April 2016

The European Commission has today published its Action Plan on VAT. We will be reflecting on the comments made and providing our insight on this in the next few days. In summary the key features of the proposals are:

• Fundamental changes to the way cross-border retailers deal with their VAT compliance. Draft law is to be published by the end of 2016 to introduce a system where the retailer is registered in one member state and accounts for VAT at the rate in force in the other 27 member states on sales to customers in those countries. This is effectively an extension of the one-stop shop (MOSS) that applies to suppliers of electronic services and telecommunications;

• Removal of the low value consignment relief for non-EU suppliers of goods;

• Simplification for SMEs in respect of VAT compliance across the EU;

• A new set of VAT rules to be published to replace the existing rules (they were drafted in 1993 as transitional rules). The objective is to move all VAT determination to be based on a place of supply of destination;

• A set of measures to reduce the VAT gap (the difference between what the EU and member states believe is the amount of VAT that should be paid and what has actually been paid); and

• More freedom for member states to choose VAT rates.

Should you have any queries on the measures announced please contact Sean McGinness or Julie Park on +44(0)1962735350.

We understand that a large online selling platform has written to a number of retailers/traders and their agents requesting confirmation of their VAT number. It is likely that this is in response to the measures announced in the 2016 Budget to counter VAT avoidance and evasion that may have taken place through large online platforms. The measures would potentially make the online platforms jointly and severally liable for any VAT that should have been accounted for on the sale of products.

Should you or your clients receive any correspondence from online platforms regarding VAT registration and you are unsure how to deal with the request and/or need assistance with VAT registration please contact us on +44(0)1962 735 350.

It has recently been announced that the Gulf Cooperation Council (GCC) has agreed that its member states will introduce VAT from 1 January 2018.

The members of the GCC include Bahrain, Kuwait, Oman, Qatar, Saudia Arabia and the United Arab Emirates.

The rate is initially set at 5%, and similar to most VAT systems there will be a range of exemptions.  It is intended that certain foods will be exempt. Certain services, including education and healthcare, will also be exempt.  With rapid growth in the region continuing, the impact on construction and the various world events taking place over the next few years, including the 2022 World Cup in Qatar needs to be fully considered by businesses.

Whilst the implementation date is 1 January 2018, there is a long-stop option which requires full implementation by 1 January 2019. It is expected that further information on the detail of the rules will be available by mid 2016.

As with any introduction of a new tax there is a systems challenge for corporates in terms of how they capture the correct information for reporting and invoicing. Certain GCC member countries rely on cheques and post-dated cheques as the main instruments for carrying out large corporate transactions in certain industries.  Businesses will therefore need to fully understand the tax point rules and how to correctly book these transactions to ensure correct VAT reporting.

There are also a number of free zones in the GCC countries.  The impact of the new VAT rules and the interaction with the existing free zones regulations will have to be considered by businesses.

Please contact Sean McGinness on +44(0)1962735350 for further information.