Snapchat, the image messaging platform founded in 2011, was valued at USD$40 billion in early March after a record-breaking IPO – making it more valuable than Delta, Target, and CBS.
These eye-watering figures are yet another example of how the sale, download, use, and sharing of digital imagery, music, and video is now big business. According to IBM we create 2.5 quintillion bytes of data every day. The sources of this data boom are everywhere online with all major social media sites depending heavily on user-generated images and videos.
The Serbian tax authority has provided the latest example of how rapidly international place of supply tax legislation is changing for digital service suppliers.
In mid-January 2017, it was announced that Serbian Value Added Tax (VAT) legislation was to change on April 1, 2017, with serious implications for foreign suppliers of digital services. The specific legal details of the VAT legislation change had been finalised in the Serbian Parliament in December 2016.
On January 1, 2017, Russia became the latest country to change laws aimed at taxing the digital economy.
The specific change in Russia is that 18% value added tax (VAT) is now applied to the sale of a digital service based on the location of the end consumer in Russia, rather than the supplier’s location. Russia, mirroring the EU taxation approach, requires two pieces of evidence to be collected during the transaction and there is no threshold for compliance.
Let’s start with the last first.
The ugly: Did you know that the Indian Government is charging digital businesses a fee for collecting tax on their behalf. This fee is over 1% and comes off the digital business’ bottom line. It is not borne by the Indian consumer who pays the service tax.
This fee is charged by way of a margined FX rate. This rate must be used by a foreign business when converting the tax that the business has collected in foreign currency from Indian consumers.
International suppliers of digital services have just two weeks to prepare for new place of consumption tax rules just introduced in India.
On November 9 India’s Central Board of Excise and Customs (CBEC) released an official circular identifying and explaining the rule change. The new rules come into effect on Thursday, December 1, and specifically target the cross-border supply of Business-to-Consumer (B2C) digital services to India-based consumers. The technical tax development here is the withdrawal of the exemption on these B2C cross-border sales.
India – one of the world’s fastest-growing large economies – is finally about to introduce a new taxation system, including a plan to tax the country’s digital economy.
As reflected in recent international approaches, the trend of enacting destination-based indirect tax legislation is to the fore. Ever since the release of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) report in October 2015 tax jurisdictions across the globe have taken stock of their existing tax collection systems and reassessing options.
Compliance with international tax regimes can be a mountain to climb for merchants that’s why we continue to expand and today can unveil our Swiss VAT support. Swiss VAT support: the key element to digital sales Since January 1, 2010, the Swiss Federal Tax Authority (FTA) has levied a value added tax (VAT) on the supply of services from non-resident companies to Swiss residents.
Article 10 of the Swiss VAT Act states that VAT is applied to a service supplied from “any person who carries on a business based abroad that supplies telecommunication or electronic services on Swiss territory to recipients who are not liable to the tax”.
New Zealand GST on digital services supplied from abroad to New Zealand-based consumers will come into effect on October 1, 2016.
Details of the proposed new digital GST – due to come into effect on October 1, 2016 – passed a third reading in the New Zealand parliament on May 10. The hurdling of this latest legislative barrier now leaves the path clear for the new rules concerning the supply of digital services by foreign companies to New Zealand consumers to be introduced at the start of Q4 2016.
Digital tax trends indicate a move to destination-based taxation. We like to keep those affected up-to-date so here’s a list of countries planning such changes.
The common thread in international digital tax trends is the move from a supplier-based taxation to one based on the consumer’s location, or destination-based taxation.
The Organisation for Economic Co-Operation and Development (OECD) has already approved the destination-based principle in Action 1 of the October 2015 release of their Base Erosion and Profit Shifting (BEPS) report.