European VAT

Changes in VAT on Digital Services

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Non-resident digital service providers: Obligation to VAT Register: New countries from January 2020

Forcing non-resident suppliers of digital services to register for VAT is a relatively easy way for tax authorities to generate windfall revenue. As a result, this provision, trailblazed by the EU, continues to spread across the world. Regular VATLife readers will know that we’ve covered many states as they have this measure. For January 2020, the new states are:

  • Uzbekistan – 15% VAT chargeable
  • Malaysia – 6% of digital service tax chargeable
  • Singapore – 7% GST chargeable, but subject to a limit of B2C digital sales into Singapore exceeding SGD 100k (EUR 66.5k; USD 74k; GBP 56,5k) and global sales exceeding SGD 1mln (EUR 665k; USD 740k; GBP 565k)

Paraguay and Ecuador are also introducing provisions to tax digital downloads locally, but they will do this via a withholding obligation on the payment provider. Suppliers will therefore need to factor this cost into gross sales figures.

UK: Digital ‘Newspaper’ Can Enjoy Zero Rating

The UK applies a VAT zero rating for books, newspapers and magazines. As these sectors have rapidly digitalised over the last years, the authorities have sought to strictly limit that privilege to the printed hard copy products originally envisaged when the law was drafted. A recent court case, however (News Corp UK & Ireland Ltd v HMRC Commissioners) has found in favour of the taxpayer that their digital ‘newspaper’ edition does, in fact qualify for zero rating. This could open up the prospect of significant VAT refund claims by similar providers. However, it is a ruling or relatively junior court (The Upper Tax Tribunal) and could be the subject of appeal. For the full ruling see here: http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j10349/TC06385.pdf

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