Global VAT Guide: August 2020
Brazil – new VAT regime
The Brazilian government have drafted a bill that will see certain federal taxes combined under a federal VAT regime.
This new proposed VAT will be known as CBS, or “Contribution on Goods and Services”, and would replace the PIS and COFINS taxes.
The VAT rate will be 12%.
The CBS regime would have a broad scope and would be levied on the sale of goods and services as well as the import of goods and services.
The new CBS would also aim at taxing digital transactions that currently fall out of the scope of taxation.
This new system is not intended to increase the tax burden on Brazilian companies.
This new tax will be simple and efficient for businesses and will also be more transparent for consumers.
There is still no definite timeline for implementation of any change but it is expected to be a lengthy process.
Costa Rica – VAT collection on cross-border service
From 1st August 2020, 13% VAT will be applied to digital sales from foreign digital service providers and intermediaries, to consumers in Costa Rica.
Foreign providers of digital services to consumers will be able to register as VAT taxpayers and collect VAT on their digital services from 1 August 2020. This will be a simplified registration and will not create a permanent establishment.
If the foreign providers do not VAT register, Costa Rican public and private entities that issue credit/debit cards will collect the VAT. These card providers now have until 1 October 2020 to prepare to collect VAT on cross-border digital services by foreign providers who do not VAT register.
The Minister of Finance has stated that this delay will allow these withholding agents to implement the measures necessary for correctly collecting the VAT.
European Union – e-commerce 2021
The European Union’s proposal to implement the e-commerce VAT package in the EU has been postponed by 6 months due to COVID-19.
As confirmed by the EU Council, the new expected date for implementation is 1 July 2021.
By this date, companies that base their activity on cross border sale of goods (mainly online) must have their data, systems and processes adapted.
The Netherlands and Germany have suggested to the European Commission that they should rethink a new extension beyond July 2021.
The Netherlands has indicated that the earliest implementation date it can commit to is 1 January 2022.
However, there are other Member States like Austria, Bulgaria, France, and Malta that would prefer the regulation to start on 1 July 2021.
What does the new regulation mean?
- The current VAT exemption for imports of low value packages into the EU will be abolished;
- The annual local turnover thresholds for the online sale of B2C goods in the EU will be abolished and replaced by a single turnover threshold;
- A One Stop Shop (OSS) scheme will be created to simplify VAT registrations, continuous compliance and billing obligations;
- New record-keeping requirements for vendors and platforms will be introduced.
Greece – e-invoicing
Greek authorities have issued a bill that will introduce provisions to provide incentives for companies to apply electronic invoicing.
Below are some of the incentives that are intended to encourage businesses to adopt the new e-invoice regime:
- The statute of the limitation period for the tax administration to issue an act of administrative, estimated or corrective tax assessment is reduced to 2 years (from 5 years);
- The cost incurred for the production, transmission and electronic archiving of electronic invoices for the first year of issuance of electronic invoices is fully deductible;
- The cost of technical equipment and software required for the implementation of e-invoicing may be fully written off in the year of acquisition; and
- The deadline for the completion of tax refunds to companies is reduced from 90 to 45 days.
To benefit from the incentives, companies must inform the tax authorities they will be applying electronic invoicing for their activities.
Indonesia – Delay on foreign e-commerce VAT
The Indonesian Tax Authorities have postponed the introduction of VAT on all e-commerce goods and services made by non-resident businesses to 1 August 2020.
The 10% VAT was due to be introduced on 1 July 2020.
At present, non-resident businesses providing e-commerce services to Indonesia are not obligated to charge VAT on their sales.
With the new legislation, digital products including streaming films, streaming music subscriptions, digital apps and games, as well as online services from abroad will be treated the same as domestic products, including similar digital products produced by domestic businesses.
This tax must be charged and collected by the non-resident businesses.
Reporting will be quarterly and must be completed no later than the month after the quarterly period ends.
Italy – VAT registration threshold
Italy was given permission by the EU Commission to extend its VAT registration threshold for resident businesses at EUR 65,000 until 31 December 2024.
This aims to reduce the compliance and tax costs for small enterprises and tax authorities, as well as reduce the administration burden.
The threshold does not apply to non-resident businesses with an Italian VAT registration threshold – the threshold is still zero.
Latvia – Threshold extension
In the past, Latvia was granted an authorisation to apply a VAT registration threshold of EUR 40,000 for small businesses. This was to expire on 31 December 2020.
The European Commission have published a proposal that gives Latvia authorisation to apply a higher VAT registration threshold for small businesses.
Under this proposal, the date will be extended to 31 December 2024.
Paraguay – VAT on foreign digital services
The government of Paraguay has announced a delay in the implementation of VAT by foreign providers of digital services to consumers in Paraguay.
The new date is set for 1 January 2021 and the VAT rate will be 10%.
The new VAT will be collected via payment providers (banks/credit card companies) when the customer makes a payment.
The payment provider will then be responsible for paying this over to the tax authorities.
This new VAT rate will be applied to electronic services such as:
- Internet services; and
- Streaming games
The Philippines – VAT on foreign digital services
From 1 January 2021, the Philippines are proposing a bill to introduce VAT on foreign digital services supplied by non-resident businesses.
At present, foreign businesses are not obligated to charge VAT on their sales.
This bill will see a 12% VAT rate applied to services such as:
- Streaming games;
- e-journals; and
- Internet services
Poland – SLIM VAT
On 16 July 2020, the Polish Minister for Finance announced that Poland is introducing a simple, local and modern VAT initiative, called “SLIM”.
It is expected that SLIM will be implemented within the first months of 2021.
Below is a summary of the changes that it will bring:
Invoicing made simple
Correcting invoices in-minus where the taxable amount is lowered – the documentation requirements will be simplified. Only documentary proof of the customer’s agreement is needed.
Correcting invoices in-plus will always be possible in a tax period when a correcting invoice is issued (as long as new circumstances occur after a supply covered by the said invoice);
If goods are shipped up to six months after the payment, advance payments on exports may benefit from zero-rating, which is a considerably higher timeframe than the current two month limit.
Income tax with common exchange rates
One common exchange rate will be set allowing taxpayers to apply the same foreign exchange (FX) rules for VAT purposes as are applied for corporate/personal income tax purposes.
A tax payer will be entitled to deduct input VAT within 4 months (currently 2 months) from the date of purchase of goods/receipt of a service in a current tax return.
In addition, the VAT-free low-value gift allowance will be increased from PLN 10 to PLN 20.
Romania – VAT cash registers roll out and SAF-T
Romania is proceeding with the pilot of the Standard Audit File for Tax (SAF-T) for large taxpayers.
A full adoption of the SAF-T is expected by the end of 2020 for most businesses.
The Romanian Tax Authority is also introducing Fiscal Cash Registers, which will be linked to the Tax Office in order to provide live reporting and help stop VAT fraud.
The Fiscal Cash Registers will come into effect in September 2020 for large businesses and for all cash based businesses, the date is 31 January 2021.
Romania – VAT registration threshold
On 7 July 2020, the European Commission proposed to extend the existing VAT registration threshold for Romania.
Romania will apply the higher VAT exemption threshold of EUR 88,500 for small business until 31 December 2024.
United Kingdom – online sales tax
The UK Chancellor Rishi Sunak is considering introducing a 2% online sales tax in a bid to save high-street business and to raise billions of pounds each year.
This online sales tax would consist of two parts:
- A 2% charge on goods sold online
- Mandatory charge on customer deliveries
There are fears that an online sales tax will raise prices for consumers and they may look elsewhere.
The government has mentioned that they must ensure that “the tax system raises sufficient revenue” after the economic damage cause by COVID-19.
For a full list of COVID-19 related updates, see our detailed COVID19 blog.