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VAT's All Folks...

Kitty Miv, Editor
11 September, 2020

As Ireland has now brought into force its much anticipated reduction to the standard VAT rate, indirect taxes seem like a good place to focus our attention this week.

The Republic has reduced its standard rate of VAT from 23 percent to 21 percent from September 1, 2020, with the reduction to be in place until February 28, 2021.

Commenting on the move, Finance Minister Paschal Donohoe explained that: "This temporary reduction in the standard rate of VAT cuts across a wide range of economic activity and as such there is a broad range of the types of businesses and traders who will benefit. Discretion in relation to the setting of prices charged will remain that of relevant businesses. However, it will help consumer confidence, benefit consumers, and generate economic activity if it was passed on to the final consumer."

However, Ireland is not the only country making moves in the area recently, with Turkey having temporarily lowered the rate of VAT on the supply of education and training services. Under the auspices of Presidential Decision No. 2913, education and training services will be subject to VAT at one percent in the period from September 1, 2020, to June 30, 2021, rather than facing their usual eight percent VAT rate.

In Finland, meanwhile, the authorities decided to cut themselves and Finnish taxpayers a break in light of the impact of COVID-19, announcing that plans to update the value-added tax return have been deferred.

The planned changes were intended to increase the amount of data that companies report on their VAT returns, to support the tax authority to tackle fraud.

The new form was due to be rolled out in 2022. However, the tax administration revealed that the plans have been put on hold (for an as yet undecided period) given the increased costs that companies would face in updating their tax software and the uncertain economic situation caused by the COVID-19 crisis.

On the opposite end of the spectrum, the UK Government has decided that now is the ideal time to consult on the direction of future policy reforms to the rules governing VAT groups, with a view to gathering the views of businesses that utilize VAT grouping provisions, and other interested parties, on how these affect them and the wider business environment.

According to the call for evidence, three key areas of VAT grouping will be under examination, namely: establishment provisions; a proposal for compulsory VAT grouping; and grouping eligibility criteria for businesses currently not in legislation, including limited partnerships.

The consultation has been sparked, at least in part, by rulings impacting on UK VAT group rules issued by the European Court of Justice in the past decade.

Finally this week, and staying with VAT matters with an European flavor, the Estonian authorities on September 4, 2020, announced that legislative amendments had been approved to introduce into domestic law the value-added tax changes affecting e-commerce that are to be rolled out across the European Union from July 2021.

The reforms, agreed by EU member states on March 12, 2019, are intended to simplify VAT rules for goods sold online and introduce new obligations on online marketplaces to require them to contribute in the fight against tax fraud.

Among other things, the amendments will abolish low-value consignment relief, which enables goods valued below EUR22 (USD25) to enter Estonia VAT-free.

The reforms also extend the scope of the mini one-stop shop (MOSS), introduced in 2015 to simplify VAT compliance for firms that faced new rules obligating them to collect VAT on business-to-consumer (B2C) supplies of broadcasting, telecommunications, and electronic (BTE) services based on the location of the consumer, rather than the supplier.

And in tax, as in politics, a week is a long time, so with that... 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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