The following is a guest blog post from Commercial and IT lawyer Colm Kelly:
THE post focuses on the first part of the information session held by the UK’s HMRC on June 2, 2014, at Queen Elizabeth II Conference Centre in London. This session revealed some interesting details relating to the EU’s VAT on eServices, new rules are due to come into effect on January 1, 2015.
HMRC held a conference on June 2 to explain the new EU VAT rules on digital services.
We had useful presentations from Jim Harra (DG Business Taxes HM Revenue & Customs), Maryse Volvert (EU Commission) on Place of Supply and The Definition of a Digital Service and Ireland’s Dermot Donegan on the meaning of Article 9a (who is the supplier) of Implementing Regulation (EU) 282⁄2011 (the “Implementing Regulation”) (as amended by Regulations 967⁄2012 and 1042⁄2013).
What was particularly interesting was the discussion panel afterwards, which consisted of Maryse Volvert and Dermot Donegan (referred to above) and Ian Broadhurst, from UK HMRC, and Ewa Wdowczyk-Szpytma, from the Commission.
The challenges concerning invoices was raised as an issue as well as the actual format of invoices. The panel made it clear that the format of invoices was to be dealt with under national rules.
However, the panel did indicate that by the end of September the EU will publish a summary of VAT rates per Member State as well as exemption rules and other country specific rules. This will include the content of invoices and will be updated in February 2015.
eBook sellers raised a range of issues and the 3% rate adopted by Luxembourg was obviously an area of contention. It was clarified by the Panel on a question from the floor that if it is the case that the ECJ (General Court) in their infringement proceedings hold against Luxembourg, that the suppliers will not be penalised.
Pending a ruling from the ECJ (the General Court) suppliers must apply the 3% rate in countries such as Luxembourg. If the ruling is negative and countries such as Luxembourg must change their rate, then, suppliers only need to change their rates to Luxembourg, when that country makes the change. It was clear that suppliers will not be penalised.
Audits, compliance and penalties
A member attending raised from the floor, the issue of audit, compliance and penalties. He asked whether a de minimus rule could apply noting that severe penalties are being imposed on companies who fail to comply with existing destination rules (for example in the goods environment).
While the panel indicated that they could not speak for how national authorities will deal with compliance, Dermot Donegan stressed that the national authorities wish this system to work, that it is not in the interest of any national authority to “hammer” individual suppliers on the compliance side (obviously without prejudice to specific cases) and that there has been a significant degree of dialogue with business to ensure that the correct balance has been achieved.
- For more information on VAT and eServices, please contact Colm Kelly solicitor on: firstname.lastname@example.org
Taxamo’s international digital tax solution enables digital service merchants to comply with new digital tax laws worldwide.
Our one simple integration meets the requirements of international digital tax laws on tax calculation, reporting, and invoicing. It also offers merchants a simple, cost-effective, and reliable way to stay compliant.
Taxamo launched with an EU VAT solution in January 2015 and has since expanded to support US digital tax (sales & use), Japanese consumption tax (JCT), South African VAT, Norway’s VAT system, Switzerland VAT, Canadian domestic sales tax, New Zealand GST, and South Korean VAT. Further regions will be introduced throughout 2016.
Existing Taxamo customers include BBC Worldwide, BitTorrent, Penguin Random House, and Time Inc., among many others. In addition, Taxamo has announced a number of strategic partnerships including Braintree Payments and WooCommerce.
Note: Taxamo content is created for guidance only, please consult your local tax advisor for professional advice.