Worldwide: VAT Roundup: July 2018

Last Updated: 3 August 2018
Article by TMF Group

Missed the VAT news? Here's a quick rundown of some key VAT and wider global tax developments from the past month.

EU and Germany - VAT refund opinion

In the latest infringements package published by the European Commission on 19 July 2018, it was announced that they have sent a reasoned opinion to Germany, asking it to bring its VAT refund rules into line with EU legislation (VAT Directive Council Directive 2006/112/EC and the Refund Directive Council Directive 2008/9/EC).

The Commission argues that "in some cases, Germany currently refuses to refund VAT applied for by taxable persons established in another Member State as it considers that the information provided is insufficient without having requested additional information from the applicant. This leads to refunds being denied even when applicants fulfil the substantive requirements as laid down in EU law."

A 'reasoned opinion' is the second infringement stage following a letter of formal notice, which was sent to Germany in October 2017. If Germany does not act within the next two months, the Commission may decide to bring the case before the Court of Justice of the EU.

Malaysia - SST Implementation

The official reintroduction of the Sales and Services tax (SST) in Malaysia has been announced by Finance minister Lim Guan Eng, who confirmed the SST Bill will be passed in parliament in August.

This will lead to it being implemented on 1 September with Minister Eng announcing that the SST will have its rate set at 6% for services and 10% for goods. This is identical to the rate it was when it was replaced by the recently zero-rated Goods and Sales Tax in April 2015.

EU - ECOFIN meeting

13 July 2018 saw the latest European Union Economic and Financial Affairs Council (ECOFIN) meeting take place in which two VAT-related proposals were discussed. Those being the VAT reverse charge mechanism and reduced VAT for e-publications.

The first of the discussions related to a proposal for a Council directive which aims to allow the application of a generalised VAT reverse charge mechanism - moving the responsibility for the reporting of a VAT transaction from the seller to the buyer. This would apply to domestic transactions between businesses involving services or goods with an invoice exceeding €10,000. The aim is to help some member states that are particularly affected by VAT fraud, and do not have sufficient measures to combat it.

The second discussion surrounded the 'e-publications' proposal, which would allow member states to apply non-standard VAT rates to electronic publications and potentially align VAT rules between physical and electronic forms of publications. The draft proposal is part of the EU's wider effort to modernise VAT for the digital economy in the context of the EU's digital single market strategy.

Agreement was not reached on either matter, but it was felt that progress had been made since the last ECOFIN meeting, leading to hope of a possible agreement at the next meeting in February.

EU - VAT minimum rate

Responding to a proposal from the European Commission, the Council has adopted a directive making the 15% minimum standard rate a permanent feature of a new VAT system. The press release can be read here.

A 15% minimum standard rate, which eliminates the risk of distortions of competition, has been maintained on a provisional basis since VAT rules for the EU single market were first applied in 1993. It was last extended in May 2016 for two years, expiring on 31 December 2017.

Ultimately the proposal was adopted without controversy as no Member State had expressed an interest in lowering its standard rate below that threshold.

Netherlands - VAT rate increase

Following previous discussions of the Dutch government intending to overhaul and reform the income tax system, it has now been confirmed - subject to what is expected to be routine approval by the first and second Chamber - that the reduced VAT rate will increase from 6% to 9% in order to facilitate this.

The increase, which is part of the 2019 Tax Plan, will take effect from 1 January 2019.

A large number of goods and services are subject to the (increasing) reduced rate including:

  • admissions to theatres, cinemas and sports events
  • hotel accommodation
  • food and drink
  • books.

Switzerland - RTV corporate fee

From 1 January 2019, with the introduction of the new Radio and Television Law, the Radio and Television corporate fee (RTV) will no longer be dependent on whether or not a taxpayer possesses a broadcasting device.

From this date, Swiss and foreign companies registered for Swiss VAT with a yearly worldwide turnover exceeding CHF 500,000 will have to automatically pay the RTV. During the first year of collection, the RTV fee liability will be based on the total turnover from 2018.

There will be six tariff categories. The minimum fee is CHF 365 while the maximum RTV fee amounts to CHF 35'590.

Key takeaways

With tax compliance among one of the biggest challenges for international businesses, failure to adhere to changing local rules such as these poses a notable threat.

If you're doing business in Malaysia you will need to come up with a transition plan from GST to SST to make sure your accounting and reporting systems are in place. Similarly, the likely increase in the reduced VAT rate means businesses in the Netherlands will need to plan ahead for adjustments to their ERP systems and implement other changes in order to remain VAT compliant.

Our VAT services team can provide you with support in understanding the changing rules, and what they mean for your enterprise.

Talk to us today to find out how we can help.

Learn how our accounting and tax services help drive efficiency for our global clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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