Global VAT Guide: November 2020

Bulgaria – 2021 Intrastat thresholds

On 20 October 2020, Bulgaria announced the new Intrastat threshold reductions for 2021.

The Intrastat thresholds are summarised below:

• Dispatches – the threshold is being reduced from BGN 290,000 to BGN 270,000;
• Arrivals – the threshold is being reduced from BGN 470,000 to BGN 430,000

The threshold for declaring statistical values are summarised below:

• Dispatches – the threshold is being reduced from BGN 15,800,000 to BGN 14,700,000;
• Arrivals – the threshold is being reduced from BGN 7,600,000 to BGN 7,300,000

European Union – new VAT rules for e-commerce

The European Commission has published explanatory notes on the new VAT e-commerce rules aiming to combat fraud and ensure fair competition for EU businesses.

These notes contain explanations of the new rules and also included in these notes are examples on how to apply these rules for suppliers or electronic interfaces (marketplaces or platforms) involved in e-commerce transactions.

These notes are aimed to help online businesses and SMEs understand their VAT obligations that arise from cross-border supplies to consumers in the EU.

The application of these new VAT e-commerce rules has been postponed by 6 months and will apply from 1 July 2021, instead of 1 January 2021. This extra 6 months will give Member States and businesses additional time to prepare.

These notes are accompanied with an update to the simplified VAT registration and reporting regime (one-stop-shop or OSS) to all cross-border B2C supplies of goods and services, and implementing a VAT reporting and payment liability to businesses operating online marketplaces.

The European Commission wants to simplify the VAT obligations for companies carrying out cross-border sale of goods and services (mostly online) to final consumers and to ensure the VAT on these supplies is paid correctly to the Member State in which the supply takes place

Some of the main changes are summarised below:

• There will be a new EU wide threshold that will replace the current thresholds – EUR 10,000 threshold for intra-Community distance sales of goods;
• There will be an extension of the current Mini One Stop Shop (MOSS), creating a bigger One Stop Shop, to other B2C services, to intra-Community distance sales of goods as well as to certain domestic supplies of goods;
• Businesses that operate electronic interfaces (marketplaces or platforms), in certain situations, will be deemed for VAT purposes to be the supplier of goods that are sold to customers in the EU by companies using the marketplace or platform – they will have to collect and pay VAT on these sales;
• The current exemption at importation of small consignments (LVCR) will be replaced with a special scheme for distance sales of goods that are imported from third territories or third countries of a value not exceeding EUR 150 – Import One Stop Shop (IOSS);
• Simplification measures for distance sales of imported goods in consignments not exceeding EUR 150 where the IOSS is not used (special arrangements); and
• There will be a new record-keeping requirements for businesses facilitating supplies of goods and services through the use of an electronic interface (this will include situations where the electronic interface is not a deemed supplier)

Luxembourg – Changes to VAT thresholds for small businesses

After EU approval, Luxembourg is moving to increase the VAT threshold for small enterprises.

Taxable persons with an annual turnover equal to or less than €35,000 are exempt from VAT in Luxembourg.

Malta – VAT Registration threshold increases

Malta has announced there will be an increase in the VAT registration threshold.

From 1 January 2021, the mandatory registration threshold will be increased from €20,000 to €30,000.

The threshold is applicable to local companies.

All for foreign businesses must register from the first taxable sale.

Portugal – delay VAT invoice software on foreign taxpayers

The Portuguese Tax Authority has announced that the date for non-resident businesses, VAT registered in Portugal, to start using certified invoicing software, has been postponed.

The date had been set to 1 January 2021 but has been postponed to 1 July 2021.

Taxpayers will now have more time to prepare for the changes.

The use of an invoicing software that has been certified by the Portuguese Tax Authorities will only be mandatory if one of the below conditions are met:

• The taxpayer’s annual turnover was higher than EUR 50,000 in the previous fiscal year (or, the estimated annual turnover exceeds that threshold in the taxpayer’s first year of activities);
• The taxpayer uses an invoicing software; or
• The taxpayer is required to use “organized accounting” (or opted for it).

This obligation applies only if the taxpayer falls under the Portuguese invoicing rules.

India – e-invoicing update

India has made the switch from voluntary to mandatory e-invoicing on 1 October 2020 for larger businesses.

All registered businesses with annual turnover greater than Rs 500 crore for their business to business transactions are now required to electronically transmit invoices to the Invoice Registration Portal (IRP); invoices that do not have an Invoice Registration Number (IRN) will be considered invalid.

E-invoices will replace the physical invoice and it is hoped e-invoices will replace the existing e-way Bill system and taxpayers will not have to generate separate e-way bills.

From 1 October, taxpayers will have to generate invoices using their internal systems (ERP/accounting/billing software) and then report the e-invoices online to the ‘Invoice Registration Portal (IRP).

The IRP will then validate the e-invoice information based on the following parameters:

• Completion of data in all mandatory fields;
• Validity of supplier GSTIN (Goods and Services Tax Identification Number);
• Validity of buyer GSTIN;
• Validity of invoice number and financial year; and
• Whether the invoice already exists in the GST system

If the IRP response is positive, they will return the digitally signed e-invoice with an Invoice Reference Number (IRN) and with a QR code to the taxpayer.

The QR code is generated in order for the supplier and buyer to confirm authenticity of the e-invoice and proof that it has been registered in the GST system. The IRP will then make the document available to both parties in the GST portal.

If the response is negative, an error message will be sent detailing the reason for rejection.

After the above steps are completed and the invoice has been accepted, the supplier must distribute the e-document to the buyer.

The e-invoicing system will be extended to medium sizes businesses with over Rs 100 crore turnover from 1 January 2021 and for all taxpayers with B2B transactions from 1 April 2021.

United Kingdom – Brexit update

The EU and Britain have not reached an agreement yet.

There are a number of sticking points in their talks, some of these include:

• Deciding the future EU access to British fishing waters;
• Level playing field provisions – the EU wants to ensure neither side can undercut standards or overly subsidise parts of the economy to give companies a competitive advantage in the market; and
• Governance – how both sides will be able to keep to their word

It was hoped that a deal would have been agreed to by 15 November 2020 so the European Parliament could ratify it before Britain’s transition period expires at the end of December 2020.

Fisheries is proving to be a particularly tricky problem with London insisting on annual negotiations on quotas. This is a demand the EU is resisting.

The talks up until now have been bitter at times, with Britain introducing legislation that would breach the earlier Brexit divorce settlement.

Then the EU began legal proceedings and claimed it would not implement any new trade deal with Britain unless London honours its previous obligations.

Boris Johnson has also accused the EU of having “refused to negotiate seriously for much of the last few months” in October 2020.

The EU and British Brexit negotiators will continue talks to try come to an agreement. An update of their progress and the chances of a deal is expected in early November 2020.