJ decision (VAT): Fast Bunkering Klaipėda (Case C-526/13)
On September 3, 2015, the Court of Justice of the European Union (ECJ) issued its decision in Fast Bunkering Klaipėda UAB v.
Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos (Case C-526/13).
The issue in the case related to whether the international transport exemption in the EU VAT Directive also applies to supplies to undisclosed intermediaries.
For the transactions in question, the ultimate use of the goods was known in advance and duly established and substantiating proof was submitted to the tax authorities in accordance with the legislative requirements. The ECJ ruled as follows:
Article 148(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the exemption provided for in that provision is not, in
principle, applicable to supplies of goods for the fuelling and provisioning to intermediaries acting in their own name, even if, at the date on which the supply is made the ultimate use of the goods is known and duly established and evidence confirming this is submitted to the tax authority in
accordance with the national legislation.
However, in circumstances such as those at issue in the main proceedings, that exemption may apply if the transfer to those intermediaries of the ownership in the goods concerned under the procedures laid down by the applicable national law took place at the earliest at the same time when the
operators of vessels used for navigation on the high seas were actually entitled to dispose of those goods as if they were the owners, a matter which is for the national court to ascertain.
Luxembourg - European Commission v.
Grand Duchy of Luxembourg (Case C-274/15)
The European Commission has brought an action against Luxembourg under article 258 of the Treaty on the Functioning of the European Union (TFEU).
European Commission v.
Grand Duchy of Luxembourg (Case C-274/15). The Commission contends that Luxembourg has failed in its obligations under Article 132(1)(f) of the EU VAT Directive. Article 132(1)(f) stipulates that Member States shall exempt from VAT “the supply of services by independent groups
of persons, who are carrying on an activity which is exempt from VAT or in relation to which they are not taxable persons, for the purpose of rendering their members the services directly necessary for the exercise of that activity, where those groups merely claim from their members exact
reimbursement of their share of the joint expenses, provided that such exemption is not likely to cause distortion of competition”.
According to the Commission, the legislation applicable in Luxembourg does not restrict the VAT exemption only to services provided by an independent group of persons and directly necessary for activities undertaken by its members which are not liable to VAT or
are exempt, and is therefore in violation of the requirements of the Directive.
Visit Your Preferred App Store for Dutch VAT Filing Reminders
The Dutch Tax and Customs Administration has notified the taxpaying public that from the beginning of August 2015, the department will no longer send SMS/text messages to taxpayers to remind them of their VAT return filing obligation.
Instead, taxpayers now can use the appropriately named “App VAT Alert” which is an application currently available (free of charge) for smartphones and tablets.
Proposed VAT Modifications in the Annual Budget
On September 15, 2015, the Dutch government released its annual budget, which includes the 2016 tax plan.
The plan primarily focuses on corporate, income, and real estate transfer taxes.
However, bills presented to the Parliament also include Other Tax Measures, which contains minor modifications of the VAT Act relating to medicines and seeds under Schedule I.
On September 10, 2015, Romania published, in Official Gazette No.
688 published Law No.
227, significant revisions to their VAT Act.
Some of the changes, which will be effective as early as January 1, 2016, are as follows:
- Standard VAT rate reduction of 4% (24% to 20%)
- Standard VAT rate reduction of 1% (20% to 19%) effective January 1, 2017
- 5% reduced rate on (previously 9% reduced rate) access to castles, museums,
historical monuments, zoos, fairs, exhibitions and cultural events, cinemas; and school manuals, books, newspapers and magazines, except for those produced mainly for advertising
- Reverse charge mechanism to be applied to: the supply of buildings, parts
of buildings, land, the supply of mobile phones, devices that use integrated circuits, laptops, PC tablets and game consoles (until December 31, 2018).
Proposed VAT Rates in 2016
Under the Slovenian budget legislation presently in force (ZIPRS1314-A and ZIPRS1415), a standard VAT rate of 22% and a reduced VAT rate of 9.5% apply until the end of 2015.
Barring additional legislation, from January 1, 2016 the VAT rates would revert back to 20% and 8.5% respectively based on Slovenian VAT Act (ZDDV-1), Article 41.
On September 20, 2015, the Slovenian Ministry of Finance announced a proposed bill that would amend the Slovenian VAT Act to permanently extend the application of the 22% and the 9.5% rates presently in effect.
Proposed Postponed VAT Accounting on Imported Goods
Under the Slovenian VAT Act, Articles 35 and 77, as a general rule the importer of record must pay VAT on goods immediately when they are imported into Slovenia.
On September 20, 2015, the Slovenian Ministry of Finance announced a proposed bill to amend the Slovenian VAT Act to simplify calculation and payment of VAT on importation of goods into Slovenia by recipients of goods identified for VAT in Slovenia.
Under the proposal, such recipients of goods would no longer pay VAT immediately upon importation but instead would report the import VAT on their VAT return.
Assuming the import VAT is deductible, the calculation of VAT for such importers would become an administrative task because the import VAT due would be offset by the deductible input VAT on the same VAT return, and no VAT would have to be remitted to the tax authorities.
If enacted, the postponed VAT accounting provisions in the bill would take effect on July 1, 2016.
Proposed Extension of EUR 50,000 VAT Registration Threshold
Under Article 287(15) of the EU VAT Directive, Slovenia would normally be allowed to exempt from VAT only those taxable persons whose annual turnover is no higher than EUR 25,000.
However, by Council Implementing Decision 2013/54/EU, Slovenia has been authorized to derogate from the rule and apply a threshold of EUR 50,000.
As things stand today, this derogation would expire on December 31, 2015.
Slovenia has requested that the European Commission extend the derogation beyond this time.
Based upon information provided by Slovenia, at the end of 2013, 51.45% of the VAT payers had a taxable turnover below EUR 50,000 and represented only 1% of total VAT revenue.
On September 3, 2015, the Commission concurred and proposed that the Council extend the EUR 50,000 VAT registration threshold until December 31, 2018.
Spain: New Tax Information System
The Tax Administration of Spain (AEAT) has approved a new information system that would allow the Tax Office to collect, in real time, information about sales made by Spanish taxpayers. This new mechanism, called the Immediate Information System (or simply
SII), will require taxpayers to submit details regarding all issued invoices, no later than four days after being issued.
This new requirement will only by mandatory for a group of 62,000 taxpayers, composed of large companies, VAT groups, and those registered under the monthly refund regime.
Those participating taxpayers will be relieved from the obligation of sending additional tax reports currently required of most standard taxpayers.
With this new information, Spain plans to create and develop a fiscal data footprint for each taxpayer, and to facilitate submission of VAT returns.
This new system is scheduled to go into effect on January 1, 2017.
Sweden: Clarification on Designation as Taxable Person
The Swedish Tax Authority recently published new guidance which details the distinction between economic activity and private activity for the purpose of determining whether an individual qualifies as a taxable person under the Swedish VAT. The guidance
provides examples of objective circumstances that are important for determining whether an individual is a taxable person subject to VAT, and lays out specific proof which must be shown through evidence.
The following proof is required to show that an individual is a taxable person:
- Independent activity
- With the intent or purpose
- Provision of goods and services for consideration
The following examples indicate that an activity was conducted independently:
If the agreement with the client is designed as an assignment agreement as opposed to a contract of
The presence of several clients.
- Assignments are limited in comparison with the work generally performed by an employee.
- The assignments are carried out in a shorter time than a normal employment arrangement.
- The work is performed in-house by the contractor.
- The contractor is obligated to provide their own equipment and tools to carry out the mission.
- The contractor determines how the work will be done and organized.
- There is financial risk to the contractor.
United Kingdom: Detailed Guides regarding Intrastat Reporting Updated
The United Kingdom has recently updated its detailed guidelines designed to assist taxpayers in completing their Intrastat declarations.
The revised guidance includes:
- Background information (duty to report statistics)
- Step-by-step guide
- Supplementary declaration
- Technical information
Global Information Reporting Beyond VAT
Businesses everywhere are facing an increasing need to be compliant with new and complex regulations.
For financial services companies, there are new regulations that impact the ways they report to governments and their clients.
- The first significant step toward international reporting started with the US implementing the Foreign Account Tax Compliance Act (FATCA) with reporting deadlines in early 2015.
- This will be followed by the UK enacting CDOT (Crown Dependencies and Overseas Territories) reporting, commonly referred to as “UK FATCA,” with reporting starting in 2016.
- CRS (Common Reporting Standards) will represent the final step toward full transparency by facilitating the reciprocal exchange of account information between countries throughout the world resulting in a substantial increase in complexity.
Even if organizations have no obligations to FATCA and CDOT, key learnings from their implementation will be critical in understanding and meeting the obligations of CRS, with reporting set to begin in 2017.
Learn more about managing through these regulations with help from Sovos Compliance.
Recently Added Resources on Sovos.com