As the governments’ announcements on VAT measures related to the COVID-19 epidemic outbreak continue to unfold at such great speed, here is our second summary of the recent developments. This is current as of the 30th of March.
For many countries there is uncertainty as to whether the below measures apply only to locally established businesses or have they been extended to non-resident companies. Essentia is investigating this on a country by country basis and we will publish the relevant updates shortly.
- ITALY – Italy has not implemented any further VAT measures apart from those outlined in our previous newsletter of the 17th of March. Moreover, it is uncertain whether or not those measures that have already been announced can apply to non-resident companies.
- SPAIN – no further announcements have been made by Spain since our previous newsletter of the 17th of March.
- GERMANY – the German tax authorities have extended the VAT deferment period until the end of 2020.
- AUSTRIA – in addition to a payment plan provisions outlined in our newsletter of the 17th of March, the deadline to submit the annual VAT return for 2019 period has been extended from the 30th of June 2020 to 31st of August 2020.
- FRANCE – as it stands at the moment there are no specific VAT measures approved in France;
- UK – according to the latest (of the 26th of March) HMRC’s guidance, both resident and non-resident businesses that are registered for UK VAT will have an option to defer their VAT payment due for the period 20 March – 30 June 2020 until the 31st of March 2021 (at the latest). Businesses paying by direct debit should cancel their direct debit orders with their banks. Note that these measures do not cover VAT MOSS payments. Please follow the link for full HMRC’s guidance: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19
- IRELAND – in addition to the VAT measures outlined in our newsletter of the 17th of March, Ireland suspends all VAT debt enforcement activities until further notice.
- POLAND – in addition to the VAT measures outlined in our newsletter of the 17th of March, Poland announced that the interest normally charged on the tax arrears will be temporarily abolished. Other VAT positions within the approved ‘anti-crisis shield’ include postponing the go-live date for the combined SAF-T file with the VAT returns for large companies from the planned 1st of April onto the 1st of July 2020 and the application of the new VAT rates matrix from the planned 1st of April onto the 1st of July 2020 as well as extension of the deadline for submitting a notification of payment to a bank account of the supplier not included in the Whitelist from 3 days to 14 days.
- SWEDEN – the measures reported in our newsletter of the 17th of March can be backdated to January 2020 period.
- DENMARK – as part of the Danish id package, businesses that settle VAT monthly received a 30-day extension of the deadline to pay the VAT whereas business settling VAT on a quarterly basis the payment for the first two quarters of 2020 can be combined and made by the 1st September 2020. Any businesses on a bi-annual frequency can pay the VAT for both half-yearly periods in a combined payment to be made only by the 1st of March 2021. For further details, please follow the link (in English): https://skat.dk/skat.aspx?oid=16900&lang=us
- NETHERLANDS – the Dutch tax authorities may grant a 3-month VAT payment holiday upon receiving an application from a business struggling with its cashflow due to the COVID-19 crisis. Such applications can even be made by the companies over a telephone as far as the 3-month payment extension is concerned. If a business requires some a payment extension beyond 3 months, a written motivated application is required. In addition, the authorities are reducing the interest rate for such payments from 8% to 0,01%. Moreover, some extra VAT relief on customer bad debts related to the COVID-19 crisis are going to be granted and businesses in a regular VAT refund situation may switch from the quarterly VAT return filing frequency into the monthly returns to improve their cash flow.
- SWITZERLAND – The Swiss tax authorities are going to allow the affected businesses to defer their VAT payments with no interest charge until the end of 2020.
- NORWAY – the deadline for payment of VAT for January-February 2020 period has been postponed from the 10th of April to the 10th of June 2020. Moreover, the tax administration will not impose enforcement fines for late submission of the VAT returns. In addition to that, VAT rate for passenger transport, accommodation, public broadcasting as well as access to cinema, sporting events, amusement parks and adventure centres will be reduced from 12% to 8% from 1 April to 31 October 2020. Link to the Norwegian tax authorities’ announcement can be found here (in English): https://www.skatteetaten.no/en/package-of-measures-in-connection-with-the-coronavirus-situation/#value-added-tax-vat
- CYPRUS – the measures reported in our newsletter of the 17th of March may now be reconsidered by the Cypriot government.
- JAPAN – Japan may be reconsidering the implementation of the consumption tax measures, which were outlined in our newsletter of the 17th of March.
If you have any queries on the above, please get in touch with either your regular Essentia or Quipsound contact, or alternatively Marta Gałązka (+44 203 713 3535; email@example.com)
Here is a summary of some emergency VAT measures to combat the financial impact of this pandemic, current as at 17 March 2020:
- The Italian Ministry of Finance announced on Friday, 13 of March that all the VAT payments due by March 16, 2020 will be postponed. Now it looks like the VAT payments for small businesses (with annual turnover below EUR 2m) will be postponed until 31st of May 2020 whereas for the remaining taxpayers the payments will be deferred until the 20th of March 2020. Moreover, all VAT declarations filings are to be postponed until the 30th of June 2020, including the Annual VAT Return for 2019 period. Businesses can apply for a 5-month payment plan.
- Last week the Spanish Tax Agency published on their website a statement about the extension of the deadlines in VAT procedures. The Spanish Tax Agency also published on their website some provisional instructions on applying for a VAT deferral in accordance with the Royal Decree of 12 March foreseen for SMEs and professionals (with the last year’s turnover below EUR 6m), i.e. automatic 6-month VAT payment deferral will be granted for the VAT returns with a filing deadline between 13 March – 30 May 2020 and resulting with a VAT payment of up to EUR 30k. In addition, no late payment interest will be due for the first 3 months of a delay in payment. Link to the Spanish Tax Agency’s announcement can be found here:
- The German tax authorities are offering a possibility to apply for delayed VAT payments as of the 13th of March 2020.
- Application can be made to the tax authorities to postpone payment of VAT or payment via instalments. Application can also be made for reduction/waiver of late payment interest.
- Businesses can apply for a suspension of their tax payments due in March 2020.
- On the 13th of March 2020 the Irish Revenue announced on their website the following assistance for SMEs experiencing cashflow difficulties:
- On the 11th of March 2020 the Polish Ministry of Finance informed that entrepreneurs who, due to the coronavirus, will have problems paying their taxes in a timely manner can apply for a reduction/relief or waiver/remission of arrears. Further detailed support should be announced by the Ministry of Finance in due course. In addition, the go-live date for the implementation of the combined SAF-T file with the VAT returns for large companies (the details of which Essentia provided to its readers in our February 2020 VAT Life publication) will be postponed from the 1st of April 2020 onto the 1st of July 2020. Moreover, the tax authorities are also to make the VAT refunds quicker. For full details about the proposed ‘shield package for companies’ follow this link: https://www.gov.pl/web/koronawirus/pakiet-oslonowy-dla-firm-w-zwiazku-z-koronawirusem
- The government is proposing an opportunity for temporary deferral with payment of VAT which is proposed to enter into force on April 7. The deferral period may be set for a maximum of one year.
- The government has announced that the Dutch tax authorities will grant a deferral of payment for any VAT if a company will motivate in writing that it has run into financial issues due to the coronavirus. As soon as the tax authorities receive such a request, they will put the collection of tax on hold.
- Cypriot government announced a temporary reduction of the standard VAT rate from 19% to 17% for 2 months and bringing down the reduced rate of 9% (applicable mainly to hotel accommodation, restaurant and catering services or domestic passenger transport) to 7.5% for 3.5 months.
- Japan is considering temporarily lowering its Consumption tax rate from 10% to 5% on top of delaying the filing and payment deadlines by 1 month until April 2020.
- The country where the first cases of the coronavirus epidemic were detected has put some extensive measures in place to overcome the crisis, e.g. expanding temporarily the scope of the VAT exemption for goods and services needed to combat the effects of the virus, exempting temporarily from VAT all small-scale VAT payers located in Hubei Province or extending monthly VAT returns filing deadline for February and March 2020 periods by 2 weeks and 1 week, respectively.
Not driven by the crisis, but nevertheless extremely timely, is a European Court of Justice case concerning remote consultations with Doctors (which may become much more popular in the coming months).
The case related to a German company X-GmbH providing medical advice to insured persons and running patient support programmes for those suffering from chronic or long-term diseases. The medical consultations were provided over a healthcare telephone line, supported by an on-line assessment which allowed the consultant to put the patients’ situation into a medical context before providing the advice. The German authorities felt that this remoteness brought the service out of the VAT exemption for medical care. However, the CJEU held that the main criterion for determining whether or not the medical services could be exempt from VAT is whether those services pursue a ‘therapeutic aim’ regardless of the place or means of providing of such services. More details of the case can be found here .
As of the 1st of January 2020 a package of the so-called 4 ‘Quick Fixes’ came into force. One of the quick fixes was the Pan-EU simplification rule for call-off stock transactions. As our readers may know from reviewing our January newsletter, the application of the call-off stock simplification is conditional upon fulfilling certain requirements, one of them being to report in the recapitulative statement (EC Sales List) the VAT identification number of the intended acquirer.
Due to the fact that the existing EC Sales List forms do not allow reporting just the customer’s VAT number without entering the value, EU Member States are either amending their current forms or, alternatively, introducing some additional codes in the indicator columns/boxes for the purposes of the new call-off stock reporting obligations.
As an example, please find below the link to the UK tax authorities guidance on how to fulfil the company’s reporting obligations on the EC Sales List under the call-off stock arrangements using the three new codes that they introduced for these purposes in the indicator column: https://www.gov.uk/guidance/vat-how-to-report-your-eu-sales#call-off-stock
Poland – changes coming into force as of 1 April 2020
As of the 1st of April 2020 a number of changes will come into force in Polish VAT, namely:
- Replacement of the currently separately submitted VAT returns (VAT-7 and VAT-7K) and SAF-T files with a combined extended SAF-T file upload called ‘JPK_VAT’ (i.e. JPK_7M’ for monthly filing frequency and JPK_V7K’ for the quarterly one). The new SAF-T file not only will combine the information that is currently reportable within the VAT returns and SAF-T files, but it will also include some additional pieces of information, which has never been required to date to be reported to the Polish tax authorities for VAT purposes, i.e. on the sales side it will be necessary to mark certain transactions with a specific code assigned to each category of products, services or types of documents. E.g. certain waste supplies will need to be marked with a code ‘05’, supplies of certain intangible services like consultancy, accountancy will need to be marked with a code ‘12’, distance sales made from Poland will need to be marked with a code ‘SW’, transactions subject to the split payment mechanism will need to be marked with a code ‘MPP’. Each error made on the new combined extended SAF-T file may be subject to a fine of PLN 500 (GBP 100; EUR 115; USD 125). The submission of the new combined SAF-T files from 1 April 2020 will be mandatory only for large companies (those with at least 250 employees or with an annual turnover exceeding EUR 50m). The remaining companies will be obliged to submit these new combined SAF-T files only starting from 1 July 2020.
- New reduced VAT rates matrix – currently the goods and services falling under one of the two reduced VAT rates in Poland (5% and 8%) are identifiable by the Polish Classification of Goods and Services (PKWiU) whereas as of April 2020 the goods, to which a reduced VAT rate can apply will be listed using the Combined Nomenclature (CN) codes. Moreover, the scope of the application of the reduced VAT rates will slightly change, i.e. the aim of the Polish legislator was to simplify and make the application of reduced VAT rates more transparent and user-friendly by: i) covering as much as possible the entire product groups (CN divisions) with one rate; ii) general reduction of rates (‘downward equation’) if it was necessary to change the rate for given products. E.g. the VAT rate for tropical and citrus fruit will decrease from 8% to 5%, VAT rate for some spices like mustard or ground pepper will decrease from 23% to 8%, VAT rate for some hygiene products or products for babies and children like food, dummies, nappies, car seats will decrease from 8% to 5%. To balance out the effect of the reduced VAT rates simplification, on few selected goods the tax rate will increase (e.g. lobsters, octopus, crabs, shrimps as well as dishes which include these products will be subject to 23% standard VAT rate instead of the current 5/8% rate).
- ‘Binding Rate Information’ (in PL ‘WIS’ – Wiążąca Informacja Stawkowa) –separately to the already existing institution of a ‘binding ruling’ (in PL ‘Indywidualna Interpretacja’) a new institution of a ‘binding rate information’ will be introduced. Currently, in order for a taxpayer to receive a binding ruling on the applicability of a reduced VAT rate to its products, the applicant of the ruling has to inform the tax authorities of the relevant Polish Classification of Goods and Services (PKWiU) code applicable to its products and the Polish tax authorities are not competent to interpret within the ruling whether or not the provided PKWiU code is correct (and the opinion issued by the Statistical Office was not binding as such). The new ‘Binding Rate Information’ will be an administrative decision, in which, on the basis of the taxpayer’s description of the supply/ingredients of the product etc., the tax authorities will confirm i) the CN (for goods), Polish Classification of the Building Objects (PKOB) or PKWiU (for services) code and ii) the relevant VAT rate applicable to the goods or services. Moreover, the ‘Binding Rate Information’ will be published by the National Tax Information in the Public Information Bulletin under the following link and it will be binding not only the person, to whom it was issued, but also other persons supplying identical goods or services:
- Accounting for import VAT in VAT returns – taxpayers accounting for import VAT under the simplified provisions within the VAT returns will no longer be required to provide the tax authorities with the evidence of the import VAT having been accounted for in the VAT return.
With effect from 1 February 2020 the VAT split payment mechanism in Romania was abolished. It used to be applicable on a mandatory basis to insolvent or VAT indebted suppliers however, following the EU Commission’s warning that the measure was incompatible with the EU VAT Directive as it was disproportionate to the aims which it wanted to achieve, this mechanism was withdrawn by the Romanian government.
A wide ranging review of New Zealand GST is underway. The authorities have sought public comments on changes to the zero rating of land, the treatment of cryptocurrencies, the treatment of fund management services, new invoicing rules and treatment of second hand goods. The consultation document can be found here https://taxpolicy.ird.govt.nz/sites/default/files/2020-ip-gst-issues.pdf
Non-resident providers of B2C digital services: Obligation to VAT Register
Regular VATLife readers will know that in almost every edition we cover new countries adopting this rule for providers of internet based digital products. The latest countries to come on board with such an obligation for foreign suppliers of B2C e-services are as follows:
- Mexico – 16% of VAT applicable on both B2C and B2B digital services as of 1 June 2020;
- Canadian province of British Colombia– 7% of provincial sales tax (PST) will be applicable as of 1 July 2020;
- Algeria – reduced VAT rate of 9% applicable as of 1 January 2020;
- Cameroon – 19.35% of VAT should apply with effect from 1 January 2020;
The additional countries that are considering to impose VAT/GST on the B2C digital services provided by foreign suppliers are:
- Fiji – 9% of VAT (planned effective date: unknown yet);
- Ukraine – 20% of VAT (planned effective date: January 2021) subject to reaching the annual sales threshold of UAH 1m (circa USD$40,200, EUR€36,500, GBP£30,800);
- Chile – 19% of VAT (planned effective date: unknown yet but should be late 2020).
- Moldova – 20% of VAT (draft effective date: April 2020);
- Kazakhstan – 12% of VAT (draft effective date January 2021).