Global VAT Guide: April 2021 VAT Updates
April 2021 VAT updates in Estonia
The Council of the European Union announced an extension for Estonia to apply a higher registration threshold of EUR 40,000 for small businesses until 31 December 2024.
April 2021 VAT updates in Greece
The Greek Ministry of Finance has announced that the deadline for the compulsory introduction of e-books and e-invoicing has been delayed from 1 April 2021 to 1 July 2021. The delay is partially due to the effects of COVID-19.
This new process will see the electronic submission of data via the AADE (Greek Public Revenue Authority’s) myDATA system.
This new process is aimed to:
- Simplify VAT compliance;
- Prevent tax fraud; and
- Decrease the administrative burden for businesses;
Businesses will have until 31 October 2021 to submit data relating to the first six months of 2021.
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April 2021 VAT updates in Portugal
From 1 January 2021, e-invoicing became mandatory for large companies in Portugal. The plan is to extend this requirement to other companies’ throughout 2021.
On 10 March 2021, Portugal announced that invoices in a PDF format will be accepted until 30 June 2021.
April 2021 VAT updates in Poland
New CJEU Ruling in Polish case (C-895/19) – Possible recovery of overpaid VAT and penalty interest of intra-Community acquisitions.
Court of Justice of the European Union (CJEU) concluded that the Polish limitations on exercising deduction right in relation to intra-Community acquisitions (ICA) distort the rule of neutrality and proportionality of the VAT system and as such is not in line with the EU Directive.
According to the current Polish regulation, input VAT in relation to the ICA transactions could be indicated in the same reporting period as the output VAT, having a ‘cash flow neutral’ effect on the taxpayer, under the conditions that the amount of output VAT is reported correctly and not later than within three months period from the end of the month in which the tax obligation arose and the taxpayer receives the respective invoice.
After the three-month period, output VAT becomes due together with any penalty interests for late reporting while the deductible side could only be indicated in the actual reporting period. Consequently, the payable side of the ICA transaction will be higher than the deductible side, resulting in actual payable VAT for the taxpayers for transactions under reverse charge mechanism.
Moreover, additional VAT sanction may apply for unreported or incorrectly reported ICA transactions in case of tax audits.
The publication of the CJEU judgment in question in the Official Journal of the EU may not only clarify this situation for the future but may open the door to recover overpaid VAT together with late payment penalty interest from the past, as well as potentially reclaim wrongly incurred VAT penalty, based on individual assessment of the taxpayer position.
Although, the question in relation to the current CJEU case was raised in relation to Intra-Community acquisition of goods, but the respective, distortive Polish VAT Act correspondingly regulates the exercise of the deduction right in the case of import of services as well, so could be interpreted in parallel.
April 2021 VAT updates in China
In 2020, the Chinese government announced a number of tax incentives in response to COVID-19 to support businesses. Some of these incentives have expired and others will remain in place for the duration of 2021.
The reduced VAT rate for small-sized taxpayers remains in place in 2021. There will be 1% VAT rate for small-scale taxpayers. The VAT rate is usually 3%; and
Small-sized taxpayers with monthly sales below RMB 150,000 will be VAT exempt until 31 December 2021.
April 2021 VAT updates in India
There are a number of changes coming into effect from 1 April 2021.
One of these changes is e-invoicing will be mandatory for B2B transactions for those taxpayers with an aggregate turnover of over 50 crore from 1 April 2021 in the previous financial year. The first phase of e-invoicing was introduced on 1 October 2020 for those taxpayers with an aggregate turnover of 500 crore or more in the previous financial year. The second phase of e-invoicing was introduced on 1 January 2021 for those taxpayers with an aggregate turnover of 100 crore or more in the previous financial year.
The e-invoicing process will require the business to generate invoice data in JSON format (using an ERP, business management software or an offline tool). This data should be uploaded to the IRP (Invoice Registration Portal). The IRP will validate the key invoice elements and once this is validated the invoice data is authenticated with an IRN (Invoice Registration Number) and QR code. If an invoice is not registered on the IRP, it will not be considered as a valid tax invoice. This is the third phase and businesses that have an annual turnover of 50 crore and above will need to electronically upload all B2G and B2B invoices to the IRP from 1 April 2021.
Another change coming into effect is the introduction of the HSN code. The Harmonized System of Nomenclature (HSN) code is a system that classifies goods. This is a four-digit or six-digit code that will categorize and classify over 5,000 products. Businesses with an aggregate turnover in the previous financial year of more than 5 crore need to declare the six-digit HSN codes on all their B2B and B2C tax invoices from 1 April 2021. Businesses with an aggregate turnover in the previous financial year up to 5 crore need to declare four-digit HSN codes on their B2B tax invoices from 1 April 2021. This is optional for B2C supplies.
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