A new law regarding tax measures to apply during the COVID-19 crisis was published in the Official gazette on 7 January 2021. The law introduces a VAT exemption for COVID-19 vaccines and in vitro diagnosis until the end of 2022…
A new law regarding tax measures to apply during the COVID-19 crisis was published in the Official gazette on 7 January 2021. The law introduces a VAT exemption for COVID-19 vaccines and in vitro diagnosis until the end of 2022, extends the temporary application of the 5% VAT reduced rate in gastronomy, culture and publishing sectors until 31 December 2021 and approves the application of the reduced VAT rate of 10% to repair services regarding bicycles, footwear, leather goods and clothing.
Belgium extended the reduced 6% VAT Rate to face masks and hydro-alcoholic gels between 1 January 2021 and 31 March 2021 and the 0% VAT Rate to the in vitro diagnostic medical devices, COVID-19 vaccines and to services connected to those from 1 January 2021 to 31 December 2022.
Regarding the end of the Brexit transitional period on 31 December 2020, Croatia announced that in the transactions with the United Kingdom taxation rules and procedures will apply as with any other non-EU member country. The UK VAT paid by Croatian businesses until 31 December 2020 ought to be claimed through electronic submission before 31 March 2021.
The recently published Finance Law for 2021 introduced the VAT group scheme, which can be benefited from the fiscal year 2023 onwards, by taxpayers who are financially, economically and organizationally linked to each other and that, therefore, may be considered as a single taxable person for VAT purposes and strengthened the conditions of application of the VAT exemption regime of cost sharing group implemented by article 261 B of the French Tax Code.
In addition, this Law deferred to 1 July 2021 the date of entry into force of the Council Directives (EU) 2017/2455 of 5 December 2017 and (EU) 2019/1995 of 21 November 2019, regarding the VAT regime applicable to electronic commerce and distance sales and confirmed the application of the 0.20% interest rate per month for late payment.
A bulletin announced by the French Tax Authorities declared upcoming changes to VAT treatment on chartering activity for contracts signed after 1 November 2020. Previously, France allowed a lump-sum reduction policy of 50% on the taxable base as long as the boat spent part of the charter in non-EU waters. With accordance to the new law, this reduction will no longer apply.
Instead, businesses involved in chartering will charge the standard French VAT rate of 20% while the vessel is located in EU waters. When the yacht moves into non-EU territory, no VAT will be applied and evidence will be needed to prove the services carried out in non-EU waters.
Taxpayers are required to keep adequate evidence of the distance covered outside EU waters. This evidence may be challenged by the tax authorities in the course of a tax inspection. However, where the boat has sufficient means according to the SOLAS convention, such means would not be challenged by the French authorities.
Similar changes can be seen in Italy, with the Italian Tax Authorities adopting a comparable stance on the VAT treatment to be applied on chartering activity. It is expected that the tax authorities in Malta and Cyprus will soon follow suit in order to make the tax laws within Europe more uniform.
A temporary reduction of the standard VAT rate, from 19% to 16%, and of the reduced VAT rate, from 7% to 5%, applied during the period between 1 July and 31 December 2020.
In this context, as from 1 January 2021, the standard and reduced German VAT rates have been again increased to 19% and to 7%, respectively.
Greek tax authorities have clarified that input VAT incurred for the supply of COVID-19 vaccines, for which a 0% VAT rate applies (as from 23 December 2020 until 31 December 2022), can be deducted.
As of 4 January 2021, the types of invoices to be reported on the real-time invoice reporting for Hungary have been further expanded. The obligation now includes the following transaction invoices:
- invoices issued to non-taxable persons (B2C transactions);
- exports from Hungary to non-EU countries;
- intra-Community deliveries from Hungary to EU countries.
A special sanction applies to the non-compliance with the above rules, however due to the COVID-19 pandemic, the National Administration has announced a 3-month sanction-free transitional period.
Hungary implements new tax measures in order to comply with the EU Anti-Tax Avoidance Directive. Among other measures, the following ones were implemented in the Hungarian VAT System:
- The inclusion of the new EU e-commerce package, which will be effective as from 1 July 2021. The concept of e-commerce comprises distance selling of goods, both from the European Union and from third countries, depending on the country of departure of the goods.
- The possibility to recover VAT on B2C bad debts as from 1 January 2021.
- The application, from 1 January 2021 to 31 December 2022, of a 5% VAT rate to the supplies of certain newly built residential real estate.
Revenue has recently provided clarifications regarding the supply of restaurant, takeaway and catering services.
In this context, the Irish Revenue has confirmed that:
- the 9% VAT rate applies to the supply of hot takeaway food; conversely, the supply of cold takeaway food is liable to a zero VAT rate (unless the cold food is supplied with hot food for an inclusive price, in which case the 9% rate applies); the 9% rate also applies to restaurant and catering services;
- the VAT exemption applies to catering services provided in hospitals or schools;
- the 21 % VAT rate applies to deliveries services and to the supplies of alcohol, bottled water, soft drinks, sports drinks and vegetable juices, even when provided as part of a restaurant/catering services.
The following clarifications were provided by the Ministry for Finance regarding the formal requirements that are applicable under the VAT zero-rating scheme and the postponed accounting scheme for VAT on imports:
- The applicant, to be authorized to apply the VAT Zero-Rating Scheme, must confirm that it keeps complete and accurate records in accordance with the VAT Act and submit the declaration confirming the applicant’s turnover from the supply of goods and services regarding the 12 months preceding the making of the application and tax clearance certificate.
- Additional conditions must be satisfied in respect of all steps leading to accounting for VAT on a postponed basis, in order to ensure that the accountable person is capable to account for VAT on that basis.
Luxembourg has recently announced that, from 1 January 2021 to 31 December 2022, the supplies, intra-Community acquisitions and importations of COVID-19 in vitro diagnostic medical devices, COVID-19 vaccines and related services are subject to a 0% VAT rate.
According to recent updates introduced into the Maltese VAT Act, as from 1 January 2021, Gibraltar and the Channel Islands will continue not to be treated as territories of Member States (as the whole United Kingdom shall no longer be considered a “Member State” for VAT purposes). Conversely, Northern Ireland as well as the UK Sovereign Base Areas of Akrotiri and Dhekelia on Cyprus shall be treated as territories of Member States.
The Fifth Schedule and the Eighth Schedule of the VAT Act. were amended by the Minister for Finance in order to include new measures related to the COVID-19 pandemic. Until 31 December 2022 the services closely linked to COVID-19 vaccines will be VAT exempt with credit supplies and the COVID-19 in vitro diagnostics devices will be subject to a 5% VAT rate.
Considering the ongoing pandemic crisis, the Netherlands has announced the extension of several measures, such as the application of the 0% VAT rate on the supply of face masks until 30 June 2021 and the emergency payment deferral regime until 1 July 2021.
As announced by the Norwegian Ministry of Finance in December 2020, UK-established companies will be relieved to know that there is no requirement for them to re-register for VAT purposes in Norway after Brexit. Keeping in mind that Norway is not a part of the European Union but part of EEA, only certain changes can be expected to impact Norwegian VAT registered businesses.
In an announcement made in 2017, The Norwegian tax authorities waived fiscal representation obligations for businesses located in most EU countries (including Belgium, Czech Republic, Denmark, Finland, France, Germany, Iceland, Italy, Malta, Netherlands, Poland, Portugal, Slovenia, Spain, Sweden, and the UK). Foreign businesses required to VAT register in Norway enjoyed this simplification and were permitted to directly register there for VAT purposes.
With the new declaration, UK businesses can continue to benefit from this waiver and will not have to register again with a new VAT number and fiscal representative.
The following measures were introduced by the Budget Law for 2021 and entered into force on 1 January 2021:
- The extension the VAT exemption scheme to taxpayers that among other conditions, have a turnover lower than 12 500 EUR in the previous four calendar years. In this context, for VAT purposes, such taxpayers will be treated as private consumers.
- The extension of the application of the 6% reduced VAT rate to the supplies of chestnuts and frozen red fruits and to certain rehabilitation works contracted by specific public funds and institutions.
Romania has approved the VAT exemption to the supplies of specific goods and services related directly with the COVID-19, such as the respective testing and vaccination supplies.
In addition, the Romanian Government announced that the deadline for the submission of the requests (i.) for rescheduling payment of taxes and (ii.) for waive the interest and penalties corresponding to tax liabilities due before 31 March 2020 is on 31 March 2021.
The Slovenian parliament has approved a temporary VAT exemption for COVID-19 vaccines, in vitro diagnostic medical devices and certain directly related services. This exemption applies until 31 December 2022.
In order to combat the effects of the pandemic, the Spanish government has recently approved several tax measures, such as the application of the zero VAT rate for the supply of Covid-19 vaccines and tests, the deferral of payment of taxes not exceeding 30 000 EUR for which the submission and payment period will apply from 1 April 2021 until 30 April 2021 and it is exceptionally allowed to renounce or withdraw the renouncement to be taxed under the objective estimation method and the simplified regime or the scheme for agriculture and fisheries VAT regimes until 31 January 2021.
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