Offshore suppliers of low-value goods to New Zealand may need to register for and charge VAT, while new businesses in Ireland have two VAT registration options to consider.
Following is a summary of the key VAT and wider tax updates from the past month. If you have questions or need more information, simply make an enquiry with our global tax team.
New Zealand - GST for offshore B2C sellers
New Zealand Inland Revenue's Taxation Act 2019 (Annual Rates for 2019–20, GST Offshore Supplier Registration and Remedial Matters) received Royal assent and was enacted on 26 June 2019.
The main measures of the Act concern the collection of goods and services tax (GST) on low value imported goods. This means that with effect from 1 December 2019, offshore suppliers with annual supplies exceeding NZD 60,000 (approx. €35,500) are required to register, collect, and return New Zealand GST on goods valued at or below NZD 1,000 (approx. €590) when supplied to consumers in New Zealand.
GST on goods valued above NZD 1,000 will continue to be collected by Customs at the border, although offshore suppliers may elect to collect GST on goods valued above NZD 1,000, provided that 75% of the total value of their sales to New Zealand are items valued at less than that. This option is meant to reduce compliance costs by removing the need to distinguish between low and high value goods where sales of high value goods are relatively small.
As with many jurisdictions across the globe, the legislation has been introduced to ensure offshore suppliers are on a level playing field with domestic retailers. As previously reported, these changes were originally planned to come into effect on 1 October 2019, but offshore suppliers have been given extra time to adapt their IT and accounting systems. You can read more about the incoming requirements in this article by our local expert.
Ireland - domestic and EU VAT registration
Irish Revenue has announced that it is developing a two-tier VAT registration system for separate domestic and EU VAT registration. Under the system, you will be able to apply for a 'domestic-only' registration or an 'intra-EU' registration. This change will apply only to persons who applied for VAT registration after 17 June 2019.
'Domestic only' registration applies to goods and services supplied and received in the state. An intra-EU registration will facilitate intra-community acquisitions from, and reporting of intra-community supplies to, all EU member states including Ireland.
A simplified registration process will be available for domestic-only applicants (businesses who are not undertaking any intra-EU trade). If you register for domestic-only purposes and subsequently wish to engage in intra-EU trade, you may then apply for an intra-EU registration.
Revenue is currently updating internal systems to facilitate the new registration process. There will be updated Revenue Online Service (ROS) screens after 15 June 2019. Full functionality, including the accelerated response for domestic-only applications, is not likely to be available until mid-September 2019.
It should be noted that:
- all existing VAT registered customers are deemed to be intra-EU VAT registered. These customers do not need to contact Revenue regarding their registration
- where an application for intra-EU registration is approved by Revenue, the registration also covers domestic activity. In the case of intra-EU suppliers, the taxpayer will be automatically registered for VIES reporting obligations.
An eBrief has been published on related updates to the guidelines for VAT registration.
EU - Brexit preparation measures
The European Commission has published its fifth Brexit Preparedness communication in which it assesses the current Brexit preparation and contingency measures, particularly in light of the decision taken on 11 April by the European Council - at the request of and in agreement with the UK - to extend the Article 50 period to 31 October 2019.
Because of the continued uncertainty in the UK, a 'no-deal' scenario on 1 November 2019 remains a possible outcome. As such, since December 2017, the European Commission has been preparing for a 'no-deal' scenario. To date, the Commission has tabled 19 legislative proposals, 18 of which have been adopted by the European Parliament and Council, with agreement reached on the remaining proposal.
The Commission has also adopted 63 non-legislative acts and published 93 preparedness notices. Because of the extension of the Article 50 period, the Commission has examined all these measures to ensure that they continue to meet their intended objectives and concluded there is no need to amend any measures on substance and that they remain fit for purpose. No new measures are envisaged ahead of the revised withdrawal date. A full press release is available online.
As ever, it should be clarified that in a 'no-deal' scenario, the UK will become a third country without any transitional arrangements. All EU primary and secondary law will cease to apply to the UK from that moment onwards and there will be no transition period, as provided for in the Withdrawal Agreement.
TMF Group has examined the many implications and we encourage you to explore our Brexit Hub, where you'll find this article specifically focusing on the implications for cross-border VAT recovery between the UK and the EU.
Czech Republic - reverse charge derogation
The European Commission has issued a proposal for a Council Implementing Decision authorising the Czech Republic to apply the generalised reverse charge mechanism (GRCM) in a derogation from Article 193 of Directive 2006/112/EC.
On 20 December 2018, the Council adopted Directive (EU) 2018/2057 regarding the temporary application of a GRCM for transactions above a threshold of EUR 17,500 via an amendment to the VAT Directive (examined in a previous bulletin). This was in response to the concerns of certain member states that while a definitive VAT system is being developed, urgent and specific measures to combat carousel fraud are required in the meantime.
The adopted Directive allows member states – who meet certain defined criteria and upon their request – to be authorised to apply a temporary GRCM until 30 June 2022. Through letters registered with the Commission on 21 January 2019 and 22 March 2019, the Czech Republic requested such an authorisation and provided information intended to demonstrate that it fulfils the criteria. Consequently, the Czech Republic is authorised to apply the generalised reverse charge mechanism from 1 January 2020 to 30 June 2022.
The EU Council, acting unanimously on a proposal from the Commission, may authorise member states to apply special measures for derogation from that Directive to simplify the procedure for charging tax or to prevent certain types of tax evasion or avoidance.
- The Norwegian Tax Administration has announced that the application deadline for the refund of Norwegian VAT for the previous calendar year has been amended to 30 September. This is an extension from the previous deadline of 30 June. The change is effective immediately, meaning that VAT refund applications for 2018 can still be made until the later date.
- With effect from 1 July 2019, Lithuania introduced the option for smaller businesses to file VAT returns on a quarterly basis. The option is available for businesses whose sales in the previous year did not exceed €300,000. Where the option is not taken, the standard monthly return period continues to apply.
- Poland has confirmed that it will delay the planned mandatory split payment regime for companies involved in business-to-business (B2B) sales within certain sectors - those susceptible to VAT fraud - until January 2020.
- The Angolan government has reportedly agreed to a delay in the implementation of the countries new VAT regime to October 2019, although there were calls for a further delay to January 2020. The new regime, which includes a standard 14% rate, was initially due to begin on 1 July 2019 for large taxpayers and the import of goods, with a transition to a full implementation from 1 January 2021.
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With tax compliance among one of the biggest challenges for international businesses, failure to adhere to changing local rules poses a notable threat.
TMF Group's 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.
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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.