Global VAT Guide: May 2024

The May edition of the Global VAT Guide features comprehensive updates on VAT regulations and developments from Belgium, Finland, France, Germany, Hungary, Romania, Slovakia, Bahrain, Sri Lanka, UAE and the UK.

Belgium

The Federal Public Service published a clarification on VAT exemption for small businesses. The VAT exemption can be invoked by small businesses, except VAT groups, when annual turnover in the previous calendar year did not exceed EUR 25,000, exclusive of VAT for the supplies of goods and services they make. This will present small businesses with advantages and concerns. This will simplify the VAT administration by exempting small businesses from charging VAT on sales, this will limit their ability to reclaim the VAT paid on business related purchases. Small businesses with a turnover below EUR 25,000 in 2023 can expect to receive a letter from the Tax Authorities in May via MyMinfin. This letter will explain the terms and conditions of the regime. Businesses that qualify for the new regime and want to participate will need to submit an online application by 1 June 2024.

Finland

Financial Policy for 2025 – 2028

On 16 April 2024, the government agreed there will be tax increases to finance the fiscal deficit. This deficit is EUR 3 billion. The negotiations took two days and focused on agreeing on the financial policy for 2025-2028. The tax measures are: Direct Taxes

• Not adjusting the two highest income brackets with inflation in 2025;
• Reducing the allowance granted to pensioners
  • The reduction will impact those whose annual pension is between EUR 23,000 and EUR 57,000;
• From 1 January 2027, the tax deductibility of voluntary pension insurance premiums will be abolished;
• Reducing the credit for certain household services by EUR 100 million;
• Extending the deductibility of donations to donations made to youth, cultural, sports and certain qualifying organizations promoting the wellbeing of children with effect from 1 January 2026

Indirect Taxes

• The standard VAT rate and insurance premium tax rate will be increased to 25.5% (currently 24%)
• Candies and chocolate will be subject to the standard VAT rate instead of the reduced VAT rate of 14%;
• Increasing excise duties on tobacco and soft drinks; and

Increasing car taxation of electric and hybrid vehicles.

VAT Refund to Foreign Businesses

On 8 April 2024, Vero Skatt (The Finnish Tax Authority) updated the guidance for the refund of VAT to foreign businesses established in the EU. The changes are in relation to the Tax Authority’s timelines for processing the application, issuing a decision, and transferring the refund payment. The updated sections are: 1.3 Contact details of VAT refund authority • Contact details of the Tax Authority are removed 6.2 Time limits for the processing of an application • Clarification added: “If the deadline for submitting additional information is extended by the applicant’s request and the deadline for processing the application is therefore extended, the application will be processed within two months of the date on which the information was received or, if no information has been received, within two months of the deadline for submitting additional information.” 6.4 Description of the decision and payment of refund • Clarifications added: “The Tax Administration can use automated decision-making when resolving tax matters. This means that decisions can be made partially or completely by automation.” and “If the deadline for submitting additional information is extended by the applicant’s request and the deadline for processing the application is therefore extended, the refund is paid within two months and ten working days of the date on which the information was received or, if no information has been received, within two months and ten working days of the deadline for submitting additional information”.

France

From 1 July 2024, it will be mandatory for the below information to appear on invoices:

• The identification number mentioned in the first paragraph of Article R. 123-221 of the French Commercial Code¹;
• The address of delivery of the goods if it is different from the customer’s address;
• Information on whether the transaction is a supply of goods, provision of services or both; and
• The statement: “Option for payment of the tax on the basis of debits”, when applicable

There are no changes in the simplified invoice requirements. ¹ The identification number assigned to each establishment is composed of the nine digits of the identification number of the registered legal unit that carries out its activity there, followed by a complementary identification number of five digits specific to this establishment.

Germany

According to the draft bill of the Annual Tax Act (JStG) 2024, event services shall no longer be taxed at the event location if the participation is only virtual. In the case of virtual participation, the place of supply shall be determined by the registered office (B2B case) or place of residence, domicile, or habitual residence (B2C case) of the participant. The draft bill also contains two crucial changes for small enterprises:

• The turnover limits will be increased to EUR 25,000 and EUR 100,000 and the way they operate will also be reorganised; and
• In addition, as from 2025, EU small enterprises will also be able to benefit from the special scheme for small enterprises in other EU countries. A special reporting process and a new small enterprise identification number will be introduced for this purpose.

Hungary

On 7 March 2024, the National Tax and Customs Administration (NAV) amended the Guide on the general rules for VAT returns and allowing the possibility of practiced accounting. If NAV determines a Community Tax Number for a taxpayer obliged to file an annual VAT return, the taxpayer in question will be obliged to switch to quarterly VAT returns even if he has not reached the respective thresholds for quarterly VAT returns – total VAT of HUF 250 thousand and total supplies above HUF 50 million. The deadline for submitting the quarterly VAT return is the 20th day of the month following the quarter. This Guide is valid from the third working day following the date of its publication.

Romania

Administrative Form for Payment Service Providers

The Romanian tax authority released a draft bill for public consultation, introducing a new Form (396) for an Informative Statement on cross-border payments. Payment service providers (PSPs) will need to fill out this form and is linked to the recently enacted Amending Directive to the VAT Directive (2020/284). Form 396 will be in scope of PSPs reporting obligation and this form must be filled in on a quarterly basis to the Romanian tax authority, exclusively by electronic means of distance transmission. The filing deadline is the end of the month (even when the end of the month is a non-working day) following the calendar quarter to which the information refers. PSPs must validate the data contained in Form 396 prior to filing it with the Romanian tax authorities. Forms that are not validated will be rejected and considered as not filed. The filing deadline is considered observed if a validated form is refiled by then. Deduction of VAT for vehicle-related costs The 50% deduction of VAT for vehicle-related costs (purchase, leasing, rental; fuel, repairs, spare parts, parking) not used exclusively for business purposes expired on 31 December 2023.

• On 14 September 2023, Romania requested a further three-year extension of the measures;
• On 10 November 2023, the Commission notified Romania that it had all the information it considered necessary for appraisal of the request; and
• On 8 April 2024, the Council of the European Union issued a proposal for a decision extending the measures until 31 December 2026.

Slovakia

VAT Scheme for Small Businesses

The Slovakian parliament have adopted a draft bill amending the VAT Law. This approved bill notes that a foreign person with fixed establishment in Slovakia becomes a VAT payer at the time of conducting taxable transactions subject to VAT in Slovakia (except for the situations that are specified in the VAT Law). The taxpayer / foreign person will be required to pay for VAT registration within 5 working days from the moment the requirement for registration is fulfilled. The Tax Authorities will issue the registration number within 10 days from registration. The approved bill also specified the reverse charge mechanism will be active from 1 July 2025 for the following:

• taxpayers (with an effective status of an AEO) on whose behalf a customs declaration is submitted within the framework of centralized customs procedures; and
• authorized economic operator (AEO) entities (i.e. economic subjects authorized under customs legislation); and

This draft bill was adopted on 24 April 2024 and will enter into force on the date of publication. The bill must be signed by the President to become Law. VAT Gap The Ministry of Finance is preparing a draft bill that would amend the VAT Act and the main goal is to decrease tax evasion and to reduce the VAT gap. The draft bill should cover the implementation of specific measures in the area of the right to deduct input VAT, as well as the adjustments of deducted input VAT. The Amendments may result in:

• an expansion of the number of cases to which the obligation to correct deducted input VAT will apply;
• a more precise legal definition of the term “investment property”; and
• an amendment of the rules in the area of adjustments to the deducted input VAT for investment property.

The public can participate in the preparation of the draft bill by sending suggestions or proposals by 15 May 2024.

Bahrain

On 28 February 2024, the National Bureau for Revenue (NBR) informed the taxpayers about extending the VAT records keeping period by 5 years in addition to the initial 5 years, resulting in 10 years keeping period for VAT records. Bahrain introduced VAT in 2019 and on 31 March 2024 the VAT records retention period for Q1 2019 should have expired. The option for a longer record keeping period is laid down in the VAT Executive Regulations, Art. 103, D. The Bureau may, before the expiry of the periods stipulated in this Article, notify the Taxable Person where there is a need to retain records for a further period, which shall not exceed five years.

Sri Lanka

On 22 March 22 2024, the Government gazetted an amendment to the VAT Act, reducing the VAT registration thresholds with effect 1 January 2024.

• to LKR 15 million per taxable period (quarter) (previously LKR 20 million); and
• to LKR 60 million per annum (previously LKR 80 million)

United Kingdom

On 11 April 2024, the UK VAT Notice 700/1 was updated with the new registration/deregistration thresholds:

• £90,000 for taxable supplies from the previous £85,000; and
• £88,000 for deregistration from the previous £83,000

The new thresholds take effect from 1 April 2024.

United Arab Emirates

A message appeared on the Federal Tax Authority FTA website – EmaraTax will only be accessible via UAE Pass based login starting 30 September 2024. Users are encouraged to link their EmaraTax account with the UAE Pass account. UAE PASS is a secure national digital identity for citizens, residents, and visitors in UAE, enabling them to access many online services across various sectors (government, semi-government, and private), in addition to providing features such as signing and verifying documents digitally, requesting digital versions of official documents, and using the same in applying for services from our partners.

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