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Digital and Indirect Taxes Dominate The Airwaves...

Kitty Miv, Editor
17 September, 2020

It's rare in this column that we cover similar ground two weeks in a row, but VAT seems to be uppermost in the tax policy toolkits of a number of governments still, and so we will continue to focus our attention on indirect tax matters this week, with an emphasis on all things digital.

In Germany, for instance, plans were announced in the draft Annual Tax Act 2020 to impose the VAT reverse charge mechanism on supplies of certain telecommunication services by resellers, following an increase in missing trader fraud related to the provision of voice over IP (VOIP) services.

According to the Annual Tax Act 2020, the fraud involving VOIP services typically centers on sales made by a German company to another Germany company that then resells the services to a foreign business. In the fraud scheme, the reseller does not remit the VAT collected to German authorities from the onward supply, while a refund may be sought by the first company in the supply chain.

Under the proposed change, from January 1, 2021, the recipient of the supply must account for the VAT due on the supply through its VAT return, instead of paying VAT to the supplier. The recipient may also recover that VAT amount as input tax, subject to the normal rules for claiming credit.

Things retained a distinctly digital flavour elsewhere as well, and in Ecuador, a new Resolution was recently released outlining obligations for taxpayers required to withhold value-added tax on supplies of automated digital services to the country.

Meanwhile, in Indonesia, the Government announced that a further 12 companies would be obliged to start collecting value-added tax on their supplies to Indonesian consumers from October 1, 2020, as part of the third phase of the roll-out of Indonesia's new digital VAT regime. The country is expanding coverage of the regime each month, starting with the largest industry players, to allow time for smaller businesses to prepare, and among the tech industry players shortly to be required to impose a 10% VAT on their Indonesian customers as part of this tranche are LinkedIn, McAfee, Microsoft, Skype, Twitter and Zoom.

And last but not least, in Bulgaria, the Government released for consultation (until October 11) a draft law to transpose into domestic legislation European Union e-commerce VAT reforms which are due to be introduced in 2021.

The e-commerce VAT package changes, include: requiring non-EU providers of all types of cross-border services to consumers to charge VAT and remit that VAT to the consumer's home state tax agency; mean that EU providers of services will need to charge VAT on all types of cross-border services to consumers and on intra-EU distance sales of goods; will abolish the low value consignment relief regime, and will expand the scope of the mini one-stop-shop (MOSS) reporting regime. The measures were originally due to be introduced on January 1, 2021, but given the disruption caused by the COVID-19 pandemic, the EU agreed to delay this deadline by six months to July 1, 2021.

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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