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This and VAT...

Kitty Miv, Editor
13 August, 2020

Over the past few weeks, our focus has mainly been on direct taxes: collecting them, maximizing them, and preventing the avoidance of them. That does not mean, however, that things have been quiet on the indirect tax front; far from it. And so it is to various recent VAT developments that we now turn.

First of all, we start with Bulgaria, which on July 30 approved legislation to further expand the scope of the nine percent reduced rate of value-added tax.

Under the changes, certain sports facilities, such as gyms; services provided by tour operators; and beer and wine served in restaurants and catering outlets will be taxed at the reduced nine percent VAT rate. These were previously taxed at the 20 percent standard rate.

The changes (which apply from August 1 to December 31) follow Parliament's approval, in June 2020, of a temporary reduction in VAT to nine percent for food consumed on the premises of restaurants and catering outlets, as well as supplies of publishing materials (including in electronic format) and certain children's products.

Moving on, we come to Greece, which recently announced VAT cuts in certain sectors. On July 31, Greece published Law 4714/2020 to lower the VAT rate applicable to sales of music manuscripts and tickets to sporting events.

Article 11 introduces a six percent reduced rate of VAT for music manuscripts, whether handwritten or printed, while Article 12 of the Law introduces this reduced rate of VAT for admission to sporting events temporarily from September 1, 2020, to June 30, 2021.

In Costa Rica meanwhile, the Government announced its decision to delay until October 1, 2020, the introduction of VAT on cross-border digital services.

On June 12, 2020, the Costa Rican Ministry of Finance had confirmed plans to introduce VAT at 13 percent on cross-border digital services rendered by foreign businesses to Costa Rican consumers from August 1. The move was designed to bring the country into line with the BEPS Action 1 recommendations of the OECD on tackling the tax issues of the digitalized economy.

Either digital services providers or payment processing firms are responsible for collecting and remitting VAT on services rendered to Costa Rican consumers. The delay, announced on July 31, is so that financial entities can finalize the necessary computer system changes, the Finance Ministry explained.

And finally, the authorities in Paraguay have made use of VAT measures to try to cushion the impact of COVID-19, enacting Decree No. 3881, which provides value-added tax relief for various services provided in pandemic-hit economic sectors.

The Decree provides for a temporary (between August 1, 2020 and June 30, 2021) concession for value-added tax registered persons whose primary or secondary economic activity consists of providing: accommodation services in hotels; restaurant services; catering for events; tourist packages for activities in Paraguay; or the rental of real estate to tourists. Under the measure, such businesses may charge 10 percent value-added tax on only 50 percent of the consideration received for standard-rated services, effectively halving the effective VAT rate for consumers.

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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