This blog was last updated on March 11, 2019
International News
EU Proposes An Interim Tax On Certain Revenue From Digital Activities
The European Commission recently proposed new rules to ensure the fair taxation of digital business, placing the EU at the forefront in designing tax laws aimed at the modern digital economy. The Commission is seeking to instate an interim tax to generate immediate revenues for Member States from digital activities that are currently taxed ineffectively.
For companies with sufficient EU (€50 million) and (€750 million) global turnover, the tax would apply on revenues generated from digital activities. Examples of such activities include selling online advertising space, digital intermediary activities allowing users to buy and sell goods amongst each other, and sales of data generated from user-provided information.
The next steps for this proposal is submission to the Council for adoption and to the European Parliament for consultation.
EU Report on E-commerce Identifies Challenges and Opportunities
The EU VAT Forum (a sub-group of the European Commission) recently released a report on the VAT aspects of E-commerce. The Commission found that one of the biggest challenges facing tax administrations and businesses is how parties access and exchange information in the e-commerce supply chain. Tax Administrations are challenged to devise a way to ensure data can be accessed, while businesses face the challenges of meeting a complex array of country-specific reporting requirements.
The report contents that governments must aim to support legitimate trade by making the process as a simple as possible, balancing their legitimate interest in targeting non-compliant businesses while maintaining a reasonable compliance burden for all taxpayers.
The Commission recognizes that solutions may be found in emerging technologies including Artificial Intelligence, Blockchain, Chatbots, and Data Analytics. These technologies all have the potential to provide simple, digital solutions that can foster compliance and legal certainty. In fact, to the extent that the report represents any conclusions, its that technology and automation must be considered.
Country-by-Country News
UK Finance Act 2018 Finalized
On March 15, 2018, Finance Act 2018 was granted Royal Assent by the UK Parliament. The Act makes several changes to direct and indirect taxation in the UK, including new requirements for online marketplaces to display their VAT registration number on the marketplace and, further, an extension of joint and several liability to these types of marketplace sellers for purposes of VAT.
All of the changes made under the Finance 2018 Act can be seen here.
UK-EU Draft Withdrawal Agreement Published
On March 19th, the UK published a first draft of a withdrawal agreement, which although not finalized, indicates that for value-added and excise taxes, much of the status-quo with the European Union (EU) will remain until January 1, 2021.
Notably, the Draft Agreement states that the UK and the EU will agree to have the EU Directive on VAT (Council Directive 2006/112/EC) remain as the controlling doctrine for matters related to VAT, when goods are transported between the UK and the EU. This agreement would remain in effect during the transitional period, which would extend until December 31, 2020. Other provisions of the Draft Agreement address excise taxes, citizens’ rights and customs procedures. The Draft Agreement has been published by the UK government here.
UK Publishes the Value Added Tax Regulations 2018
The finalized Value Added Tax Regulations for 2018 (herein “VAT Regulations”) have been published by the United Kingdom’s Parliament. The VAT Regulations clarify the digital record-keeping requirements that have been announced under the Making Tax Digital (MTD) initiative, starting April 1, 2019. Included in the VAT Regulations are definitions for “functionally compatible software” and “API”, as well as detailed lists of the information that will be required to be stored electronically by VAT-registered businesses after April 1, 2019. VAT-registered businesses will be found non-compliant with VAT reporting obligations in the United Kingdom after April 1, 2019, if their electronic VAT records are not maintained on functionally compatible software that is capable of communicating with the HMRC API, or if these electronic VAT records do not contain the specific information required under the VAT Regulations.
For further information on these new VAT Regulations, please find the Parliament’s published version here.
UK Publishes Regulations Pertaining To Digital Record-Keeping Requirements For VAT
On February 28, 2018, the HMRC Commissioners presented the VAT Regulations Amendments for 2018 to the House of Commons. The amendments would become effective on April 1, 2019, and are intended to inform businesses impacted by the Making Tax Digital Initiative of their digital record-keeping requirements. Notably, the Amendments clarify the type of information required to be kept in digital format, the definition of functionally compatible software, and the exemptions available to businesses who will not be required to meet this digital standard.
The text of the Amendments can be seen here, and the explanatory memorandum issued to accompany the changes is found on the third tab of that publication.
Paraguay Advances in the Implementation of the Electronic Invoice
The tax administration of Paraguay (SET) has announced it will soon be deploying a new version of its electronic invoicing system known as “Marangatu 2.” The announcement is made at the time that the tax administration is entering the special testing phase of its electronic invoicing pilot, which started at the end of 2017. This special testing period will start in April 2018 and will be the final stage of the pilot program. Once this phase is concluded, the government is planning to put the system into Production by June 2018. In the next months, it will release the first mandate regulations specifying which taxpayers will be required to issue electronic invoices.
Read more: http://www.set.gov.py/portal/PARAGUAY-SET/Home/marangatu2
