At Sovos, we are committed to keeping current with VAT compliance changes from around the world. Check out these recent updates compiled by our dedicated research team:
European Union
EU Council Approves Minimum VAT Rate Extension
On May 25, 2016, the Council of the European Union adopted a directive extending the minimum standard VAT rate of 15% for an additional two years. Under the directive, the 15% rate will be maintained from January 1, 2016 until December 31, 2017.
Belgium: Draft Law Affecting Cost-Sharing Associations
Effective July 1, 2016, a draft law will amend the Belgian VAT Code affecting cost-sharing associations. A cost-sharing association is defined as a permanent shared-interest group consisting of natural and/or legal persons. The purpose is to reduce management and operational costs for the group as a whole. A cost-sharing association is an exempt taxable person if certain conditions are met.
The draft law will make various changes to these conditions. Currently, for example, only completely exempt VAT payers or non-taxable persons can be members of a cost-sharing association. Under the draft law, the main activity of the members of a cost-sharing association will be the determining factor. The activity of the association overall must be exempt from VAT or not taxable (e.g. educational facilities, hospitals, etc.) rather than looking to each individual member. Cost-sharing associations will have until December 31, 2016 to conform to the new rules.
Czech Republic: Proposed Reverse Charge on Supply of Goods
According to a draft amendment of the VAT Act, a reverse charge mechanism would to apply to supplies of goods to a Czech taxpayer by a non-established supplier effective July 1, 2016. The reverse charge would not apply if the non-established supplier has Czech VAT registration.
Greece: Standard Rate Increase to 24%
On May 22, 2016, the Greek Parliament approved a bill increasing the standard VAT rate from 23% to 24% effective June 1, 2016. While a VAT increase was expected for July 1, the Parliament moved to adjust the rate one month early as a part of a broader measure to ensure additional debt financing. This change also impacts the rates which apply on the islands of Syros, Thasos, Andros, Tinos, Karpathos, Milos, Skyros, Alonnisos, Kea, Antiparos and Sifnos.
Hungary: VAT Proposals Effective January 1, 2017
On May 3, 2016, the Hungarian Government submitted to the Parliament the Amendments to Tax Laws, T/10537. The bill contains several VAT proposals that would take effect on January 1, 2017, unless otherwise noted, including the following:
- The VAT rate for eggs and poultry would be reduced from 27% to 5%
- The VAT rate for fresh milk would be reduced from 18% to 5%
- The VAT rate for restaurant services would be reduced from 27% to 18% and would be decreased further to 5% in 2018
- The VAT rate for internet services would be reduced from 27% to 18%
- The threshold requiring a company to register as a domestic taxable person would be reduced from HUF 1 million (about EUR 3,181) to HUF 100,000 (about EUR 318)
Ireland: Revenue Notice No. 42/16 on Cancellation of a Registration Number
The Office of the Revenue Commissioners of the Irish Tax and Customs Department issued Revenue eBrief No. 42/16. The eBrief discusses the Finance Act 2015, which added a new section, Section 108D, to the VAT Consolidation Act 2010. The new section is an anti-fraud measure. The section provides that when a VAT registration number is cancelled, the Revenue Commissioners may, when necessary, notify the taxpayer’s suppliers of the cancellation. The Revenue Commissioners may also make public certain information relating to the cancellation. The purpose of the measure is to ensure that suppliers, particularly suppliers in other Member States, are aware of cancellations and will therefore charge VAT when applicable.
Italy
Reverse Charge and Electronic Devices
Using the authority provided in Article 199a of the EU VAT Directive, Italy had extended the reverse charge mechanism to supplies of game consoles, tablets, portable computers and certain other electronic devices. On May 25, 2016, the Italian Tax Administration (Agenzia Entrate) issued Circular No. 21/E that clarifies the application of the reverse charge mechanism to the electronic devices in question. Among other issues, the circular clarifies that the reverse charge mechanism will not apply to sales made by retailers because it applies only on the sale of goods in the distributive phase. The circular also specifies the sanctions applicable to taxpayers that violate the rules governing the application of the reverse charge mechanism.
MOSS
On May 26, 2016, the Italian Tax Administration also issued Circular No. 22/E intended to clarify the territoriality of the Italian VAT law regarding the provision of telecommunication, broadcasting, and electronically supplied services. In addition, the circular clarifies the application of how the Mini One Stop Shop (MOSS) regime applies in Italy.
Lithuania: Proposed 5% VAT Rate on Farming Cooperatives Introduced
Draft law XIIP-4325 to amend Article 19 of the Lithuanian Value Added Tax Law has been introduced. The draft law proposes a 5% VAT rate applicable to agricultural services provided by members of recognized agricultural cooperative societies. If approved, the rate would be effective January 1, 2017.
Slovenia: Reduced Rate on Sanitary Products
A draft law to reduce the VAT rate on certain sanitary products from 21% to 9.5% is currently being debated in Slovenia. On April 20, 2016, the Government announced its opposition to the reduction, pointing to the need for stable and consistent economic growth for Slovenia’s recovering economy. On May 4, 2016, an official opposition motion sponsored by the Government was rejected by the Parliamentary Finance and Monetary Policy Committee, allowing debate on the draft law to continue.
Sweden: Taxable Amount for VAT on Imported Goods
The Swedish tax administration issued a regulation, 131 185777-16 / 111, specifying how the taxable amount of VAT will be determined for imported goods in view of the new customs legislation that entered into effect on May 1, 2016. By way of a summary, as a rule, the taxable amount of imports includes:
- The customs value established by the Customs Department
- Customs and other governmental taxes or charges other than VAT
- Incidental expenses such as commission, packing, transport and insurance until the known destination where the goods are transported
The Regulation then provides detail on a number of specific situations, such as for goods imported back into the European Union after having been processed outside the European Union.
United Kingdom
Spot the Ball Competition Held to be Game of Chance
Under the Value Added Tax Act 1994, games of chance are exempt from VAT. The game at issue in this case is called, “Spot the Ball,” which requires the player to identify where the ball is in a picture from a football game where the ball is not shown. The First-tier Tribunal (FTT) held that the game was a game of chance and therefore exempt from VAT. However, the Upper Tribunal (UT) overturned the FTT holding that the game wasn’t a game at all because the player did not need to “respond to another competitor’s move or to a change of circumstance resulting from his move” (termed an inter-player interaction rule). The Court of Appeal affirmed the FTT’s holding that this game did qualify as a game of chance, reasoning that the inter-player interaction rule wasn’t a requirement to be considered a game and that there was an element of chance when playing, in addition to skill.
Isle of Man Increases VAT Registration Thresholds
Effective retroactively to April 1, 2016, the Value Added Tax (Increase of Registration Limits) Order 2016 increases the threshold for the required registration for VAT. Under the revised standards, if a business has taxable supplies valued in excess of £83,000 over a 12 month period they must register. Previously the amount was £82,000. A business may now opt to de-register if the value of its taxable supplies over a 12 month period is less than £81,000. Previously the amount was £80,000. For comparison, the registration threshold in the United Kingdom is also £83,000.
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