Global VAT Guide: May 2022 VAT Updates
May 2022 VAT Updates in Bulgaria
A bill is currently being reviewed in relation to an increase in the VAT registration threshold.
If this bill is accepted, the VAT registration threshold will be increased in two stages:
- In January 2023 – BGN 100,000
- In January 2024 – BGN 166,000
May 2022 VAT Updates on DAC 7
In March 2021, a directive called DAC 7 was adopted by the EU Council and this will introduce new specific reporting obligations for digital platform operators. Digital platform operators will have an obligation to report revenues that are generated by sellers using the digital platform.
The reportable activities performed through digital platforms will include:
- Personal services;
- Sales of goods;
- Rental of any mode of transport; and
- Rental of immovable properties.
The new reporting obligation will apply to digital platform operators who are:
- Tax residents of the Union;
- Non-residents of the Union but are registered/have a permanent establishment in the Union; and
- Foreign platform operators carrying out business in the Union, are not registered, not tax residents or do not have a permanent establishment in a Member State but facilitate the performance of taxable activities and are not qualified non-Union platform operators. These operators will also be subject to special registration obligations.
There has been a massive increase in the number of businesses and individuals that are now using digital platforms to sell their goods or provide services, including across borders. There is a huge concern surrounding the profits that are obtained by these businesses and individuals through the use of digital platforms that tax may not be reported correctly.
The DAC 7 will transfer the reporting obligations of the operators’ to the digital platforms with the hopes to fight against tax evasion. DAC 7 will allow the national tax authorities to identify the profits gained through the use of digital platforms.
Platforms that are located outside the European Union will have an obligation to report to the authorities of their home country, which will be responsible for exchanging this information reported with European Member States. Member States will be required to exchange data received from the platforms with another country within one month following the reporting.
Below are some of the details the platform operators will need to report:
- Platform business name;
- Address of the website;
- Financial account number;
- Information related to the seller’s verification;
- Total remuneration paid or credited for the reporting period;
- Fees or taxes withheld or charged by the reporting operator during the reporting period; and
- Number of relevant activities for which remuneration was paid or credited.
The calendar year is the reporting period and the platform operators will have an obligation to make their reporting to the tax authority by 31 January of the following year. The first reporting period will be for 2023 and the reports will need to be finalised by 31 January 2024. Non-compliance will be penalised and the penalties will be decided by each Member State. The new DAC 7 rules are due to come into effect on 1 January 2023 and will hopefully help toward preventing tax evasion going forward.
May 2022 VAT Updates in India
The Group of Ministers have been discussing the GST rates for the below activities:
- Online gaming;
- Casinos; and
- Race courses.
Currently, the commission collected by online gaming platforms is subject to a GST rate of 18%.
It is thought the GST rate will be 28%.
They will hold a meeting in May to discuss this increase.
In last month’s newsletter, we discussed the GST tier in India.
There are a list of items, such as certain foods, that are exempt. The GST council are considering a proposal that will see the end of the 5% GST rate. The Council may decide to subject those items that are currently exempt to a GST rate of 3% and potentially raise the 5% GST rate to 7% or 8%.
May 2022 VAT Updates in KSA
From 1 January 2023, the second phase of e-invoicing will come into effect. This is known as the “Integration Phase”.
This phase includes new technical and business requirements with ZATCA’s system. Invoices must be generated in XML or PDF/A-3 invoice with embedded XML. After invoices are generated, these will be transmitted to the ZATCA platform and from here, the invoices will get a cryptographic stamp and a UUID (Universally Unique Identifier).
In the past, for B2B invoices, QR codes were optional. With the “Integration Phase”, it will be mandatory to add QR codes to e-invoices. E-invoices need to be stored locally and offline. ZATCA will notify taxpayers who will need to be compliant six months in advance in order to prepare for the change.
May 2022 VAT Updates in Switzerland
On 15 May 2022, a public referendum will be held in Switzerland relating to a new 4% tax on streaming services. Streaming service providers, like Netflix, would be required to either invest a minimum of 4% of their turnover in Switzerland to audio visual productions or be subject to a 4% levy that will be payable to the Federal Office of Culture. This new measure is expected to generate between CHF18 million and CHF30 million per year for the Swiss film industry.
Adding to the above, the streaming services will be required to ensure 30% of the content on their platforms must be produced in Europe. There are concerns that the increase in operation costs would eventually be passed onto the consumer.
May 2022 VAT Updates in Turkey
Turkey has introduced an optional reverse charge VAT mechanism for specific transactions through General Communiqué No. 41 on the Value Added Tax Law. This mechanism aims to prevent compliant taxpayers from falling into the scope of “special provisions” in VAT applications.
Under the current legislation, taxpayers that fall under the scope of “special provisions” include the below:
- taxpayers not making a declaration;
- taxpayers using misleading or false documents due to their content;
- taxpayers not submitting books and documents; and
- taxpayers that cannot be found at the address they declared.
In order to benefit from this mechanism, taxpayers will need to draw up a written contract with the taxpayers they purchase their goods and services from and declare and pay all VAT. Contracts must be for one year. A copy of the contract will need to be submitted to the relevant tax office. Taxpayers that use the optional reverse charge VAT mechanism will not be jointly and severally liable in terms of VAT and will not be subject to “special provisions”.
May 2022 VAT Updates in Vietnam
Vietnam has announced a number of tax payment extensions for 2022:
- VAT payments for the period’s March 2022, April 2022 and May 2022 will be subject to a six-month extension;
- VAT payments for Q1 2022 will be subject to a six-month extension;
- VAT payments for the period June 2022 will be subject to a five-month extension;
- VAT payments for Q2 2022 will be subject to a five-month extension;
- VAT payments for July 2022 will be subject to a four-month extension; and
- VAT payments for August 2022 will be subject to a three-month extension.
May 2022 VAT Updates in the United Kingdom
The HMRC is taking a long time to refund overpaid tax.
It is thought this is because the HMRC are extremely busy and the checks surrounding the refunds are heightened. It has been reported that for particularly large sums of money, this is taking up to one year to be processed, which can cause huge cashflow problems for businesses.
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