News from Accountancy Europe January 2018

European Commission 

European Commission proposes to maintain minimum VAT rate of 15% under definitive regime - 19 December 2017

The European Commission has published and calls for stakeholders’ views on a proposal to establish the EU minimum standard VAT rate at 15%, even under an eventual destination-based definitive regime.

The Commission maintains that although a definitive VAT system would grant member states more flexibility in setting VAT rates, a minimum standard VAT rate should be maintained and made permanent. It reasons that since all member states currently apply a standard rate of at least 17%, the current arrangement for a minimum standard rate of 15% remains appropriate. The Commission, therefore, proposes to permanently implement an agreed limit that it maintains will ensure the proper functioning of the internal market whilst leaving flexibility for member states in setting the standard VAT rate at the same time.

Stakeholders are invited to provide their views on the Commission’s proposal by 13 February 2018.

Link to the Commission’s proposal: https://ec.europa.eu/info/law/better-regulation/initiatives/com-2017-783_en

Court of Justice of the EU - Rulings

C305/16: Sales through intermediaries not subject to VAT - 14 December 2017

The Third Chamber of the CJEU has ruled on a UK case concerning the application of a derogation to the rule whereby the value of the supply is the sale price charged by the supplier. The Court maintains that the derogation for direct selling cannot be applied in a modified way so as to take into account any notional input tax, incurred by the non-VAT registered distributors.

C462/16: Reduction of the taxable amount - 20 December 2017 

The Fifth Chamber of the CJEU has ruled that that the discount granted, under national law, by a pharmaceutical company to a private health insurance company results in a reduction of the taxable amount in favour of that pharmaceutical company, where it supplies medicinal products via wholesalers to pharmacies which make supplies to persons covered by private health insurance that reimburses the purchase price of the medicinal products to persons it insures.

C500/16: Refund of an overpayment of VAT - 20 December 2017

The Second Chamber of the CJEU has approved national legislation which allows a request for a refund of an overpayment of VAT to be refused where that request was submitted by the taxable person after the expiry of the five-year limitation period, although it follows from a judgment of the Court, delivered after the expiry of that period, that the payment of the VAT which is the subject of that request for a refund was not payable. 

International

HMRC Issues Guidance On disclosure of tax avoidance schemes for VAT and other indirect taxes - 22 December 2017

HMRC has published new guidance on the disclosure of tax avoidance schemes for VAT and other indirect taxes.

The guidance clarifies what must be disclosed, who is responsible for the disclosure, and the obligations of businesses and promoters of arrangements or notifiable proposals. The new rules are applicable from 1 January 2018. They replace the existing avoidance disclosure rules exclusively covering VAT to also apply to all indirect taxes.

Link to the guidance: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/672881/Notice799_.pdf

United Arab Emirates and Saudi Arabia introduce VAT - 1 January 2018

Saudi-Arabia and UAE have become the first two countries out of a total of six within the Gulf Cooperation Council (GCC) to introduce a VAT regime. 

Starting 1 January, in both countries VAT will have to be administered by businesses whose taxable supplies exceed a mandatory registration threshold. Both countries also introduced new VAT rules to cover foreign-supplied digital services.

The other GCC countries are Kuwait, Bahrain, Oman, and Qatar. Although they have committed at GCC level to also introduce a VAT regime, none of them has announced a timeline for it.

Belarus, Turkey introduce digital VAT on foreign supplied services – 1 January 2018

Major digital VAT reforms have been introduced in Turkey and Belarus in the past few weeks.

In Turkey, international digital service suppliers will be liable for Turkish VAT on supplies to consumers, following a late-December rule change by the country Revenue Administration. Digital businesses with a global reach need will be considered liable for applying, collecting, and remitting Turkish VAT (current standard rate of 18%) on their supplies to customers there.

In Belarus, in turn, a 20% VAT rate will be applied on foreign supplies of digital services to consumers in Belarus.

Foreign businesses with customers based in Belarus must now register for, collect, and remit VAT to the Belarus tax authority. 

Until now, over 45 jurisdictions have introduced such rules. At the turn of 2018 alone, four jurisdictions Turkey, Saudi Arabia, the UAE, and Belarus introduced new VAT rules aimed at non-resident digital service suppliers.

Switzerland Introduces Landmark VAT Changes - 1 January 2018

Switzerland has introduced a number of major VAT reforms, applicable from 1 January onwards.

Notably under the new rules, a company's global turnover will now be taken into account when calculating its VAT liability. Companies with a global turnover of at least CHF 100,000 will be liable for VAT purposes from the first franc of turnover in Switzerland. Under the previous regime, a foreign company providing services in Switzerland did not have to pay VAT on Swiss turnover up to a CHF100,000 threshold. This led to a competitive disadvantage for Swiss businesses, especially in the border regions.

As part of its VAT reforms, Switzerland also introduced a reduced VAT rate for e-publications. The headline VAT rate was reduced to 7,7%.

Other

Accountancy Europe responds to the Commission on the taxation of the digital economy - 3 January 2018

Accountancy Europe has responded to the Commission’s consultation on fair taxation of the digital economy.

Accountancy Europe’s response consists of the consultation form itself, as well as a comment letter. Its main positions are as follows: 

  • The digitalised economy: the issues identified in the public consultation are not always specific to the digitalised economy, which cannot be ringfenced from the economy as a whole
  • Temporary measures: Accountancy Europe does not agree with the imposition of temporary measures and believes that the Commission should prioritise the development of a long-term solution, agreed at international level
  • Long-term, comprehensive measures: the appropriate long-term solution is to agree and implement as soon as possible an internationally agreed Virtual Permanent Establishment
  • Smaller entities: if temporary measures were to be introduced, these should apply only to the very largest businesses 

Consultation form: https://www.accountancyeurope.eu/wp-content/uploads/180103-response-digital-tax-public-consultation.pdf

Comment letter: https://www.accountancyeurope.eu/wp-content/uploads/180103-cover-letter-on-PC-on-digital-taxation-Accountancy-Europe-Commissioner-Pierre-Moscovici.pdf

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Disclaimer:  The information contained in the present page is general and does not constitute legal advice. Before taking any decision or action on the above information you should take the appropriate professional advice.