The Trend Continues – BEPS Action Plan 1 Accelerates Globally

Kelsey O'Gorman
July 21, 2020

This blog was last updated on July 21, 2020

Addressing Base Erosion and Profit Shifting (BEPS) has been a key priority of governments around the world.  The Organisation for Economic Co-operation and Development (OECD) has been working for years to tackle taxation issues across the globe.  Much of the world has expressed concern about tax planning by multinational enterprises that make use of gaps in the interaction of different tax systems to artificially reduce income or shift profits to low-tax jurisdictions in which little or no economic activity is performed.  To address these challenges the OECD released BEPS Action Plan 1, back in 2013, which focuses on imposing indirect taxes on foreign electronic service providers who have a significant digital presence in the economy of another country but who lack the physical link under current international rules.  As a result, countries across the world have worked to ensure fair taxation of all service providers and have brought in laws to ensure foreign service providers register and collect VAT/GST on certain transactions.

What are countries doing today?

Europe

The European Union has had rules for remote sellers in place for quite some time now.  Since 2015, foreign providers of electronic services have been required to collect and remit VAT to address tax challenges facing the digital economy; sellers must charge the VAT rate applicable in the country where the buyer is established. 

Many countries have followed in the footsteps of the European Union, or in cases such as Switzerland, have implemented rules earlier.

Adoption timeline

What the future holds

Though Europe has had rules in place for many years, other countries throughout the world are starting to catch up.  The current hot spots for imposing new rules on foreign service providers look to be Asia and Latin America where countries are rapidly enacting laws to equalize the playing field for providers of electronic services.

January – July 2020

During the last six months, countries including Chile, Malaysia, Mexico, Moldova, Singapore, Uzbekistan, and Zimbabwe have all enacted their own versions of BEPS Action Plan 1 and now require foreign providers of electronic services to register and collect VAT/GST.

August 2020 – 2021

The trend to impose requirements to register, collect, and remit VAT/GST continues to spread globally and there are many countries with proposals in parliament for the upcoming year ahead.  Costa Rica, Indonesia, Fiji, Kazakhstan, Mauritius, Panama, Paraguay, Philippines, Thailand, Ukraine, and Vietnam have all recently set out their plans to increase taxation of the digital economy.  It certainly would not be a surprise if other countries join them before the year ends.

Take Action

To keep up to date with the changing VAT compliance landscape, download Trends: Continuous Global VAT Compliance and follow us on LinkedIn and Twitter to stay ahead of regulatory news and other updates.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Kelsey O'Gorman

Kelsey O’Gorman is a Regulatory Counsel at Sovos. Within Sovos’ Regulatory Analysis function, Kelsey focuses on global sales tax and VAT issues, supporting both the tax determination and reporting engines. Kelsey received her B.A. in Psychology from University at Buffalo and her J.D. from Roger Williams University School of Law. She is a member of the Massachusetts Bar.
Share this post

form 1099-k reporting
North America Tax Information Reporting
November 25, 2024
Form 1099-K Reporting: What TPSOs Should Know

This blog was last updated on November 27, 2024 As tax year 2024 approaches, third-party settlement organizations (TPSOs) are keeping a close watch on IRS guidance regarding their obligations under the IRS’s Form 1099-K reporting requirements. Recent changes to the 1099-K reporting threshold, coupled with delayed enforcement and conflicting guidance, have left many TPSOs uncertain […]

2025 tax filing season
North America Tax Information Reporting
November 21, 2024
Top 5 FAQs to Prepare for the 2025 Tax Filing Season

This blog was last updated on November 21, 2024 While “spooky season” may be over for most of us, the scariest time of year for many businesses is right around the corner: tax filing season. As they brace themselves for the flood of forms, regulatory updates, and tight deadlines, the fear of missing a critical […]

dtc shipping law updates
North America ShipCompliant
November 13, 2024
DtC Shipping Laws: Key Updates for Alcohol Shippers

This blog was last updated on November 13, 2024 When engaging in direct-to-consumer (DtC) shipping of alcohol, compliance with different state laws is paramount and so keeping up with law changes is critical. In 2024, the rules in several states for DtC have already been adjusted or will change soon. Here is a review of […]

sales tax vs. use taxes
North America Sales & Use Tax
November 8, 2024
Sales Tax vs. Use Tax, Explained. Who Reports What, and When?

This blog was last updated on November 19, 2024 One of the core concepts in sales tax compliance is also one of the most frequently misunderstood: the differences between sales tax and use tax. These tax types may look similar on the surface, but knowing the differences is essential for staying compliant and avoiding costly […]

2025 bond project
North America Tax Information Reporting
November 4, 2024
2025 NAIC Bond Project – The Insurer’s Guide

This blog was last updated on November 14, 2024 The regulatory landscape for insurance companies is undergoing significant changes with the Principles-Based Bond Project which is set to take effect on January 1, 2025. These changes, driven by the National Association of Insurance Commissioners (NAIC), will impact how insurance companies classify and value bond investments, […]