Worldwide: January VAT Roundup: Updates From The EU, Singapore And South Korea

Last Updated: 1 February 2019
Article by Rob Hutchinson

Foreign technology businesses in South Korea will need to assess whether their services are affected by VAT changes taking place in July. And if you are a business that supplies B2C digital services in Singapore, you could soon be subject to tax registration and local VAT filing requirements.

TMF Group's global tax team is pleased to bring you a round-up of some key VAT news and wider tax bulletins from December 2018 and January 2019.

Have questions or need more information about any of the below? Simply make an enquiry with us.

South Korea - VAT extended on B2C digital

The Korean National Assembly has passed amendments to the VAT Act that will extend the scope of the 10% VAT rate for offshore businesses that provide any of an increased range of B2C online services.

Under the new rules, which are set to come into force on 1 July 2019, online advertisements, cloud computing services and forms of online-to-offline businesses supplied by international technology companies will now be subject to 10% VAT. As a result, profits from cloud services by firms like Amazon Web Services, online ad revenues collected by YouTube and platform commissions earned by Airbnb are now subject to VAT.

Currently, multinational tech companies such as Google and Apple pay VAT on certain services such as app sales at Google Play or Apple App Store. But with the enforcement of the new law, all tech firms providing services in Korea will have to pay VAT.

Singapore - GST developments in 2018 Budget

Singapore's 2018 Budget GST measures were enacted through the Goods and Services Tax (Amendment) Act 2018. The main measures of the Act concern the collection of GST on imported digital services - such as movie and music streaming services and mobile apps - from non-resident suppliers that will take effect from 1 January 2020.

In general, foreign suppliers will be required to register and account for GST, at the end of the year 2019 or any subsequent calendar year where:

  • the total value of all taxable supplies, and supplies outside Singapore that would have been taxable supplies if made in Singapore, has exceeded SGD 1 million and
  • the total value of digital supplies to Singapore customers (B2C) has exceeded SGD 100,000.

Suppliers should also register where it is expected that those thresholds will be met in a 12-month period beginning from 1 January 2020.

Bahrain - online VAT registration launched

VAT came into force in Bahrain on 1 January 2019 and the Bahrain National Bureau of Taxation (NBT) has enabled online registration for the new tax. To register for VAT, taxpayers must first create an NBT profile, which involves the completion of an online form that includes taxpayer details, commercial registration details, financial information, registrant details and documentation.

Once approved, login details will be provided to access and submit the registration form. Once the submission is reviewed and approved by NBT, the VAT certificate will be available on the taxpayer's NBT profile.

The 2019 deadlines to register for VAT are:

  • 20 June 2019 for taxable persons generating or expected to generate between BHD 500,000 and BHD 5 million in annual supplies of goods and services
  • 20 December 2019 for taxable persons generating or expected to generate between BHD 37,500 and BHD 500,000 in annual supplies of goods and services.

Voluntary registration is also allowed for businesses generating over BHD 18,750 in annual supplies, providing them with an opportunity for input VAT recovery.

Non-resident businesses must register for VAT in Bahrain, regardless of the value of supplies, if they make supplies for which VAT is liable.

Looking for more information on VAT in Bahrain? Download our free Quick Guide.

India - simplified GST returns

India's Revenue Secretary Ajay Bhushan Pandey announced that the government is planning to implement new, simplified GST return filing requirements on 1 April 2019. The simplified requirements, which were approved by the GST Council in 2018, include the introduction of a single monthly return and the introduction of optional quarterly return filing, with monthly payment, for smaller businesses.

The GST system currently includes several different forms, including three standard monthly returns: Form GSTR-1 (return on outward supplies), Form GSTR-2 (return on inward supplies), and Form GSTR-3 (final monthly return). However, given the difficulties with the system, GST payers have been allowed to use a simplified GST return (Form GSTR-3B), while also required to file Form GSTR-1. This somewhat simplified approach continues to apply until the new simplified system is implemented.

Also of note is India's Press Information Bureau press release providing an overview of the GST rate reductions decided on by the GST Council during their 22 December 2018 meeting. A separate release was also published providing further information on services and certain clarifications.

EU - Directive on reverse charge mechanism

Council Directive (EU) 2018/2057 was published in the Official Journal of the European Union. The Directive provides for the generalised reverse charge mechanism, which allows Member States that are most severely affected by VAT fraud to temporarily apply a generalised reversal of VAT liability. A significant part of the rationale behind this is to address carousel fraud.

Member states are only allowed to use the generalised reverse charge mechanism for domestic supplies of goods and services above a threshold of €17,500 per transaction, and only up to 30 June 2022. To implement the reverse charge, application for approval must be made, and several conditions must be met by the member state.

As described in the Directive, carousel fraud finds notably its roots in the current exemption for intra-community supplies that allows for goods to be obtained VAT-free. Certain traders subsequently engage in tax fraud by not paying to the tax authorities the VAT received from their customers. Those customers, however, being in receipt of valid invoices, remain entitled to a tax deduction. The same goods can be supplied several times over by including again exempt intra-community supplies. Similar carousel fraud can also occur when services are supplied. By designating the taxable person to whom the goods or services are supplied as the person liable for payment of VAT, the derogation would remove the opportunity to engage in that form of tax fraud.

The Directive enters into force on the 20th day following its publication and applies until 30 June 2022.

Key takeaways

In South Korea, foreign technology businesses will need to assess whether their services are affected by the changes taking place in July 2019, and whether they need to take VAT registration steps.

If you are a business that supplies B2C digital services in Singapore, you could be subject to tax registration and local VAT filing requirements from 1 January 2020.

Meanwhile, should you be a non-resident business making supplies in Bahrain for which VAT is liable, you will need to register for VAT purposes there.

Our VAT services team and in-country tax experts 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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