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A Direct Look At Indirect Taxes

Kitty Miv, Editor
19 June, 2020

In this week's column, we will be taking a look at value added taxes, with an emphasis on measures being put in place to tackle the COVID-19 pandemic and its economic and social aftermath.

However, not all recent developments are Coronavirus-related, and we begin with the news that earlier this month, Chile began requiring overseas suppliers of electronic services to collect VAT on supplies to made to consumers in the country.

The new regime covers software provided as a service, video and music streaming services, digital media, certain gig economy activities, data storage services, certain intermediation services, and online advertising, and suppliers must now collect VAT at the headline rate of 19 percent regardless of whether they have a physical presence in Chile.

Meanwhile, in Germany, the much discussed (including in this column last week) fiscal stimulus package was approved by the Federal Cabinet, paving the way for a reduction in the standard rate of value-added tax from 19 to 16 percent from July 1 to December 31, 2020, with the reduced seven percent rate also cut, to five percent, during the same period.

Bulgaria has followed Germany's – previously unveiled – VAT reduction for the catering sector, with the Bulgarian Parliament had approved legislation temporarily reducing the rate of value-added tax in this area.

Under the measures, food served in catering outlets will be taxed at the nine percent reduced rate of VAT. However, alcoholic beverages served in restaurants will continue to be taxed at the 20 percent standard rate. This temporary regime will apply from July 1, 2020, until December 31, 2021.

Elsewhere in Europe, approval was given by the European Commission in relation to a VAT-related COVID-19 support scheme in place in Cyprus.

Under the Temporary State Aid Framework, the European Commission has approved a Cypriot aid plan allowing for the deferral of VAT payments by companies affected by the COVID-19 pandemic.

Cyprus had notified the Commission of a scheme to allow companies facing difficulties due to the COVID-19 outbreak to delay the payment of VAT due by April 10, May 10, and June 10, 2020. Under the scheme, no interest or penalties will be imposed on those companies, which pay the VAT due by November 10, 2020.

The Commission explained that the scheme will be accessible to companies of all sizes and in all sectors, with the exception of those sectors which continued to operate during the country's lockdown.

Finally, ending back where we began – thematically, if not in terms of location – Thailand's Cabinet has approved a legislative proposal to require foreign electronic services providers and foreign platforms to collect VAT on supplies to Thai consumers, with the draft legislation now tabled before the House of Representatives. According to the Thai authorities, the requirement to collect VAT will apply to those businesses whose turnover is greater than THB1.8m annually from supplies made to non-taxable persons.

Until next week!


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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