Worldwide: VAT Roundup: October 2018

Last Updated: 16 November 2018
Article by TMF Group

From the e-invoicing grace period in Italy to the UK's 'Making Tax Digital' VAT deferment and Malaysia's foreign digital services tax. Catch up on some key tax updates from the past month.

TMF Group's global tax team is pleased to bring you a round-up of some key VAT news and wider tax bulletins. Have questions or need more information about any of the below? Simply make an enquiry with us.

Italy - e-invoicing concession period

With the 1 January 2019 introduction of mandatory e-invoicing reporting approaching, Decree no. 119 has provided a six-month concession period.

This means that until 1 July 2019, rather than submitting live invoices on the issue date, invoices do not have to be transmitted to the Sistema di Interscambio (SDI) portal until the 15th of the following month. If this is adhered to, there will be no penalty. If more time is required, the penalty will be reduced by 80% if the invoice is transmitted to the SDI by the 15th of the subsequent month. After this six-month period, invoices will need to be transmitted to the SDI within ten days of their issue date or sanctions will apply.

UK – Making Tax Digital VAT deferment

In line with the tax digitisation projects of countries worldwide, the United Kingdom's ' Making Tax Digital' (MTD) programme is designed to streamline tax filing and reporting processes for businesses and individuals. VAT registered businesses with a taxable turnover above the VAT threshold of £85,000 will be required to use the MTD service to keep records digitally and use software to submit their VAT returns from 1 April 2019.

However, Her Majesty's Revenue and Customs (HMRC) released a publication last month which announces that a small minority - 3.5% - of VAT registered businesses with more complex requirements will now have until 1 October 2019 before they are required to join the scheme. They are:

  • trusts
  • 'not for profit' organisations that are not set up as a company
  • VAT divisions
  • VAT groups
  • those public-sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts)
  • local authorities
  • public corporations
  • traders based overseas
  • those required to make payments on account and
  • annual accounting scheme users.

Oman - VAT is coming in September 2019

The government of Oman has reportedly announced its intent to implement its value added tax (VAT) regime with a standard rate of 5% effective 1 September 2019. Under an agreement among the Gulf Cooperation Council (GCC) member states, Oman is committed to introducing a VAT regime. 

GCC member states were to implement VAT from January 2018, although only Saudi Arabia and the United Arab Emirates met that deadline. Bahrain has recently approved its regime, which is to apply from 1 January 2019.

EU - VAT 'quick fixes'

On 2 October 2018, the European Council agreed on four adjustments to the EU's current VAT rules to fix specific issues. Pending introduction of the new VAT system, four short-term 'quick fixes' will be made regarding the VAT aspects of trade between the member states.

  • Call-off stock. The proposals provide for a simplified and uniform treatment for call-off stock arrangements, where a vendor transfers stock to a warehouse at the disposal of a known acquirer in another member state.
  • VAT identification number. To benefit from a VAT exemption for the intra-EU supply of goods, the identification number of the customer will become an additional condition.
  • Chain transactions. To enhance legal certainty in determining the VAT treatment of chain transactions, the proposals establish uniform criteria.
  • Proof of intra-EU supply. A common framework is proposed for the documentary evidence required to claim a VAT exemption for intra-EU supplies.

These adjustments, subject to ratification, will apply from 1 January 2020. The full press release can be read here.

Malaysia - Foreign digital services tax

The 2019 Malaysian Budget saw the announcement of the introduction - in 2020 - of a tax scheme specifically for online services imported by users. This includes software, music, videos, or any digital advertising provided to Malaysians. Malaysia is the second country in South East Asia after Singapore to introduce such a digital tax and the two schemes closely resemble each other

The tax is intended to level the playing field for local service providers of digital technology so they can fairly compete with foreign firms. Online service providers who meet certain criteria will have to register with Malaysia's Customs Department from 1 January 2020 to continue providing their offerings to Malaysian consumers.

The specifics of the planned digital tax scheme, including rates, have not yet been announced.

France - VAT recovery deadline ratified

In Decree no. 2018-865 France sets the deadline for taxable persons established in other EU member states to claim a refund of French VAT.

To benefit from the refund of VAT, the taxable person must send a refund request to the tax office via the electronic portal made available by the EU member state where the taxable person is established, and the application must be submitted no later than 30 September of the calendar year following the period to which it applies.

Although EU law provides that cross-border VAT refund claims must be filed by 30 September of the year following the refund period, until now the French Government had not transposed the relevant legal provision into their domestic legislation.

Key takeaways

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

Despite the new concession period, companies in Italy still need to continue with their efforts to connect with the SDI or to engage with a third-party software provider who can connect on their behalf. Businesses in Oman now have less than a year to prepare for the introduction of VAT and will need to assess the preparations they need to make. Meanwhile, most VAT-registered UK businesses now have less than six months to engage with MTD.

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

Contact 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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