Kitty Miv, Editor
12 September, 2019
Brexit is still too much of a hot potato to tackle with any degree of certainty (with tax and economic consequences potentially taking place across the board in the event of the no deal Brexit being sought by Eurosceptics, or very little immediate change to the status quo on the cards if the remain contingent wins out). So this week, we'll be looking at the somewhat safer issue of digital taxation... however, if anything substantive breaks through prorogation and purdah (should a general election be called) I promise that our loyal readers will be among the first to know!
In the meantime, on to steadier ground, and in early September, the Government of the Czech Republic received from the Ministry of Finance draft legislation for the introduction of a temporary digital services tax, which was first announced in April 2019.
According to the Finance Ministry, the scope of the tax is based largely on the European Commission's proposals for an temporary EU digital tax, which will apply to revenues from online advertising, the sale of user data, and intermediation services, by companies with a global turnover of EUR750m (USD825m) or more and realizing sales in the Czech Republic of at last CZK50m (USD2.1m) per year. The DST will only apply to revenue from intermediation services if the platform has in excess of 200,000 users, will be imposed on a calendar year period, and will be payable three months after the end of the tax year, the ministry said.
The Government expects the digital tax to be introduced in mid-2020 subject to parliamentary approval, the Ministry of Finance revealed.
Poland, meanwhile, is reported to have ditched its plans for the imposition of a digital tax, according to a recent comment by United States Vice President Mike Pence.
During a joint press conference in Warsaw with Polish President Andrzej Duda, Pence announced that the US is "deeply grateful that you rejected proposals for a digital service tax, which would have hampered trade between our two nations."
Although Poland's deputy Finance Minister reportedly said earlier this year that the Government would soon adopt legislation for a digital services tax, no formal proposals had been submitted to Parliament.
Portugal sought to issue guidance on the VAT treatment of virtual currencies this month, with the tax agency clarifying that the exchange of virtual currencies for fiat currency and vice versa should not be subject to value-added tax.
The agency has released a ruling (Case: No. 14436) at the request of a taxpayer on the subject, which referenced the European Court of Justice's ruling in Swedish Tax Agency v. David Hedqvist (Case C-264/14).
In its October 22, 2015, ruling, the ECJ ruled that taxpayers that exchange traditional currencies for units of the "bitcoin" virtual currency should be exempt from value-added tax.
Specifically, the ECJ said that "purchases" of bitcoin should fall under provisions in the EU VAT Directive that provide that member states must exempt, among other things, transactions relating to "currency, bank notes, and coins used as legal tender."
As well as confirming a VAT exemption for the exchange of virtual currencies for fiat currencies, the Portuguese ruling confirmed that the provision of virtual currencies in payment for goods and services is outside the scope of VAT. The underlying goods and services should be subject to VAT, if required, as standard.
Moving away from Europe, and New Zealand's Inland Revenue department was also in the guidance-issuing business, advising on virtual currencies and their use in employee share schemes.
Public Rulings Director Susan Price explained that, similar to the other rulings, the tax department is simply laying out the tax implications for when crypto-assets are used as remuneration, rather than sanctioning their use.
"As far as we're aware, there's no widespread use of cryptocurrencies as a form of remuneration, nor is there an increasing demand. Our guidance is mostly in response to queries from our customers who want to know how the use of crypto-assets can be applied to existing tax laws, so that's all we're providing here," she stated.
The new guidance states that when crypto-assets are issued to employees in the form of a "share" in the company that is issuing them they may be part of an employee share scheme package. The share could be created as part of an initial coin offering or some other sort of token-generating event, the Inland Revenue noted. The ruling explains how a crypto-asset can qualify as a share. However, the Inland Revenue considers that most assets will not have features of shares and so will fall outside of the employee share scheme rules.
And finally, last but by no means least, the Brazilian authorities have stipulated that virtual currency users, traders, and exchanges must disclose details of significant transactions for the first time.
The required information must be provided by completing an online form, or by submitting the required file, based on requirements set out in Interpretative Declaratory Act No. 5 of August 30, 2019. These filings are required for the first time by September 30, 2019, covering transactions that took place during August 2019.
The filings, which must now be filed each month, can be sent through the online e-CAC tax administration portal, and affect those individuals or legal entities resident in Brazil whose monthly transactions amount to or exceed BRL30,000 (USD7,290)
Until next week!
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