VAT news round-up: 1 May 2015

What’s happening in the world of VAT? Our Global Managing Editor gives her daily round-up.

Poland

Poland has referred a case to the European Court of Justice (ECJ) which could dramatically impact insurance outsourcing activity across Europe, reports the International Tax Review. 

If it reaches the ECJ, the current case concerning insurance service provider BRE Ubezpieczenia (BRE) could cause the court to clarify long-standing VAT issues stemming from the 2005 Andersen case around the outsourcing of insurance services.

Poland’s laws on the VAT exemption given to insurance service providers interpret the EU VAT Directive in a much broader way than most countries. Source

EU

With figures showing how much VAT has been collected under the new EU VAT system implemented in January to be released this month, European parties are looking at the possibility of and justification for a threshold on VAT paid on B2C e-services, reports the ITR. No other member state has as much to gain from such as threshold as the UKSource

UK

With the election now less than a week away, the UK’s main parties are bringing out the big guns. Leader of the Conservatives and Prime Minister of the last government, David Cameron this week pledged a “tax lock” – a Tory government will not hike income tax, National Insurance or VAT if it wins on Thursday. Read more on this from our UK team.

In other election news, it seems the book trade is more likely to support Labour and the Green Party since throwing its weight behind the Liberal Democrats at the last election. Support for libraries and making Amazon pay a fair share of tax are among the issues the trade wants any new government to address. Source 

Elsewhere in the UK, the HMRC published VAT Notice 1001 this week, regarding VAT refunds for certain charities. It explains the VAT rules that apply to charities eligible for refunds under sections 33C and 33D of the VAT Act 1994; to be eligible, charities must be in the sectors of palliative care, air ambulance, search and rescue, or medical couriers. VAT refunds can be claimed on when VAT is incurred after 1 April 2015 on goods and services used for non-business activities; it extends to UK VAT incurred on the supply to you of goods and services, and to goods imported from a country outside the EC or acquired from another member state of the EC. Access the note on gov.uk.  

HMRC also published statistics this week on the numbers of different types of tax and taxpayers; it shows that the number of VAT registered traders in the UK has climbed back to more than 2 million for the first time since the global financial crisis. Source

Spain

The General Directorate of Taxes (DGT) has announced it will treat virtual currencies such as Bitcoin as financial services exempt from VAT. It sees Spain take the same position as the UK and some other EU member states. VAT will only apply to supplies of goods and services tax for a consideration of Bitcoin, in the same manner as purchases using fiat currency. Spain does not, however, consider virtual currencies to have the same status as fiat currency. They instead fall under the heading of “other negotiable instruments”. Source

The Spanish government has also approved a draft law to amend the General Tax Law, including measures to tackle tax fraud and overhaul VAT reporting rules. Income tax, corporate tax and VAT and excise duties will be reformed with the intention to “reduce conflict and increase legal certainty”. Source

India

Today India announced the price of non-subsidised LPG was cut by Rs 5 per cylinder as jet fuel (ATF) rates were marginally raised in step with global trends. The reduction comes on the back of two successive hikes – Rs 5 on 1 March and Rs 11 on 1 April. 

Oil companies raised the price of aviation turbine fuel (ATF) in Delhi by Rs 272 per kilolitre, or 0.5%, to Rs 49,609.84 per kl after reducing rates by 2% last year.Jet fuel constitutes more than 40% of an airline’s operating costs and the price cut will reduce the financial burden on cash-strapped carriers. Source

But in a bid to attract airlines to start international operations from the Biju Patnaik International Airport, the Odisha state government has announced a waiver of VAT on ATF for airlines wanting to operate international flights from the airport. It had earlier reduced the amount of VAT collected on ATF from the national 20% to just 5%.

Switzerland

The Swiss TV licence is no longer subject to VAT, decreasing the cost of alicence from CHF 462 to CHF 451 per year for households, says the federal office of communications. It’s a result of a ruling published on 29 April by the Federal Supreme Court that the license fee is no longer subject to a 2.5% VAT. Source.

Germany

The Supreme Tax Court has held that a mail order business selling books and CDs to German consumers was acting on its own account, not importing on behalf of its customers as contended.This means sales were made in Germany and so were subject to German VAT. 

The goods were delivered from a store run by an associated company in Switzerland, with delivery by post. The postal service cleared the shipments through customs “for the account” of the customer, and customers were told no taxes or duties would be payable. The tax office, on the other hand, maintained the seller had sold the goods in Germany to German consumers and so should have paid the VAT on sale. 

The Supreme Tax Court agreed with the tax office under Supreme Tax Court judgement V R 5/14 of 29 January 2015. Source

Philippines

The nation of islands in South East Asia is preparing for a major tax overhaul which will include a hefty corporate income tax (CIT) cut, but could mean an increase in VAT and excise taxes, says the International Tax Review. Several Bills have been drafted proposing different reform strategies, the most drastic of which would see CIT slashed by 10 percentage points from 30% to 20% by 2019. Source

Qatar

Little chinks in the tax-free armour of the Gulf states have been appearing since the six member GCC states signed a pact to enhance economic integration in 2001. In 2003 came an agreement on a regional customs union, and then in 2007 a decision in principle to try our VAT on a collective basis. It was proposed as a means to broaden the revenue income sources of member states away from their traditional heavy dependence on oil, and under some pressure from the IMF to diversify the economies. 

The IMF issued a report in March asking Qatar to enhance its non-hydrocarbon revenue by broadening its corporate tax base to include Qatari and GCC companies within the tax net and introducing VAT of up to 5%. This would not affect investor or comsumer behaviour and at the same time would increase the non-energy revenue soruces of the member states. But the IMF is not the only backer of a VAT in the GCC; several global audit firms believe there are benefits to taxing the GCC. 

bq magazine brings a full report here. 

Nigeria

In order to simplify the tax system, Nigeria’s FIRS has designed a new payment platform. Known as e-tax pay, it is an online self-service tax payment system where taxpayers are able to pay through their banks’ online payment portal. It’s put in place by the FIRS in collaboration with Nigerian Interbank Settlement System (NIBSS) and approved collecting banks. To use the system, you must have registered and obtain a Taxpayer Identification Number and satisfy several other criteria. You can pay, among others, your VAT, personal income tax and companies income tax. Source

Finland

A new VAT reverse charge is now available in Finland, covering supplies of scrap metal. The measure was propsed by the government in May 201r to replicate similar arrangements in other EU member states. It shifts the obligation to account for VAT from the supplier to the recipient as a mechanism to prevent the perpetration of VAT fraud and in particular missing trader intra-community (MTIC) fraud. Source

Israel

The ultra-orthodox party Shas looks set to join the new coalition government in Israel, under Prime Minister Binyamin Netanyahu, after a key demand for eliminating VAT on basic consumer items was agreed to, reports Hamodia.

The VAT proposal has backing from Israeli non-profits working to assist the poor. In a letter to Netanyahu, a collection of welfare groups argue that Israel’s current uniform 18% VAT rate places an unequal burden on the poor. They want the government to either reduce VAT on basic foods to 7% in keeping with the OECD average, or to abolish it all together.

During the campaign, Netanyahu had pledged to implement zero VAT. Source.

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