I am Martin Lazaroff and I am the VAT Manager at SABRIX responsible for the international Content that makes sure that all of our clients are VAT rate current and compliant with no prejudice to their location and time zone of operation.
Professionally, I am a licensed CPA in the State of Colorado and a VAT specialist. In my previous positions I was a VAT Manager at Deloitte and Touche in Bulgaria, The Netherlands & Canada, as well as a Goods and Services ("GST") Auditor with the Canada Revenue Agency.
Here the idea is simple, i-Talk and u-Blog about EU VAT from EU policy perspective, individual Member States compliance perspective, and Thomson Reuters - SABRIX implementation perspective. I will also discuss Canadian indirect sales taxes.
According to the media an administrative court in Spain has nullified 5.1 billion EUR worth of VAT tax assessments sent out to taxpaying businesses from 2006 through 2008.
The 5.1 billion, EUR includes assessments and related penalties. Apparently, the agency based assessment on calendar years, when the law requires that it be done on a monthly or quarterly basis.
The 5.1 billion EUR will have to be returned to over 480,000 entities who were charged the tax. But the Treasury hopes to reassess using the required monthly and quarterly periods.
According to the media the Estonian government has approved the following draft amendments to the country’s VAT Act:
• VAT payers whose turnover does not exceed €200,000 would be entitled to use cash-basis VAT accounting; The amendment is based on EC Council decision 2009/1022 of December 15, 2009, which authorizes Estonia to apply a measure derogating from article 167 of EU VAT Directive (2006/112/EC).
• For anti-evasion purposes, taxation by reverse charge would be extended to the supply of waste metal and real estate.
• The special tax regime applicable to cross-border supplies of natural gas and electricity via network would also be extended to heating and cooling energy. Under the special tax regime, the place of supply of heating and cooling energy would be the place where the customer is established. This amendment would implement changes introduced to the EU VAT Directive by Council Directive 2009/162/EC.
If adopted, the amendments will enter into force on January 1, 2011.
It has been reported that Britain's tax authority will introduce reverse value-added tax (VAT) charges relating to carbon emissions trading from November 1, 2010, replacing a zero tax rate implemented last year to prevent fraud.
The zero VAT rate was put in place in July 2009 as an interim measure to halt rapidly escalating carousel fraud in spot trading of European Union carbon permits, called EUAs, HMRC said.
The new reverse charge will also apply to sales of two types of Kyoto Protocol carbon offsets called Certified Emissions Reductions (CERs) and Emissions Reduction Units (ERUs).
HMRC had been awaiting an EU-wide directive to provide a reverse charge option, which was finally adopted by member states in March.
In the UK, government ministers have advised professional representatives that they will make online filing of VAT returns compulsory for all businesses from 1 April 2012.
According to the reporting media, people who have a conscientious objection to using a computer will be able to continue filing paper returns and the CIOT has argued that some people with disabilities that prevent them using computers should also be exempted from the rule.
Obviously, there are a few issues to be finalized yet and I will keep you informed as the information becomes available.
According to numerous news sources the VAT rate in Poland will increase effective January 2011. Therefore, the value added rates published by the European commission remain current for now.
On 30 June 2010 when updating the information on the Romanian VAT rate in my blog I made the following statement: “I trust that other EU Member States may follow in the near future. I have my eye on the Czech Republic.”
I admit that at the time I did not have Poland in mind. However, I got this partially right in suggesting that other EU Member States may increase the VAT rate. Poland's prime minister is on record as saying that his government plans to raise the value-added tax by one percentage point to 23 percent as part of efforts to tackle the country's budget deficit. Therefore, it is highly likely that Poland will be the next EU Member State to use a hike in the indirect tax rates to battle its country’s deficit.
The European Court of Justice has found under case C 582/08 in favor of the United Kingdom in an action brought against it by the European Commission concerning the repayment of UK VAT to businesses outside the European Union. The decision will be a blow to the financial services and insurance sectors and means that the UK Government can deny claims for the repayment of UK VAT incurred by businesses established outside the European Union.
In particular this ruling is a setback for finance and insurance businesses established outside the EU that were hoping to make substantial VAT recovery. But it can also be viewed as a favorable treatment for the EU established financial services companies trading outside of the EU. I have a feeling this will not be the end of this issue.
To read about the case you can go to the official website of the EU Court of Justice or follow the link here:
The standard VAT rate in UK is currently 17.5 per cent but will be increased to 20 per cent on 4 January 2011. The change only applies to the standard VAT rate. There are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions. Any sales you make at these rates are unaffected by this change. We will include this change in the standard Thomson Reuters September 2010 Content release.
In the Official Journal of the European Union of 22 July 2010, the text of Council Directive 2010/45/EU of 13 July 2010, on VAT invoicing rules, was published. Member States have to bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 31 December 2012. Member States shall apply those provisions from 1 January 2013. For your convenience I am providing the web link to the published directive: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:189:0001:0008:EN:PDF
Happy readings and I will be interested in hearing your opinions.
Since the beginning of the year a number of Member States have seen changes in their VAT rates. The beginning of July was especially prolific. We have been informing you of those changes as they happen. However, the EU Commission has published the VAT rates applicable to Member States as of 1, July 2010 in a single document. I thought you might find it useful to have this document handy. To view the document please click on the link: “2010 - EU VAT rates at 1.7.2010”.
On 15 July 2010, the European Commission adopted a Directive proposal to postpone the deadline for the submission of VAT refund requests related to 2009 from 30 September 2010 until 31 March 2011. Under the new VAT refund Directive (2008/9/EC), starting January 1, 2010 taxable persons can request a refund of VAT incurred in another Member State via a web portal in their home Member State. However, because of Member States’ difficulties with launching their web portals and arising technical difficulties many taxable persons were unsuccessful in submitting their refund applications.
As mentioned in my blog earlier on 15 July 2010 at the meeting of the Economic and Finance ministers of European Union (ECOFIN), the decision and resolutions of the Council were approved and thereby confirmed Estonia’s adoption of the euro as of 1 January 2011. The EU Council also confirmed the official conversion rate from Estonian kroons to the euro. During the changeover Estonian kroons will be changed to euros at a rate of 1 euro = 15.6466 kroons, which means that the current exchange rate remains unchanged. Additionally, subject to some exceptions starting 1 July 2010 and until 30 June 2011 the prices of goods and services offered to consumers shall also be presented in kroons and euros.
In an article in the Financial Times’ electronic issue of July 15, 2010 Nikki Tait draws a connection between the EU Commission extension of the deadline for submitting 2009 company expenses from September 2010 to March 2011 and the failure of most EU Member States to comply with the Commission’s requirements to provide electronic means of submission of those expenses.
The article states that “A survey by the International VAT Association found that, by the electronic system’s January launch, only seven EU countries had fully working electronic refund systems. Fourteen either did not have working portals or only partially working ones, and it could not obtain information from a further six countries.” It goes on to say that “The association criticized the failure to conduct end-to-end testing of the IT system before it went live, and also the failure of countries to collaborate in building compatible portals – and cited Finland and Sweden as the only countries known to have worked together.”
The question now is will the extension by itself resolve the problem or should it be supplemented by stiff penalties imposed on non-compliant governments to be used to some extend in helping industries where companies have been extremely badly affected.
The ECOFIN Council which met on 13th of July has adopted a directive aimed at simplifying VAT invoicing requirements, in particular as regards electronic invoicing. The new directive sets out to ensure the acceptance by tax authorities of e-invoices under the same conditions as for paper invoices, and to remove legal obstacles to the transmission and storage of e-invoices. It also comprises measures to help tax authorities ensure that tax is paid so as to better tackle VAT fraud. These include establishing deadlines for the issuance of invoices, thus enabling speedier exchange of information on intra-EU supplies of goods and services.
Also, the Council has decided to allow Estonia to adopt the euro as its currency with effect from 1 January 2011.
To continue updating you on VAT rate changes in the EU, Romania is the latest EU state along with Portugal, Spain, Greece, Finland, and the UK that has decided on increasing its VAT rate. To comply with the conditions of the joint aid package from the International Monetary Fund, the European Commission, and the World Bank, effective July 1, 2010 the standard VAT rate will increase from 19% to 24%.
I trust that other EU Member States may follow in the near future. I have my eye on the Czech Republic. Do you think that there is a trend in increasing the VAT rates in the EU? Do you think that the EU will increase the upper limit of 25% in the next 24 months?
For most of us there are set dates of the year when we move our watches one hour forward or backwards when we go on Day Light Savings Time or revert back from it. Similarly, in Canada every year July 1st is traditionally celebrated with almost ubiquitous enthusiasm throughout the country as Canada Day. This year will not be different as some of us head up to Ottawa for the biggest party in the country. Those of us in Ontario and British Columbia who decide to stay home and do some shopping instead would be reminded of the new tax reality. Gone will be the provincial sales tax. However, consumers will have to pay GST/HST of 13% in Ontario and 12% in British Columbia on almost all products and services, instead. Consumers in Nova Scotia who are a little more familiar with the concept of GST/HST will have to pay a new rate of 15%, also. Consumers will have to make sure they have just enough money to cover the new tax at the register. Businesses on the other hand have to make sure that they account for the new requirements correctly and on a timely basis well in advance if they want to enjoy the celebrations. Like it or not Canada Day is also a GST/HST Day!
While the political debate over the pros and cons of the HST is being waged in British Columbia, it is becoming apparent that the HST will have an effect on Washington State’s revenue. An announcement from the Washington Department of Revenue on June 8, 2010 states that British Columbia residents will soon be entitled to an exemption from state and local sales taxes on merchandise. British Columbia residents will be able to get the exemption by showing their driver’s licenses. The new exemption for British Columbia residents is the result of two factors:
·the 1965 law meant to benefit Clark County merchants; and
·a change in the tax system in British Columbia.
The 1965 law says that people whose home states or provinces have a sales tax of 3 percent or less are entitled to a sales tax exemption when they shop in Washington. British Columbia's provincial sales tax is now 7 percent, and as of July 1, 2010 will become a component of the 12% HST rate. At least in this case, a value added tax is not viewed as a sales tax to the “benefit” of British Columbia residents. This will result in legal and interpretive arguments on what constitutes a sales tax. In my view what should be debated is tax fairness and the question of double taxation resulting from cross border commerce. The US and Canada have integrated their economies but have missed on opportunities to integrate indirect tax laws to the level of personal income tax to avoid double taxation specifically for consumers. Presently, where a resident of British Columbia buys taxable goods from a merchant in Washington State he/she also pays the sales tax and the GST and PST on return to British Columbia. Whatever the arguments in Washington State, effort should be made to avoid the double taxation of consumers. In addition, where a US resident shops in Canada there are mechanisms to recover the GST/HST on exit from Canada which is neither fair nor equitable as it lacks reciprocity.
The Council of the Economic and Finance Ministers (the “Council) of the 27 EU Member States has met in Luxembourg on Monday, June 6, 2010 and has agreed to establish Eurofisc - a “common operational structure” which would allow member states to coordinate “rapid action in the fight against cross border value added tax (VAT) fraud. On Wednesday, June 8, 2010 the Council made the following press release:
“The Council today reached political agreement on a draft regulation aimed at enabling the member states to step up their efforts in combating fraud with regard to value-added taxation (VAT).
The main innovation involves the creation of Eurofisc, a network of national officials to detect and combat new cases of cross-border VAT fraud.Combating VAT fraud represents a major challenge for the EU, as every year it costs member states billions of Euros in lost revenues. VAT fraud is often organized on a cross border basis, in particular so-called carrousel schemes where goods are traded amongst several operators in different member states without paying VAT to the tax authorities.
The Council has highlighted the need for a common approach, so as to make cooperation between tax administrations more effective and to give member states the means to combat
VAT fraud more effectively.The draft regulation, which recasts regulation 1798/2003, specifies the cases in which member states must exchange information spontaneously, the procedures for providing feedback on such information and situations in which member states must conduct multilateral controls.
The Eurofisc network, in which all member states will participate, will enable targeted and swift action to be taken in order to combat new and specific types of fraud. It will involve a multilateral early warning mechanism, and the coordination of both data exchange and the work of liaison officials in acting upon warnings received.
The regulation will be adopted without discussion at a forthcoming Council meeting, once the text has been finalized.”
In January of this year in a blog titled “One month into the VAT package” I informed of the new electronic procedure adopted by the EU Member States on January 1, 2010 on processing VAT reimbursement claims. This is what I wrote:
“Also, from 1 January 2010, the current procedure for reimbursement of VAT incurred by EU businesses in EU Member States where they are not established will be replaced by a new fully electronic procedure, thereby ensuring a quicker refund to claimants. The current paper-based procedure is slow, cumbersome, and costly. It also lacks in legal certainty. The new procedure will better facilitate businesses and improve the functioning of the internal market. A new feature is that businesses will be paid interest if Member States are late making refunds. Will all the requirements be applied uniformly in all EU Member States, will the procedure work, and will that lead to an increase in claims that were in many cases deemed to be not worth filing for?”
The International VAT Association (‘IVA”) that represents businesses and advisors involved in VAT worldwide recently provided the following assessment of how the EU VAT refund system is performing. As it addresses my questions I am providing the link to you:
I am Martin Lazaroff and I am the VAT Manager at SABRIX responsible for the international Content that makes sure that all of our clients are VAT rate current and compliant with no prejudice to their location and time zone of operation.
According to the media an administrative court in Spain has nullified 5.1 billion EUR worth of VAT tax assessments sent out to taxpaying businesses from 2006 through 2008.
According to the media the Estonian government has approved the following draft amendments to the country’s VAT Act:
In the UK, government ministers have advised professional representatives that they will make online filing of VAT returns compulsory for all businesses from 1 April 2012.
On 30 June 2010 when updating the information on the Romanian VAT rate in my blog I made the following statement: “I trust that other EU Member States may follow in the near future. I have my eye on the Czech Republic.”
To continue updating you on VAT rate changes in the EU, 
For most of us there are set dates of the year when we move our watches one hour forward or backwards when we go on Day Light Savings Time or revert back from it. Similarly, in Canada every year July 1st is traditionally celebrated with almost ubiquitous enthusiasm throughout the country as Canada Day. This year will not be different as some of us head up to Ottawa for the biggest party in the country. Those of us in Ontario and British Columbia who decide to stay home and do some shopping instead would be reminded of the new tax reality. Gone will be the provincial sales tax. However, consumers will have to pay GST/HST of 13% in Ontario and 12% in British Columbia on almost all products and services, instead. Consumers in Nova Scotia who are a little more familiar with the concept of GST/HST will have to pay a new rate of 15%, also. Consumers will have to make sure they have just enough money to cover the new tax at the register. Businesses on the other hand have to make sure that they account for the new requirements correctly and on a timely basis well in advance if they want to enjoy the celebrations. Like it or not Canada Day is also a GST/HST Day!
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