VAT Newsletter: August 2017

Keep current with VAT news without having to sift through the news every day. Here are the most significant happenings in the world of VAT reporting from August:

International News

OECD:

OECD Publishes Comments on Model Tax Convention

On August 11, the Organisation for Economic Co-operation and Development published comments to its newly-released 2017 Model Tax Convention. The Convention contains a proposed new paragraph stating registration for VAT has no bearing on the question of whether an organisation has a “permanent establishment” within a jurisdiction; this clarification is especially timely now that a number of countries that have adopted mandatory VAT registration rules for organisations selling e-services to private consumers. The commentators largely approved of the new paragraph, with many suggesting that the OECD go farther and clarify that optional registration and/or appointing a VAT representative would also have no implications for the permanent establishment question.

European Union:

Extension of Romanian Derogation for Small Business VAT Thresholds

On August 11, 2017, the European Commission proposed that Romania be allowed to extend its current derogation on VAT threshold for small business registration until December 31, 2020. Romania currently sets its threshold at EUR 65 000 pursuant to a derogation that expires at the end of 2017. The Commission’s proposal would extend this derogation and would at the same time allow Romania to raise its threshold to 88 500, until 2021 or until the provisions of the VAT Directive on special schemes for small enterprises are reviewed and amended. The proposal would only take effect upon issuance of a council implementing decision.

Proposed VAT Derogation for Hard Drives

The European Commission has proposed Poland be authorized to assess a reverse charge on hard drives, such as solid-state drives and hard disk drives, which would impose VAT liability on the purchaser of such items. Article 199(a) of Council Directive 2006/112/EC (“the EU VAT Directive”) currently allows for Member States to impose a reverse charge on similar high-value items such as laptops and microprocessors, as a mechanism to combat VAT fraud. Extending the reverse charge to hard drives, however, would require a council implementing decision. The Commission recommends that such a derogation be granted to Poland from January 1, 2018 to December 31, 2020.

Country-by-Country News 

Spain

AEAT Updates SII FAQ

As part of an effort to facilitate a better understanding and increase compliance of taxpayers subject to the Supply of Information System (locally known as SII), which became effective July 1, the Spanish tax administration (AEAT) has updated its content of the Frequently Asked Questions document that explains, using a question and answer format, how the SII works. This new release of the SII FAQ includes five new questions and answers related to how taxpayers should report invoices for transactions carried out between January 1 and June 30, and how the AEAT will compare the invoice information supplied by a taxpayer with the invoice information provided by other taxpayers. Another important updates made to the FAQ relates to transactions reported in the Ledger of Certain Intra Community Transactions, which now will need to be reported in the Sales and Purchase ledgers if such transactions are supported by invoices.

United Kingdom:

United Kingdom Disputes EU Fraud Estimate

The United Kingdom is contesting a charge that “continuous negligence” by its customs agency has resulted in 1.987 billion Euros in lost duties on Chinese merchandise. The Office de Lutte Anti-Fraude (OLAF) conducted a two-year investigation into the matter, and recommended earlier this year that the UK pay the money into the EU budget itself as compensation.

The UK has now written a letter, addressed to the European Commission, calling OLAF’s estimate of the losses “inflated” and “overly simplistic,” while touting HMRCs record at combating tax evasion. The letter, dated August 8, comes at a time when the UK government is engaging the EU about future customs relationships following Brexit. The Commission’s only response has been that the investigation procedure is “ongoing.”

VAT Guide Receives Simplifications and Updates in Latest Version

Her Majesty’s Revenue and Customs (HMRC) has published the latest version of VAT Notice 700, which is a guide for a variety of topics related to VAT. This latest publication simplifies numerous sections of the notice for easier understanding and clarity, and provides additional guidance on topics such as single and mixed supplies of goods, as well as agents who are registered for VAT but acting in their own name. All of the changes made by HMRC are summarized in Section 1.2 of the Notice, which can be found here.  

Belgium:

VAT on Letting of Property

In its most recent framework for a budget agreement, the Belgian government has proposed giving taxpayers the option to collect VAT on the letting of immovable property, beginning January 1, 2018. This would allow taxpayers to deduct any input VAT incurred on operations such as construction that are directly related to the letting of the property. Member States are authorized to grant the right of option for taxation of the leasing or letting of immovable property under Article 137 of Council Directive 2006/112/EC (the EU VAT Directive).

Portugal

Portugal to Allow Payment of VAT Using Periodic Tax Return

The tax administration of Portugal has issued a new regulation (Portaria 221/2017) that will allow taxpayers to pay the VAT due on imports using Portugal’s periodic VAT return. The new measure is expected to enter into effect in two stages: September 1, 2017 for most goods contained in Annex C of the VAT Code (except mineral oils) and March 1, 2018 for the rest of the imported goods. For that purpose, two new fields (40 and 41) have been added to annex R of the periodic return.

Romania

Romania Split Payments and Electronic Filings

The Romanian Ministry of Finance released a draft ordinance introducing a split-payment mechanism for VAT payments on August 4. A revised version of the order was released on August 18th. The order requires that all VAT registered persons must open a dedicated VAT account for the collection and payment of VAT on supplies and purchases in Romania. Taxable persons must pay the VAT on purchased supplies into the supplier’s VAT account. Suppliers are required to supply purchasers with their VAT account information. Businesses will have seven days to transfer VAT payments not paid into the VAT account (such as cash or credit card payments) into the VAT accounts. The revised order has an optional effective date of October 1, 2017 and a mandatory effective date of January 1, 2018.

Earlier this month ordinance number 2326/2017 was officially published, requiring the electronic filing of many tax returns, including the VAT returns and the recapitulative statement.

Germany

Germany Updates List of NATO Headquarters for Purposes of VAT Exemption

On August 8, 2017, the Bundesministerium der Finanzen (BMF) published an up-to-date list of NATO Headquarters to which deliveries are tax exempt under Article 4 paragraph 7 of the German VAT Act.