Need to catch up on what's happening in the world of VAT and wider tax updates? Here's a summary from our global tax team.
If you have questions or need more information on any of the below points, simply make an enquiry with us.
UAE - VAT Recovery
Further to our previous update, the Federal Tax Authority (FTA) in the United Arab Emirates has now published a comprehensive user guide to help foreign businesses and business visitors submit claims for a VAT refund.
The period of each refund claim is a calendar year (eg. 1 January 2018 - 31 December 2018). For 2018 calendar year claims, refunds can be made from 2 April 2019. The opening date for refund applications in subsequent calendar years will be 1 March. The FTA will only process refund applications for six months from the date businesses can first make a claim (ie. six months from 2 April 2019 for the 2018 calendar year).
Initially it will be necessary to create an eServices account with the FTA, which will then allow access to the refund form. As well as completion of the form, the following documents will be required:
- proof of incorporation in the country of establishment (such as a certificate of incorporation/registration with the competent authority)
- tax registration certificate with the relevant national tax administration
- if you do not have the right to fully recover any input tax, you will need to provide evidence from your tax administration which indicates the level of input tax you are eligible to recover on expenses
- the relevant tax invoices with proof of payment that you are claiming for refund - copy of the passport of the authorised signatory
- proof of authority of the authorised signator.
The FTA has also stated that original hard copies of all invoices (with proof of payment) must be sent along with your application. The proof of payment can be in the form of a receipt, stamp of invoice as paid with the supplier's details on the stamp or a bank/credit card statement (indicating the account name, account number and showing the relevant paid transaction). Soft copies of invoices should not be uploaded. The invoices must also be addressed to the name of the applicant (ie. name of the foreign business) and not just in the name of any employee.
Original hard copies of your certificate of incorporation/registration and your tax registration certificate or an equivalent attested hard copy of each must also be sent along with your application. All documents required must be submitted in Arabic or English (or attested translated documents).
The hard copies of both the invoices and certificates need to be received, along with a print out of the form and reference number, at the specified FTA address within one month of the refund application being submitted.
The guide also publishes an approved list of countries with reciprocal agreements from which businesses will be eligible to make a claim.
USA - California Sales Tax for remote sellers
On 25 April 2019, California Governor Gavin Newsom signed Assembly Bill (A.B.) 147 into law. It imposes a sales tax registration and collection obligation on remote sellers that exceed USD 500,000 in sales for delivery in California.
This makes California the latest US state to act following the landmark 2018 case – 'South Dakota vs Wayfair' – in which the US Supreme Court ruled that states can require remote sellers to collect sales tax even if they do not have a physical presence there.
It had been proposed that remote sellers would need to register and collect sales tax if they make annual sales of more than USD 100,000, or make at least 200 separate sales of taxable products or services - the recommendation made in the Wayfair case. However, A.B. 147 decreed that the threshold would be USD 500,000 in the current or preceding calendar year. This retroactively operates from 1 April 2019.
The legislation also stated that if certain conditions are met, the marketplace facilitator is considered the seller and retailer, meaning that it needs to collect and remit sales and use tax on California-based sales.
Marketplaces are defined to include either a physical or electronic place, including internet websites. The provision about marketplace facilitators is effective 1 October 2019.
This resembles legislation which has recently been introduced in a number of EU Member States, where there are now additional VAT obligations for the operators of online marketplaces and those that sell on them.
Greece and Lithuania - VAT rate reductions
The Greek parliament has approved legislation – proposed by Prime Minister Alexis Tsipras - to reduce the rate of VAT in certain sectors. The new rates became effective on 20 May 2019 and saw the following changes:
- a reduction in the rate for certain foodstuffs and food and drink (restaurant) services from 24% to 13%
- a reduction in the rate for domestic gas and electricity from 13% to 6%.
Meanwhile, members of the Lithuanian parliament are proposing to amend the VAT law in the country. If adopted, the standard rate of VAT would reduce from 21% to 18% with the amendments entering into force on 1 January 2020.
The move aims to boosting the economy and investments, and reduce prices for consumers.
European Commission - VAT Fraud tool
A new tool to address VAT fraud and help EU countries both clamp down on criminals and recoup significant funds has been launched. According to a press release from the European Commission, the new system will allow Member States to rapidly exchange and jointly process VAT data, leading to the earlier detection of suspicious networks.
The launch of the Transaction Network Analysis (TNA) tool comes alongside the recent focus on the huge costs of VAT fraud for public finances, with criminal gangs profiting at the expense of taxpayers. It is part of the Commission's efforts to put in place a modern and fraud-proof VAT system.
The TNA, developed through close collaboration between Member States and the Commission, will also allow much closer cooperation between the EU's network of anti-fraud experts ('Eurofisc') when it comes to jointly analysing information so that VAT carousel fraud can be detected and intercepted as fast and effectively as possible.
Norway - SAF-T confirmed
The Norwegian tax office has confirmed that the reporting of accounting information using the internationally accepted Standard Audit File for Tax (SAF-T) will become compulsory from January 2020.
SAF-T is a standard international format for the exchange of accounting data between taxpayers, tax authorities, and external auditors. In Norway, the standard was developed jointly by the business community, the accounting sector, and the Norwegian tax administration, based on a recommendation by the OECD. The standard specifies what accounting data is to be exchanged and the structure of the data.
The requirement will be applicable to any business with accounting obligations who use an electronic accounting system. Businesses with less than NOK 5 million (approx. EUR 512,000) in turnover are exempt from the requirement. However, if these businesses have accounting information that is electronically available, the requirement will apply to them.
You can find out more in this question and answer paper produced by the Norwegian tax office.
The clarifications to the VAT refund rules in the UAE mean that businesses wishing to recover VAT incurred there in 2018 have until 1 October to do so. While the reduction of the VAT rate in certain sectors means many businesses in Greece will need to adjust their ERP systems, whilst implementing other changes in order to remain VAT compliant.
And businesses both in Norway and abroad need to begin preparations for the introduction of SAF-T there in 2020.
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 operations.
Contact us today to find out how we can help.
Download the Global Business Complexity Index to discover which jurisdictions are the most demanding for firms to operate in.
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.