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July 2020

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Following the lifting of the COVID-19 lockdown, national governments are currently trying to revive their economies. To help boost consumer spending, in particular in those most-hit by COVID-19 pandemic industries like tourism and hospitality sectors, some countries have recently decided to cut their VAT rates. Others continue to address administrative disruptions by the postponement of new measures or burdens.

EU

With a view to addressing severe disruptions created by the COVID-19 pandemic, on the 24th of June 2020 the EU Council agreed on the 6-month deferral for introducing the e-Commerce VAT package.

In light of the above, the new rules for e-Commerce in the EU will apply only from 1 July 2021.

In a nutshell, the e-Commerce VAT package will apply the principle of taxation of B2C supplies of cross-border goods and services at destination/place of consumption. The corresponding pan-EU VAT compliance obligations will be facilitated by the OSS (One-Stop-Shop) special scheme, which in essence is the extension of the currently operating MOSS (Mini-One-Stop-Shop) scheme.

Austria

Between 1 July – 31 December 202 0 the Austrian authorities https://www.bmf.gv.at/rechtsnews.html will temporarily cut VAT rate of 5% will apply on food and drinks in catering establishments, accommodation services, visits to museums, cinemas or music events, publications as well as e-books.

Belgium

Belgium has halved its VAT rate to restaurant and catering services (excluding alcoholic beverages) from 12% to 6% from the date of reopening of the hotel, restaurant and catering industry until 31 December 2020.

Germany

As of 1st of July 2020 the new standard VAT rate in Germany has been decreased from 19% to 16% and the reduced VAT rate of 7% was cut to 5%.

The reduced rates will apply only between 1 July – 31 December 2020.

https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/2020-06-25-FAQ_Corona_Umsatzsteuer.html 

Poland

The Polish Ministry of Finance has decided to further postpone the introduction of the new SAF-T file upload that will be combined with the VAT return (‘JPK_VAT’) from the previously announced go-live date of 1 July 2020 onto 1 October 2020 for all taxpayers.

UK

For a temporary period between 15 July 2020 and 12 January 2021 the UK will apply a reduced 5% VAT rate to certain supplies related to hospitality, hotel accommodation as well as admission to certain attractions. https://www.gov.uk/government/news/rishis-plan-for-jobs-will-help-britain-bounce-back

Saudi Arabia

On the other pole of governmental approach to the post-pandemic recovery Saudi Arabia has tripled its VAT rate from the previous 5% to 15% with a view to tackling the economic difficulties caused by the COVID-19 pandemic.

The ‘Transitional Provisions Guidelines’ related to the VAT rate increase published by the General Authority of Zakat & Tax can be found under the following link:

https://gazt.gov.sa/en/HelpCenter/guidelines/Documents/Transitional%20Provisions%20Guidelines%20of%20VAT%20Rate%20Increase%20to%2015.pdf

EU – New tax package and VAT-related reforms

With a view to achieving fair, efficient and sustainable taxation in the EU, on 15 July 2020 the European Commission adopted a new Tax Package. As part of the Tax Action Plan the Commission presented 25 new initiatives to be implemented by 2024 to make taxation fairer, simpler and better adapted to our digital world. Amongst others, the Commission announced the following VAT-related reforms:

  • modernising VAT rules to fit the online platform economy;
  • moving towards a single EU VAT registration system;
  • updating VAT rules on financial services;
  • improving the use of technology and information sharing between Member States to fight VAT fraud.

More information on this new tax package can be found here: https://ec.europa.eu/taxation_customs/general-information-taxation/eu-tax-policy-strategy/package-fair-and-simple-taxation_en

Hungary – changes to invoice real-time reporting as of 1 July 2020

Some of Essentia’s VAT life readers may already be aware of the existing Hungarian invoicing real-time reporting requirements. I.e. according to the existing rules, VAT-registered taxpayers in Hungary issuing invoices to other VAT-registered taxpayers in Hungary must electronically report to the Hungarian tax authorities the details of those invoices, on which the VAT amount is equal to or more than HUF 100.000 (approx. EUR 325). The reporting of the said invoices is made via a special invoicing software that automatically transmits the details of the qualifying invoices in XML format at the time of issue (real-time).

As of 1 July 2020 the HUF 100,000 threshold for the VAT element for the invoice to qualify for the real-time reporting requirement will be abolished, therefore all B2B invoices issued to Hungarian VAT-registered customers will need to be reported to the Hungarian tax authorities through the real-time invoicing software regardless of the value of the VAT included on the invoices. This means that the VAT exempt as well as the invoices falling with the domestic reverse-charge mechanism will also fall within the real-time reporting obligation.

Poland – VAT legislation to be changed in line with EU

Poland has formally amended its national VAT legislation in line with the EU quick fixes regulations only from 1 July 2020. However, before the formal adoption of those changes, at the beginning of the year the Polish Ministry of Finance announced that taxpayers had an option to either reply on the existing local VAT legislation in this matter or, alternatively, to directly apply the provisions of the EU VAT Directive in the interim period between 1 January – 30 June 2020.

Italy – quick fixes regulations

Italy has not yet fully implemented the quick fixes regulations, however the Italian tax authorities have recently published Circular 12/E (12 May 2020) to clarify the new EU proof of delivery requirements introduced by the quick fixes regime for zero-rating/exempting from VAT of intra-Community supplies of goods.

On the 1 July 2020 the deadline for the UK to apply for the extension of the transitional Brexit period passed. Since the UK did not opt to apply for the extension in question, as of 1 January 2021 the transition period with the EU will end and the UK will leave the EU Single Market. This means that controls will be placed on the movement of goods between Great Britain and the EU.

In order to recognize the impact of COVID-19 on businesses to prepare for the changes, the UK government has decided to introduce the new border controls in  three stages: from 1 January 2021, from 1 April 2021 and from 1 July 2021.

At the beginning of July 2020 the UK government published a policy paper ‘UK Border Operating Model’ outlining the new processes per each stage of their implementation. The document can be found here: https://www.gov.uk/government/publications/the-border-operating-model

UK VAT on B2C consignments of value below £135

As part of the above-mentioned paper, the UK tax authorities provided the details of the new UK VAT rules to be applicable from 1 January 2021 to online retailers selling goods to be imported into the UK with a value not exceeding £135. On such goods (excluding excise goods and gifts) UK import VAT will no longer be due at the border. In addition to that, the existing low value consignment import VAT relief will be withdrawn. Sellers will be required to register for VAT in the UK, charge UK VAT due at the point of sale and report it on their UK VAT returns. This mirrors measures pioneered by countries such as Australia and Norway.

There are two new joiners to the ever-growing list of jurisdictions demanding non-resident suppliers of digital services to consumers based in their countries to register and charge local VAT on their supplies:

Indonesia

Starting from 1 August 2020 10% VAT rate applies to B2C digital services rendered by foreign suppliers so long as:

  • Their Indonesian transactions exceed the threshold of 600m rupiah (currently circa GBP 32k , EUR 35k, USD 41k) per annum or 50m rupiah (currently circa GBP 2,6k, EUR 2,9k, USD 3,5k) per month; OR
  • Their web traffic in Indonesia exceeds 12,000 visitors per year or 1,000 per month.

Costa Rica

As of 1 August 2020 13% VAT rate must be applied on B2C digital sales made to consumers in Costa Rica by non-resident suppliers, who are included on the list of digital service providers published by General Directorate of Taxation. The list can be found here: https://www.presidencia.go.cr/comunicados/2020/06/servicios-digitales-transfronterizos-pagaran-13-de-iva-a-partir-del-01-de-agosto/ and it will be updated at least every six months in order to include new suppliers or exclude those who have voluntarily registered as taxpayers.

The Costa Rican legislator foresees two VAT collection mechanisms:

  • Direct collection of VAT by the digital service provider; or
  • in respect of the services rendered by those suppliers, who do not voluntarily VAT register, the VAT will be withheld by the payment card issuers.