Across the globe indirect VAT/GST rules are being amended to ensure that foreign digital suppliers become liable for the collection and remittance of these taxes.
This pace of change, from a taxation perspective, is rapid. In the first half of 2017 alone Russia, Serbia, Taiwan, India, and Australia all amended their indirect taxation laws (or in India’s case introduced a whole new system).
The Organisation for Economic Co-Operation and Development (OECD) has already approved the destination-based principle in Action 1 of its Base Erosion and Profit Shifting (BEPS) report.
VAT, GST, consumption tax, sales tax, use tax – no matter what term, or name, is used it is clear that the taxation of the digital economy is growing in popularity.
Here we outline the tax jurisdictions where such destination-based indirect tax rules are in place.
European Union Value-Added Tax (VAT) rate: 28 EU Member State VAT rates - taxation depends on location of the consumer In January 2015 new rules on the taxation of cross-border supplies of digital services to EU-based consumers came into force.
“It is unfair that overseas-based businesses selling services into Australia may not charge GST when local businesses have to charge GST. A local business that employs Australians pays rent in Australia, pays tax in Australia, and helps build our economy is disadvantaged by the current system. We will level the playing field for Australian businesses by mandating that foreign businesses supplying digital products and services are subject to the GST.
The connected car of the not-too-distant future will be a revenue-generating machine on wheels: with data transmission at its epicentre. This movement of data will, given global trends, lead to burdens for owners of the potentially lucrative connected car platform as tax architects continue to recalibrate systems to account for the evolving digital economy.
CRUISE CONTROL: A woman (above) on board a test driverless car. Source: Wikimedia Commons. This image has not been changed.
Digital disruption has laid waste to numerous traditional industries, from the ramifications of internet publishing on the print media to the effects of the Uber and AirBnB models on the car travel and lodging sectors.
An increasingly connected (and smartphone-obsessed) population expects this disruption. Today, consumption is all about the now economy. It is now easier than ever, thanks to infrastructural advances in broadband and WiFi, for consumers to access digital content from anywhere in the world.
From April 1, 2017, international digital businesses with Serbia-based consumers will see an impact on operating costs, regulatory burdens, and resource management as Serbian VAT rules extend to cover their digital supplies.
Here are seven difficulties that any international digital business with consumers in Serbia should be aware for:
1. Tax advice Before you can think of making any inroads in relation to compliance with Serbia’s extension of VAT to cover cross-border digital supplies there is the significant cost in sourcing expert tax advice in relation to the law change.
Australia Digital GST liabilities are to become a reality for international digital service suppliers on the 1st of July.
On July 1, 2017, Australia’s Goods and Services Tax (GST) will – as outlined here new law — be extended to the cross-border supplies of digital services bought by Australian consumers. These supplies include digital services (e.g. the streaming, or downloading, of movies, music, apps, games, e-books) in addition to services such as architectural or legal services.
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.
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.
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”.
South Korea has long been admired as a digital economy visionary so it’s with great pleasure that we reveal our support for South Korean VAT compliance.
We understand that South Korea is a key marketplace for digital service merchants and compliance with the local tax laws is non-negotiable. Now, with Taxamo, merchants can achieve this compliance without major upheaval to their existing strategies and systems.
We have distilled our international digital tax compliance solution into one simple integration.
The standard rate of VAT in Greece is to increase from 23% to 24% on June 1 after the relevant tax bill amendments were adopted by the Greek Parliament on May 22.
The tax rate increases approved on Sunday will have a broad impact as increases were announced to the taxation of cars, fuel, cable TV, lotteries, telephone subscriptions, beer, and cigars.
The background to these taxation measures was the May 24 meeting of Eurozone finance ministers in Brussels.
Russia digital VAT looks set to become a reality by 2017.
But why is Russia making this move now?
First, some context. At the start of December 2015 it was revealed that Russia plans to introduce a new value-added tax (VAT) on digital services provided by foreign companies in January 2017.
This new 18% VAT (the standard rate) will mirror similar taxation intentions in the European Union (EU), and is aimed at non-Russian digital service companies supplying Russian consumers.
As of today Taxamo provides support for merchants seeking to comply with the South Africa digital VAT system.
The South African Revenue Service (SARS) was one of the international pioneers in changing the approach to taxing digital services. On June 1, 2014, non-resident suppliers of certain “electronic services” to South African residents (or if payment originates from South Africa) are required to register for VAT.
All the key details of the South African VAT system are contained in the ‘Registration Guide for Foreign Suppliers of Electronic Services’ , we have also compiled a useful list of FAQs on the topic.
The second VAT Mini One-Stop Shop (MOSS) return is due within 20 days of the end of the second quarter. that is: July 20.
Merchants who have registered with the EU’s new MOSS system are always allowed 20 days from the end of each calendar quarter to submit their VAT MOSS return to their chosen Member State of Identification (MSI).
The MSI is the EU tax authority with which a merchant registers with for the purposes of declaring all of the VAT collected on their pan-EU supplies.
Taxamo’s integration with WooCommerce enables full compliance with 2015 EU VAT rules for digital sellers. WooCommerce, the world’s most popular e-commerce platform, today announced an integration with global digital tax experts, Taxamo. Taxamo offer an end-to-end solution for compliance with new 2015 EU VAT rules on the sale of e-services and digital goods.
The integrated WooCommerce Taxamo plugin enables any e-commerce business to quickly adjust their website to enable full compliance by allowing them to:
As HMRC emphasises that the law expects e-commerce platforms to take responsibility, even major players like PayPal, eBay and Etsy are failing to fully explain how they will enable businesses to comply with January’s EU wide VAT changes.
8 thDecember 2014: Cork, Ireland – Speaking in a webinar, hosted by on-line VAT compliance specialists Taxamo, HMRC emphasised that they expect e-commerce platforms; payment service providers, web stores and online marketplaces; to manage the technical aspects of VAT accounting for their merchants, when the EU VAT changes for electronic services become law.
A series of myths have been perpetuated since the new EU digital VAT rules were established. It is time these were shattered.
Before we proceed with our myth demolition let’s get one thing straight: these new rules are going to come into effect on January 1, 2015. This date has already been agreed to by all of the 28 EU Member States – it will not be moved, or postponed.
Few realize that rules regarding the supply of services by US digital companies to customers in the EU have been in place since July 1, 2003.
The rules may have existed but compliance with the VAT on eServices (VOES) scheme as it was called had been “mixed and indifferent”, according to Andrew Webb, of the UK’s tax authority HMRC. Mr Webb was speaking at a Taxamo-organised webinar in London prior to the introduction of the new rules.
Looking for the definitive list on MOSS registration? Look no further.
MOSS (the Mini One-Stop Shop) is a system designed to – as the EU Commission has previously stated – ‘ease the administrative burden’ on digital service merchants.
MOSS web portals across the EU are opening to accept registrations from merchants ahead of the new EU VAT rules due to come into effect on January 1, 2015.
The tax authorities of member states operate the MOSS web portals.
You asked us and now we answer your questions about the new EU VAT rules. The 20 questions in this blog post were posed by participants – online and in person – during Taxamo’s seminar in London. Our full EU VAT event is online here.
1. How is it determined who is making the digital service supply? Article 9(A) of the implementing regulations outlines who will be affected by these new cross-border rules.
New EU VAT rules hit previously exempt UK businesses.
Major VAT rule changes impacting how tens of thousands of UK e-service providers do business in the EU are less than four months away, yet the majority of those affected are unprepared and may be at risk of heavy non-compliance penalties.
Technology provider Taxamo, who offer software that helps companies navigate and process the new rules, say that e-service merchants, many of whom are small-to-medium sized businesses and were previously small enough to be exempt from UK VAT rules, are ill-equipped to deal with the significant obligations that come with the 2015 rules changes.
WE have blogged on technological trends before and how the EU VAT Directive is framed to take advantage. These technological trends have already revamped our lives and are about to become much more important (or, indeed, instrusive, depending on your outlook).
The EU has gone to great lengths to ensure that technological trends are catered for in their 2015 VAT Directive. Photo: Getty Images
Well, the EU Expert Group on the Taxation of the Digital Economy gives us some fascinating insight into what the European Commission is keeping a close eye on.
Here are some practical examples of digital services unaffected by the 2015 EU VAT rule change, i.e. services not regarded as being electronically supplied (source: revenue.ie):
Example 1 of digital services unaffected
The supply of a game on a DVD or CD-ROM is not affected by the 2015 EU VAT change.
A supply of
A good, where the order and processing is done electronically
A CD-ROM, floppy disc or similar tangible media
The VAT explanatory notes (final discussion took place on Monday, February 17) were drafted to provide a better understanding of the legislation adopted by the EU in October 2013. The notes themselves do not replace VAT committee guidelines which has its own role in the process. They are a guidance tool for businesses to clarify the practical application for of the new rules for BTE (broadcasting, telecommunications and electronic services).
The VAT Information Exchange System (VIES) was put in place by the EU to assist in the policing of the new VAT arrangements from January 1, 1993. Under the VIES legislation, all VAT-registered traders who make intra-community supplies of goods must furnish the relevant EU member state tax authorities with a VIES statement listing such supplies.
Under the new VAT system intra-Community supplies of goods are exempt from VAT in the member state of despatch when they are made to a taxable person in another member state who will account for the VAT on arrival.