Inside Indirect Tax - KPMG Institutes Indirect Tax ... taxes on cross-border sales. ... The validity...

Inside Indirect TaxDecember 2017

About this Newsletter

Welcome to Inside Indirect Taxmdasha publication from KPMGs US Indirect Tax practice focusing on global indirect tax changes and trends from a US perspective Inside Indirect Tax is produced on a monthly basis as developments occur We look forward to hearing your feedback to help us in providing you with the most relevant information to your business

Announcement

OECD Practical Guide on VATGST Collection on Cross-Border Sales

On October 24 2017 the Organization for Economic Cooperation and Development (OECD) released a new implementation guidance to promote the effective collection of consumption taxes on cross-border sales The guidance is intended to support the consistent implementation of internationally agreed-upon standards for the treatment of value added tax (VAT) for cross-border trade particularly the digital economy The guidance focuses on the implementation of the recommended approaches included in the final report under the Base erosion and profit shifting (BEPS) Action 1 report addressing the tax challenges of the digital economy These recommended approaches have already been successfully implemented by a large number of countries The implementation guidance builds on approaches deployed by jurisdictions that require foreign vendors to register and collect VAT on cross-border business-to-consumer (B2C) sales of services The OECD reported that early data on the impact of the recommended solutions is ldquovery promisingrdquo and that the EU (the first adopter of these collection mechanisms) identified the total VAT revenue declared via its compliance regime (the Mini One Stop Shop or MOSS) as in excess of EUR 3 billion ($35 billion) in its first year of operation The MOSS has also played an important role in reducing the compliance burden of businesses that use the regime Approximately 70 percent of the total cross-border B2C sales of services and intangibles that are in scope of this regime are captured by this compliance regime For more information please click here

Global Rate Changes

mdash Indonesia Effective August 16 2017 Indonesia exempts 11 types of basic necessities from VAT including rice and grain corn sago soybean table salt meat eggs milk fruits vegetables tubers spices and sugar To read a report prepared by the KPMG International member firm in Indonesia please click here

copy 2017 KPMG LLP a Delaware limited liability partnership and the US member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved NDPPS 635696

mdash Lebanon Effective October 1 2017 Lebanon increased its standard VAT rate from 10 percent to 11 percent

The Americas

United States Mississippi Introduces Economic Nexus Standard for Remote Sellers

The Mississippi Department of Revenue recently finalized a new regulation that adopts an economic nexus standard for sales and use tax purposes The rule requires sellers lacking a physical presence in Mississippi to collect and remit use tax on sales of tangible personal property and digital goods if they have a substantial economic presence in in the state Under the rule sellers are considered to have a substantial economic presence if they purposefully or systematically exploit the Mississippi market and have made sales into the state that exceed $250000 during the prior twelve months A nonexclusive list of activities that constitute ldquopurposefulrdquo or ldquosystematicrdquo exploitation includes but is not limited to advertising to or targeting Mississippi customers through various means such as emails texts online banners and apps The rule becomes effective on December 1 2017 and applies to all transactions involving the sale of tangible personal property or digital goods occurring on or after that date However sellers remain liable for any tax collected but not remitted before December 1

Brazil ICMS Liability on Sale of Software in State of Satildeo Paulo Clarified

On September 21 2017 the tax authority of the State of Satildeo Paulo of Brazil issued guidance CAT 42017 in which it held that mass-produced electronic software or software programs are subject to the state value added tax ICMS regardless of how the software is transferred and sold to customers ICMS is due on the import of products and on the physical movement of goods including electricity ICMS also applies on interstate and inter-municipal transportation services and communications services In addition ICMS applies to the resale of products in the domestic market and when products are physically removed from a manufacturing facility As a consequence of the guidance the sale of software whether physically distributed downloaded streamed transmitted accessed through the cloud or otherwise transferred will be subject to ICMS To read a report (in Portuguese) prepared by the KPMG International member firm in Brazil please click here

Brazil State Representatives Agree on Application of ICMS on Digital Goods

On October 5 2017 the National Council of Treasury Policy (CONFAZ) which is composed by a representative of each state and a representative of the federal government approved Convecircnio ICMS 1062017 (the Agreement) relating to the ICMS collection procedure relating to digital goods and


merchandise traded through electronic data transfer effective April 1 2018 The agreement is not binding on the states until a state effectively implements the agreement into local legislation

The Agreement clarifies that the person liable to collect ICMS on sales of digital goods is the legal entity that owns the website or electronic platform that sells or makes available the digital goodsmerchandise The Agreement further allows the states to attribute the responsibility for collection to third parties namely (1) the person that makes the offer sale or delivery of the merchandise by virtue of a marketing contract (2) the financial intermediary including the credit card administrator or other means of payment (3) the purchaser of the digital goods when the taxpayer or responsible person is not registered in the State of destination (4) the debit card administrator or the financial intermediary responsible for the exchange in the import operations As a consequence the seller may be liable to register for ICMS purposes in the state where the customer is established However such a requirement would not be applicable to imports of digital goods in which case the financial intermediary would be liable to collect the ICMS

The validity of the Agreement might be subject to constitutional challenges as only a federal complementary law can resolve a conflict between the states and the municipalities over who can tax a particular transaction In this respect it should be highlighted that there are decisions that have established that the municipal services tax (ISS) should be charged on custom software (ie customized computer programs) while ICMS should be charged on the sale of computer software and programs that are not customized (ie canned software) Moreover the supreme court of Brazil recently held that computer programs provided on physical property (CD-ROM) are subject to ICMS whereas computer programs provided digitally are subject to ISS To read a report (in Portuguese) prepared by the KPMG International member firm in Brazil please click here

Brazil Municipalities of Rio de Janeiro and Satildeo Paulo Expand Scope of Service Tax to Electronic Services

On October 16 2017 the city of Rio de Janeiro published Law 62632017 and on November 15 2017 the city of Satildeo Paulo published Law No 167572017 Both laws added new services to the list of services subject to the municipal service tax (ISS) Recall Complementary Law 157 published on December 30 2016 introduced a number of changes to the levy of ISS principally widening the types of services subject to ISS In this context Law 62632017 specifically adds the following activities to the list of services subject to ISS in the municipality of Rio de Janeiro effective January 16 2017

mdash ldquostreaming which includes the provision of audio video image and text content via the internet without any definitive assignment of the content (item 109) at a 2 percent rate

mdash advertising which consists on inserting texts images drawings and other marketing and merchandise contents in any media (except books newspapers journals and through broadcasting services and free of charge reception of images and sounds) (item 1724) at a 3 percent rate


mdash processing storage or hosting of data texts images videos electronic pages applications and information systems among other formats and similar (item 103) at a 5 percent rate and

mdash development of computer programs including electronic games regardless of the constructive architecture of the machine on which the program will run including tablets smartphones and similar (item 104) at a 5 percent rate

For the city of Satildeo Paulo Law No 167572017 expands the scope of taxable services subject to ISS to the same service (ie items 109 1724 103 and 104) at a rate of 29 percent Law 16757 expressly states that the amendments referring to items 103 and 104 will be in force 90 days after the date of its publication However it is worth noting that there is no express provision determining that the amendments referring to items 109 and 1724 should come into force only 90 days after the publication of the law Thus based on the wording of Law 16757 it seems that the changes to the referred items (109 and 1724) should become effective immediately Such a provision is subject to discussion since it seems to infringe upon the constitutional principle of the 90-day holding period before amendments come into force Please click here to read a report prepared by the KPMG International member firm in Brazil on the Rio de Janeiro changes and here for a report on the Satildeo Paulo changes

Canada Update on Proposed Amendments to GSTHST Law

On December 14 2017 Canada announced that the Budget Implementation Act 2017 No 2 received Royal Assent The Act incorporates many previously proposed amendments to the goods and services tax (GST) and harmonized sales tax (HST) provisions included in the draft legislation released earlier this year including changes to pension plan rules and drop-shipment rules (For KPMGrsquos previous discussion on the draft proposed amendments please click here) However the Act does not include the proposed changes related to general partners of investment limited partnerships and the expansion of the application of the selected listed financial institution (SLFI) rules to investment limited partnerships Also the bill Act does not include any of the proposed changes to the GSTHST SLFI regulations The changes included in the Act affect a wide range of businesses including (1) public service entities including charities and qualifying non-profit organizations (2) some SLFIs (3) employers that offer registered pension plans to their employees pension entities and master pension entities and (4) businesses that sell goods and services to non-residents subject to the drop-shipment rules

In particular the changes to the drop-shipment rules may affect US businesses that are involved in drop shipment sales in Canada The Act clarifies certain aspects of the rules add new requirements and broaden the current rules to include additional circumstances where a drop-shipment certificate may be issued Thus the changes to the drop-shipment rules could potentially affect the scope of the GSTHST relief that may be available In examining the changes and their effective dates businesses should (1) review if any of their transactions with non-residents may benefit from the drop-shipment rules (2) determine whether any of the proposed


changes affect their tax obligations as well as their current drop-shipment certificates (3) review the drop-shipment certificates they have accepted or issued to ensure that the transactions covered by the certificates meet the new requirements and (4) review the certificates to determine if they need to be updated in light of the changes To read two reports prepared by the KPMG International member firm in Canada please click here and here

Colombia Overview of Recently Published VAT Guidance

On September 15 2017 Colombia published Decree 1515 of 2017 which exempts from VAT the sale of smart devices (mobile phones and tablets) not exceeding 22 Tax Value Units (TVUs)

On September 25 2017 Colombia published Decree 1564 which exempts from VAT the sale of equipment for the construction installation assembly and operation of systems for environmental control and supervision which is necessary for complying with the environmental regulations Moreover the Decree exempts from VAT the import of machinery and equipment for processing litter According to the Decree the National Agency of Environmental Licenses is the competent authority for approving or rejecting the requests for certifications required for applying the VAT exemption

Finally the Colombian tax authority recently published Ruling 673 of 2017 in which it held that software licensing is subject to VAT at the standard rate (currently 19 percent) For software licensing agreements that include ancillary services such as software updates and maintenance the provision of such services does not change the principal object of the software licensing agreement Thus a software licensing agreement cannot be transformed into a VAT exempt software maintenance agreement or a remote maintenance service agreement by the mere fact that it provides for software updates and maintenance

Source Colombia ndash VAT exemption on smart devices ndash decree published (20 Sep 2017) News IBFD Colombia ndash VAT exemption for equipment for environmental control and supervision systems (27 Sep 2017) News IBFD Colombia ndash National Tax Authority pronounces on VAT on software licensing (27 Sep 2017) News IBFD

Mexico Tax Incentives and Delimitation of Special Economic Zones

On September 29 2017 Mexico released three decrees that contain tax benefits and incentives including VAT and customs duties that will be granted to administrators and investors authorized to carry on activities in the special economic zones (SEZ) of Chiapas Port Coatzacoalcos and Lazaro Cardenas provided certain requirements are met According to the decrees effective September 30 2017 the following transactions are subject to VAT at zero percent (1) the alienation of goods made by resident individuals or companies located outside the SEZ to administrators or investors located within the SEZ (2) services provided by resident individuals or companies located outside the SEZ to administrators or investors located within the SEZ (3) the temporary use or enjoyment of tangible goods granted by resident individuals or companies located outside the SEZ to administrators or investors located within the SEZ Moreover goods introduced from abroad


within the SEZ as well as services provided by non-residents are not considered imports for VAT purposes The Decrees further state that activities subject to VAT under the VAT Law carried on within the SEZ are not subject to VAT As a consequence individuals and companies carrying on those activities within the SEZ are not considered VAT taxpayers for those activities Moreover the transfer of goods between SEZs by an administrator or an investor with establishments located in two or more SEZ are not subject to VAT Finally goods introduced into the SEZs for a limited period are not subject to customs duties

Source Tax incentives and delimitation of Special Economic Zones ndash published (October 4 2017) News IBFD

Europe Middle East Africa (EMA)

European Union Import VAT Refunds and Evidence of Imported Goods

On September 21 2017 the Court of Justice of the European Union (ECJ) published its judgment in SMS group GmbH Case C-44116 regarding whether a VAT refund request submitted by a nonresident for import VAT can be denied on the grounds that at the time of importation the contract in connection with which the import was performed was suspended In the case at hand the taxpayer a company established in Germany sold and erected steel processing systems and had entered into an agreement with an Austrian company for the construction of a pipe welding system in Russia In preparation the taxpayer ordered equipment from Turkey which were then imported into Romania At the time of importation the contract was suspended following the purchaserrsquos failure to make further agreed-upon payments The goods were stored in Romania until the contract was permanently cancelled The taxpayer submitted a VAT refund claim under the Eighth Directive the repayment mechanism for businesses from other EU Member States allowing them to claim VAT incurred in Member State they are not established in The Romanian tax authority denied the claim arguing that following the cancellation of the contract the goods were worthless and sold for scrap but no evidence was produced as to where they ended up

The ECJ noted that the Eighth Directive is the counterpart of a personrsquos right to recover VAT in its own Member State The ECJ then set up a three-stage check to determine whether an unregistered non-resident taxpayer is entitled to a VAT refund First it should be determined that the taxpayer did not have any establishment in the Member State of refund Second the taxpayer should not perform any sales that are sourced to the Member State of refund Third it should be determined whether the entity requesting the refund acted as a taxpayer in connection with the transaction regarding which the refund is requested With respect to the last point


the ECJ notes that the taxpayer performed the import of goods in view of a subsequent exportation which is an activity that gives a right to recover VAT The ECJ therefore concluded that the taxpayer was entitled to claim the import VAT Even though the contract was suspended and subsequently cancelled the taxpayer had met the conditions for recovery at the time of importation The Member State would only have the right to refuse recovery where there was objective evidence of abuse or fraud

Source PT ECJ September 21 2017 Case C-44116 SMS group GmbH v Direcţia Generală Regională a Finanțelor Publice a Municipiului BucureștiECJ Case Law IBFD

European Union Conditions for Zero-Rating Shipping Services in Relation to Imports Clarified

On October 4 2017 the ECJ published its judgment in Federal Express Europe Inc Case C-27316 regarding whether shipping services related to the import of goods can be zero-rated In the case at hand the taxpayer received international consignments subject to the VAT exemption for consignments of negligible value and it subsequently delivered them to recipients in Italy The taxpayer did not charge Italian VAT on those shipping services because it held the view that the value of these services were included in the taxable amount of the imported consignments The Italian tax authority did not agree with taxpayerrsquos view that the shipping services were subject to the VAT zero rate because according to the Italian national legislation the application of the VAT zero rate to shipping services related to the importation of goods was not only subject to the condition that the value of these services was included in the taxable amount of the imported goods but also to the condition that these costs were actually subject to VAT at the customs stage However the importation concerned consignments of negligible value the importation of the goods was VAT exempt As such although the value of the shipping services was included in the taxable amount of the imported goods they were not actually subject to VAT Therefore according to the Italian tax authorities the VAT zero rate for services related to the importation of goods could not be applied

The ECJ stated that each transaction is normally regarded as distinct and independent for VAT purposes However in some cases several formally distinct services are considered to be a single transaction when they are not independent In this regard the provisions of the EU VAT Directive make sure that the treatment of the ancillary service (ie the shipping services) follows the treatment of the primary service (ie the importation of the consignments) Therefore the provision of ancillary services such as the shipping services at hand must also be zero rated insofar as their value is included in the taxable amount of the import transaction The requirement that these services were actually subject to VAT would negate the effectiveness of the VAT zero rate for services related to the importation of goods of which the value is included in the taxable amount of the imported goods This view is also underlined by the objective of the VAT zero rate being the administrative simplification of the application of VAT and not as the Italian tax authorities stated to avoid situations of double taxation The ECJ thus held that the EU


VAT Directive precludes a national legislation such as that at issue in the main proceedings which requires for the application of an exemption from VAT for ancillary services including shipping services not only that their value is included in the taxable amount but also that value added tax has in fact been charged on those services at the customs stage at the time of importation

Source PT ECJ October 4 2017 Case C-27316 Agenzia delle Entrate v Federal Express Europe Inc ECJ Case Law IBFD

European Union VAT Treatment of Leasing Clarified

On October 4 2017 the ECJ published its judgment in Mercedes Benz Financial Services UK Ltd Case C-27316 regarding whether leasing agreements with an option to purchase in return for payment of a substantial amount qualify as sales of goods In the case at hand a UK company offered financial products related to the use and acquisition of vehicles including a mixed vehicle use agreement Under the agreement the lessee had the option to purchase the vehicle at the end of the lease term subject to payment of a final amount corresponding to the mean anticipated value of the vehicle at the time of purchase The sum of previous payments corresponded to the remainder of the vehicle price including financing costs The UK tax authority considered that the agreement constituted a sale of goods and not a sale of services In its earlier Opinion the ECJrsquos Advocate General (AG) proposed that a leasing agreement constitutes a sale of goods where it provides for transfer of the ownership of the leased asset to the lessee by the end of the lease or it provides that ownership of the leased asset may be transferred to the lessee by way of a unilateral declaration of intent by the lessee and the sum of the installments payable under the agreement is virtually equivalent to the purchase price of the leased asset including financing costs

The ECJ preliminarily pointed out that the transactions carried out under the contracts at issue may be referred to as finance leases Based on previous ECJ cases the key criteria to take into account are whether the ownership is transferred at the expiry of the contract and whether the lease payments are identical to the market value of the leased goods However even if the transaction can be classified as a finance lease this still does not determine whether the transaction qualifies as a sale of goods for VAT purposes To determine this two conditions need to be satisfied First the agreement needs to expressly provide for the transfer of ownership a condition which is fulfilled if it contains an option to purchase the leased assets Second it should be clear from the terms that the ownership of the goods in question is intended to be acquired automatically If the agreement contains an option to purchase the automatic transfer of ownership needs to be considered in light of the foreseeable performance of the agreement Consequently even if under the contractual terms the lessee may decide not to acquire the goods the automatic transfer of ownership should be considered to exist if the only economically rational choice for the lessee is to opt for purchase According to the ECJ if the contractual instalments correspond to the market value of the goods in question (including the costs of financing) and the lessee is not required to pay a substantial additional sum to obtain ownership of the goods


it should be assumed that the lesseersquos only economically rational choice is to buy the goods Therefore the ECJ held that a sale of goods for VAT purposes should include a leasing contract with an option to purchase if it can be inferred from the financial terms of the contract that exercising the option appears to be the only economically rational choice that the lessee will be able to make at the appropriate time if the contract is performed for its full term which it is for the national court to ascertain

Source PT ECJ October 4 2017 Case C-16416 Commissioners for Her Majestys Revenue amp Customs v Mercedes Benz Financial Services UK Ltd ECJ Case Law IBFD

European Union Lease Termination Constitutes Price Reduction for VAT Purposes

On October 12 2017 the ECJ published its judgment in Lombard Ingatlan Liacutezing Zrt Case C-40416 regarding whether an early financial lease termination constitutes price reduction resulting in adjustment of the VAT amount paid to the tax authority In the case at hand a Hungarian company concluded three financial leasing agreements with definite transfer of ownership concerning various immovable property (in April 2006 February 2007 and May 2008) As the leasing agreements were considered to be sales of goods Lombard accounted for the VAT due on all of the leasing instalments at the moment of transfer of ownership of the assets However as a consequence of partial non-payment of the amounts payable by the lessees Lombard terminated the leasing agreements and issued corrected invoices reducing the taxable amount This reduction was accounted for by deducting the resulting shortfall from the VAT payable in subsequent periods (February March and May 2011) However the Hungarian tax authority did not agree with the taxpayerrsquos position and assessed the taxpayer for a VAT shortfall

The ECJ observed that it has previously found that the EU VAT Directive requires member states to reduce the taxable amount and the amount of VAT payable whenever consideration has not been received by the taxable person following the conclusion of a transaction The concepts of ldquocancellationrdquo and ldquorefusalrdquo in the EU VAT Directive must be interpreted as including the situation in which under a financial leasing agreement with definite transfer of ownership the lessor may no longer claim payment of the leasing installment from the lessee because the lessor has terminated the agreement owing to breach of contract by the lessee Therefore the ECJ held that the early termination of property lease agreements for nonpayment constitute price reductions after a lease has taken place and therefore Hungary must allow a company to correct its prior VAT invoices to reduce the tax due on the lease transactions

Source Tax notes Hungary Must Allow Corrected VAT to Account for Terminated Leases CJEU Finds (October 13 2017)

European Union New Rules on Cross-Border Sales of Goods and Services Adopted

On December 5 2017 the Economic and Financial Affairs Council of the EU adopted the e-commerce VAT package (one Directive and two Regulations) which introduces a series of measures to improve how VAT works for online companies in the EU


Effective January 1 2019 the package will simplify VAT rules for EU start-ups micro-businesses and SMEs selling digital services to consumers online in other EU Member States VAT on cross-border sales under EUR 10000 ($11800) a year will be handled according to the rules of the home country of the SME Moreover EU SMEs will benefit from simpler procedures for cross-border sales of up to EUR 100000 ($118000) annually

Moreover effective January 1 2021 the package will amend the rules applicable to sales of goods to final consumers (B2C) made by EU and non-EU businesses across the EU With respect to B2C sales of goods within the EU the one-stop-shop regime already in place for sales of digital services and other services will be extended to distance sales of goods While this will avoid the requirement for some online sellers to have multiple VAT registrations it will however require more businesses to charge VAT on distance sales of goods based on the location of their customer This is because current national registration thresholds for distance sales of goods (in most cases amounting to EUR 35000 ($41300) or EUR 100000) will be reduced by a new common threshold of EUR 10000 for all sales within the EU but outside of the home country With respect to B2C sales of goods made by vendors established outside the EU the existing relief from VAT on consignments imported into the EU from outside the EU with a value of less than EUR 22 ($26) will be abolished in 2021 However where distance sales of goods imported into the EU are facilitated by an electronic marketplace including platforms or portals and have an intrinsic value of EUR 150 ($180) or below the marketplace operator will be liable to pay the VAT in the EU country where the customer is located Where the EUR 150 threshold is exceeded a full customs declaration will still be required Moreover online marketplaces are held responsible for ensuring VAT is collected on sales on their platforms that are made by companies in non-EU countries to EU consumers This includes sales of goods that are already being stored by non-EU companies in warehouses (so-called ldquofulfilment centersrdquo) within the EU which can often be used to sell goods VAT free to consumers in the EU

While 2021 may seem some way off businesses involved in or which facilitate B2C sales of goods to consumers in the EU should begin to consider the implications of these measures for their business Perhaps more urgently however the coming months will be critical for engaging with the European Commission and governments on the development of detailed implementing regulations To read a report prepared by the KPMG International member firm in Belgium please click here

Germany Guidance on the VAT Treatment of Cross-Border Consignment Stock Published

On October 10 2017 the German Ministry of Finance issued guidance (III C 3 S 7103-a1510001) in which it changes its position on the VAT treatment of cross-border consignment stock Under the previous guidance the German Ministry of Finance considered movements of goods from a EU Member State into a German consignment stock to be an intra-Community movement within the own business As a result the foreign trader was required to register for VAT purposes in Germany However the German


federal tax court (BFH) did not follow this approach Depending on the set-up of the contract and the specific execution the BFH considered that there is no VAT registration obligation

Under the new guidance the tax authority will consider that the nonresident performs an intra-EU dispatch of goods if the customer was known before the goods are dispatched to Germany and if the goods were bindingly ordered or paid at that point in time In addition the consignment stock must have been set up on the initiative of the customer the customer must have an unlimited access right to the goods and the goods may only be temporarily stored for a certain period of time (a few days or weeks) The new guidance should further affect the VAT treatment of consignment stocks in Germany by vendors established outside the EU Under the previous guidance the foreign vendor was required to register for VAT in Germany even in situations where the customer was the importer of the goods into Germany Based on the new guidance the vendor would thus not perform a taxable sale in Germany In addition the new guidance applies to sales of goods from countries outside the EU through a consignment stock in Germany if the purchaser is liable to import VAT Finally the guidance clarifies that transactions performed before January 1 2018 will not be challenged if the vendor follows the previous VAT guidance To read a report prepared by the KPMG International member firm in Germany please click here

Italy Proposed Amendments to the VAT Law

Effective January 1 2018 the split-payment regime will be extended to sales of goods and services rendered to additional categories of public entities (such as public economic entities special companies foundations etc) and of their subsidiaries Non-Italian corporations listed on FTSE MIB Italian Stock Exchange are subject to the split-payment regime only if they are registered for Italian VAT purposes To read a report prepared by the KPMG International member firm in Italy please click here

The government of Italy recently presented the Budget for 2018 which if adopted would amend the VAT Law The Budget proposes to gradually increase the VAT rates effective January 1 2019 as follows

mdash The reduced VAT rate would increase from 10 percent to 115 percent effective January 1 2019 and from 115 percent to 13 percent effective January 1 2020

mdash The standard VAT rate would increase from 22 percent to 242 percent effective January 1 2019 from 242 percent to 249 percent effective January 1 2020 and from 249 percent to 25 percent effective January 1 2021

Moreover the Budget would require all taxpayers established in Italy to issue e-invoices for business to business transactions effective January 1 2019 E-invoices would have to be issued through the ldquoSistema di Interscambiordquo system (ldquoSdIrdquo) which is the current platform used to transmit e-invoices to public bodies and which will allow the Italian tax authority to automatically collect the details of e-invoices Moreover e-invoices would need to be issued


in the ldquoFatturaPArdquo format which is the only one currently admitted although different formats based on European standards might be allowed in the future if introduced by decree Should e-invoices not comply with the above conditions they will be treated as not having been issued and the Italian tax authority would impose penalties to the seller and under certain conditions the customer E-invoicing would however become mandatory effective January 1 2018 for business to business sales of gasoline or diesel fuel intended for use as motor fuel and services rendered by subcontractors under a contract with public bodies In the case of gasoline or diesel fuel the draft Budget Law makes the electronic storage and transmission of daily payment details mandatory as effective July 1 2018

In addition effective January 1 2019 taxpayers would be required to report the invoice details of cross-border transactions Taxpayers would be required to file this report by the fifth day of the month following that in which invoices (other than those transmitted for imports documented by customs bills) are issued or received A penalty of EUR 2 ($236) per invoice (capped at EUR 1000 ($1180) per quarter) may apply for failing to submit a report or submitting an incorrect one However if the submission is made or amended within 15 days of the deadline the penalties will be reduced by 50 percent and capped at EUR 500 ($590)

Finally the draft Budget Law provides that as of January 1 2019 there will no longer be a quarterly obligation (six-monthly for FY 2017) to report details of invoices issued received and booked and customs bills and a quarterly option to electronically report the VAT details of invoices issued received and booked Large retailers that opted by December 31 2016 for the ldquooldrdquo monthly transmission of daily payment data would be allowed to continue to make these monthly transmissions up to December 31 2018 rather than December 31 2017 To read a report prepared by the KPMG International member firm in Italy please click here

Poland Proposed Introduction of Real Time Reporting of Cash Register Sales

Poland recently published a draft amending the VAT Act and the Measurement Law According to the draft Poland will introduce a Central Register Repository and a new kind of cash registers which will be continuously connected to the Repository in order to upload in real-time the information about transactions performed through the cash register The draft aims to ensure more effective verification of VAT settlements by the tax authorities According to the draft Central Register Repository will be created and maintained by the Head of National Revenue Administration who will also administer the data contained in the Repository To read a report prepared by the KPMG International member firm in Poland please click here

Poland Proposed Introduction of Split Payment System

On September 19 2017 the Council of Ministers of Poland adopted a draft amendment to the VAT Act which introduces a voluntary ldquosplit paymentrdquo system Under the ldquosplit paymentrdquo system for a transaction payment the amount of VAT due will be deposited in an account with restricted access while the net due amount for the seller will be kept in a separate account


According to the draft amendment taxpayers will not have free access to the funds deposited on the ldquosplit paymentrdquo account In practice it will only be possible to transfer funds to the analogical account of the customer or as a payment of the due output VAT Alternative use of funds deposited on this account will require the approval of the tax authority which must provide a decision within 60 days from the submission of an application

To encourage taxpayers to use the ldquosplit paymentrdquo system the draft amendment provides the certain incentives including excluding the joint and several liability with the vendor and limiting the application of VAT sanctions However the incentives will not be applicable if the taxpayer had a knowledge that the paid invoice (1) was issued by a non-existing entity (2) related to activities that were not performed or (3) included incorrect VAT amounts In case the transfer is made to a taxpayer other than the taxpayer mentioned on the invoice the taxpayer and the vendor will bear joint and several liability for any unsettled VAT in respect of the amount received unless the money transfer will be made from the ldquosplit paymentrdquo account To read a report prepared by the KPMG International member firm in Poland please click here

Norway Enforcement of Electronic Services Rules

In July 2011 Norway implemented the ldquoVAT on electronic servicesrdquo (VOES) mechanism that requires all foreign companies selling electronic services to Norwegian consumers to collect and report VAT at a standard rate of 25 percent on all sales even if the companies have no establishment in Norway The definition of ldquoelectronic servicesrdquo under the Norwegian VAT law covers a variety of services including but not limited to sales of software applications games music films digital books and other electronic publications Movie streaming services are also subject to VAT

In case of non-compliance the Norwegian tax authority generally has a five-year statute of limitation period in which to make a VAT assessment and an extended ten-year statute of limitation period in case there is evidence of gross negligence or intentional misconduct In addition to assessing the actual VAT liability the tax administration typically may decide to impose a penalty ranging between 20 percent and 60 percent of the underlying VAT charge with the percentage depending on factors of the failure to report and pay VAT in the specific case The tax authority further generally imposes interest at a rate ranging between 6 percent and 13 percent over the period(s) or year(s) at issue

The KPMG International member firm in Norway reports that earlier in 2017 a foreign company was assessed NOK 30 million ($38 million) including penalties and interest for the companyrsquos failure to report and pay VAT through the VOES mechanism Moreover tax auditors are expected to increase their focus on compliance with the VOES mechanism Because nonpayment of VAT on electronic services is considered a direct loss of revenue for the Norwegian government (given that individual customers cannot deduct VAT) it appears that the Norwegian government has an incentive to enforce the VOES legislation Reports indicate that VAT audits under the VOES mechanism have resulted in additional revenue totaling nearly NOK 500 million Notably the tax administration has already announced there were


at least 20 new audits initiated in 2017 In this respect it should be highlighted that Norway has entered into international tax collection agreements with many countries thus increasing the effectiveness of such audits

Russia Overview of Recent VAT Guidance

On July 4 2017 the Russian Ministry of Finance (MOF) published Guidance Letter 03-07-1142332 in which it held that transactions involving the assignment of monetary claims arising from securities assignment contracts are subject to VAT The tax base should include all income a taxpayer receives from settlement payments (whether monetary or in kind) made in connection with the sale of goods works services or property rights Moreover the taxpayer should determine its VAT liabilities in transactions involving the assignment of monetary claims arising from securities assignment contracts on the earlier of the date on which the property rights are transferred or the date on which payments (including partial payments) for the property rights are made

On July 10 2017 the MOF published Guidance Letter 03-07-0843657 in which it held that the transfer by a nonresident to a Russian legal entity of rights to use audiovisual works under a licensing agreement is considered to have taken place in Russia and accordingly is subject to VAT in Russia

On July 11 2017 the MOF published Guidance Letter 03-07-1143989 in which it held that a taxpayer may deduct the VAT paid in connection with the management of accounts payable if those accounts payable were generated in connection with goods works or services used in transactions that are subject to VAT However commissions received by a factoring company are not subject to VAT

On July 20 2017 the MOF published Guidance Letter 03-07-1146162 in which it held that the transfer of immovable property from a reorganized company to a legal successor is not subject to VAT

On August 25 2017 the MOF published Guidance Letter 03-03-06154596 in which it held that if a legal entity pays dividends in kind to its shareholders in the form of goods of its own production the ownership title to those goods is transferred to the shareholders receiving those dividends Therefore such a transfer of goods by a dividend payer to the shareholders is subject to VAT in Russia in accordance with the general established procedure The MOF further held that shareholders that receive dividends in kind in the form of goods must determine their VAT liability in connection with the transfer of the goods on the date on which those goods are received from the dividend payer

Source Tax Notes VAT treatment of immovable property transferred upon reorganization ndash MoF clarifications (October 13 2017) Tax Notes Russian Finance Ministry Issues VAT Guidance (September 22 2017) Tax Notes Russia Clarifies VAT Matters Involving Licensing Agreement (September 29 2017)


Sweden VAT Treatment of Cross-Border Head Office to Branch Transactions Reviewed

On September 27 2017 the Swedish Administrative Court (SAC) published a decision relating to the VAT treatment of head office ndash branch transactions The ECJ held in Skandia Case C-713 (Sep 17 2014) that services provided by a head office to a branch that is a member of a VAT group are subject to VAT in the country where the VAT group is established (For KPMGrsquos previous report on Skandia please click here) Following the ECJ judgment the SAC has ruled that the principle laid down in Skandia applies on transactions involving a Swedish establishment being a member of a Swedish VAT group and its foreign establishment In addition the Swedish Tax Authority (STA) has published a guideline in late 2015 The STAacutes view is in line with above judgments and covers scenarios where the Swedish establishment is a member of Swedish VAT Group The STA also states that the guidelines apply regardless of whether the foreign country (EU or non-EU) has rules on VAT groups The Swedish position on ldquoreverse Skandiardquo is however unclear as there are no judgments or any official statement from the STA in this regard

In the new case before the SCA the taxpayer was an insurance group with an Irish head office and a Swedish branch The Head office was member of an Irish VAT Group The Swedish branch not being member of a Swedish VAT Group did apply for an advance ruling with the Swedish Council for Advance Rulings on how to handle transactions between the Irish head office and the Swedish branch for VAT purposes The Council concluded that those transactions are outside the scope for VAT in Sweden as the branch and head office constitute a single taxpayer because the branch was not a member of a Swedish VAT group The STA appealed to the SAC which rescinded the ruling on the basis that the details of the Irish VAT Group and the Irish VAT grouping rules in general had not been sufficiently investigated by the Council From the STA appeal and the way the STA argues it seems that the STA suggests that ldquoreverse Skandiardquo can apply in Sweden but this will depend on how the other Member state has implemented its VAT grouping

United Arab Emirates Tax Regulations Published

On September 30 2017 the United Arab Emirates (UAE) Ministry of Finance announced the release of cabinet decisions on the executive regulations on tax procedures and on excise tax as well as the cabinet decision on excise goods excise tax rates and the method of calculating the excise price

Cabinet Decision No (36) of 2017 on the Executive Regulation of Federal Law No (7) of 2017 on Tax Procedures outlines procedures with regards to registration and de-registration for tax purposes and amending details of registration tax obligations voluntary disclosure tax notification and tax agents It also specifies the various elements involved in tax audits rights to conduct tax audit audit notices the power to remove and retain original documents or assets or make copies and the power to mark assets and record information The regulation further clarifies the rules for tax and administrative penalties assessments tax refund bankruptcy cases disclosure of information and the reduction in or exemption from administrative penalties


Cabinet Decision No (37) of 2017 on the Executive Regulation of the Federal-Law no (7) on the Excise Tax outlines provisions with regards to the liability to excise tax excise tax registration and exception methods rules of tax payment and exemption for selective goods It further provides guidance on the rules applicable to designated zones mechanisms for the calculation of due tax tax returns tax period and payment of tax In addition it specifies the rules related to other tax refund requirements for keeping tax records as well as the repeal of conflicting provisions Recall effective October 1 2017 the UAE started levying an excise tax on tobacco tobacco products carbonate drinks and energy drinks

Cabinet Decision No (38) of 2017 on Excise Goods Excise Tax rates and the Methods of Calculating the Excise Price outlines the rules applicable to excisable goods including tobacco and tobacco products carbonated drinks and energy drinks in addition to its tax rates The provisions also specify the excise price designated retail sales price and the rules with regards to contradicting provisions

On November 23 2017 the UAE published Cabinet Decision No (52) of 2017 on the Executive Regulation of the Federal-Law no (8) on Value Added Tax which includes details on the definition of key terms used rules relating to sales of goods and services registration process zero-rated goods and services exemptions methods of accounting compliance requirements VAT refunds transitional rules and invoicing and recordkeeping requirements Recall effective January 1 2018 the UAE will introduce a five percent VAT

Source Orbitax UAE Cabinet Decisions on Tax Procedures and Excise Tax Regulation Released (October 4 2017) United Arab Emirates ndash VAT Executive Regulations ndash signed (01 Dec 2017) News IBFD

United Kingdom Overview of Recent Brexit Discussion Papers

On August 15 2017 the UK Treasury tax authority (HMRC) and Department for Exiting the European Union issued the first of a series of papers on the United Kingdoms future partnership with the European Union Future customs arrangements a future partnership paper The paper confirms amongst others that regardless of the outcome of Brexit negotiations the United Kingdom would need new customs legislation in place by March 2019 and highlights two broad approaches (1) highly streamlined customs arrangement between the UK and the EU with customs requirements that are as frictionless as possible and (2) a new customs partnership with the EU by aligning the UKs approach to the customs border in a way that removes the need for a UK-EU customs border

On September 21 2017 the European Commission published a position paper that discusses certain topics that should be covered by the Withdrawal Agreement between the EU and the UK The main concern is how the customs status of goods should be determined in cases where the movement starts before the withdrawal date and ends on or after the withdrawal date As a general principle the Commission takes the view that in these cases the rules and procedures described by the Union Customs Code should be followed The position paper also lists the administrative cooperative procedures started before the withdrawal date that should be continued


after the withdrawal date and regarding which the Withdrawal Agreement should contain provisions for the period following the withdrawal date Finally the Commission also finds it necessary for the parties to agree upon the settlement of customs duties collected during this transitional period

On October 9 2017 UK HM Treasury published Customs Bill White Paper that covers plans for the customs VAT and excise regimes the UK will need once it leaves the EU The White Paper confirms that the UKrsquos new legislation will as far as possible replicate the effect of existing EU customs laws It also covers provisions for the implementation of customs VAT and excise regimes in the event that no deal with EU is reached In particular the Customs Bill will give the UK the power to (1) charge customs duty on goods define how goods will be classified set and vary the rates of customs duty and any quotas (2) amend the VAT and excise regimes so that they can function effectively post-exit (3) set out the rules governing how HMRC will collect and enforce the taxes and duties owed and (4) implement tax-related elements of the UKrsquos future trade policy

Source European Commission publishes paper discussing transition period in customs matters in relation to Brexit (October 10 2017) News IBFD Brexit referendum Customs Bill ndash consultation (October 10 2017) News IBFD

United Kingdom Amendment to VAT Law

On November 16 2017 the UK published Finance (No2) Act 2017 which amends the VAT Law The Act extends the scope of the UK tax authorityrsquos (HMRC) existing joint and several liability rules Currently ldquomarketplacesrdquo can be held jointly and severally liable in respect of overseas businesses (For KPMGrsquos previous discussion on this point please click here) Marketplaces are businesses that provide a facility for consumers to view and place orders for goods being offered for sale by sellers Following the changes HMRC will be able to hold an online marketplace jointly and severally liable for (1) any future VAT that a UK business selling goods via the online marketplace fails to account for after HMRC has issued a notice to the online marketplace ensuring that all sellers are in scope and (2) any VAT that a non-UK business selling goods via the online marketplace fails to account for where the business was not registered for VAT in the UK and that online marketplace knew or should have known that that business should be registered for VAT in the UK

The Act further allows the Scottish Police Authority the Scottish Fire and Rescue Service combined authorities and fire and Rescue Service Bodies which become a function of Police and Crime Commissioners (PCC) to recover input VAT and removes the need for individual statutory instruments to be laid on the establishment of each new combined authority and PCC Fire and Rescue authorities To read a report prepared by the KPMG International member firm in the UK please click here

United Kingdom Overview on Recent Consultations

HMRC recently published a summary of responses following the call for evidence in March regarding introducing the split payment method for online payments (For KPMGrsquos previous discussion on this please click here) In the

next steps section it states that HMRC will lsquocontinue to develop and test its insights over the coming months through a process of internal evaluation and on-going engagement with the payment sector and marketplaces most likely in the form of collaborative workshop-style sessions with those who have expressed an interest in participatingrsquo These sessions are planned for early 2018 The output will be used to inform the potential options for a split payment model

HMRC have issued a consultation document on the changes to the UK voucher rules This is part of the process to implement the required voucher changes following the agreed EU changes to the VAT Directive into domestic law These will be effective January 1 2019 The consultation document has been issued before the drafting of legislation in order to confirm as far as possible that it will achieve the intended policy effect with no unintended effects

HMRC further issued a summary of responses to its earlier consultation This review dates back to 2016 when HMRC issued Brief 3 (2016) Review of VAT grouping following the ECJ judgments in Larentia + Minerva and Marenave cases C-10814 and C-10914 (Jul 16 2015) and Skandia case C-713 (Sep 17 2014) The Brief noted that in Larentia + Minerva the ECJ found that Member States may only restrict VAT grouping to legal persons where those restrictions are appropriate and necessary in order to prevent abuse avoidance or evasion The response document acknowledges the value of VAT grouping It confirms that HMRC will discuss the issues raised with representative bodies It also notes that businesses will require certainty on any future changes and alongside the review HMRC will consider the outcomes of the UKrsquos EU exit negotiations to ensure that businesses are not required to make a series of changes In the meantime and in response to concerns raised during the consultation process HMRC will clarify its current approach to certain types of partnerships joining a VAT group through issuing a policy paper and clearer guidance for business

Finally HMRC issued a summary of responses to its earlier consultation on a domestic VAT reverse charge on construction services The measure is aimed at shifting responsibility for paying VAT along the supply chain to remove the opportunity for fraud The summary confirms that HMRC will publish a technical consultation on draft legislation for a VAT reverse charge in spring 2018 with the legislation to be implemented effective October 1 2019 A final draft of the legislation and guidance will be published by October 2018 During this period HMRC will set up stakeholder implementation groups to work with businesses to support them in making the change

United Kingdom Guidance on Fulfilment Centers Released

HM Revenue and Customs has launched guidance into a new due diligence scheme the Fulfilment House Due Diligence Scheme which aims to ensure that overseas traders comply with UK VAT rules The mechanism targets businesses that store any goods imported from outside the EU for or on behalf of someone outside the EU It provides that a business seeking to carry on third-country goods fulfillment business must first notify and gain approvals from HMRC A business must then notify HMRC if they know or have


reasonable grounds to suspect that a third country customer has not met a VAT or customs duty obligation in relation to third-country goods stored by the approved person It also restricts an approved person from carrying on a third country goods fulfillment business with a person named in a notice issued by the Commissioners

The regime provides that an approved person must give notice to all third-country customers about the mechanism and makes further provision about what that notice must state Among other things it includes certain due diligence and record-keeping obligations including that the business must verify a third-country customers VAT registration number Those trading as a fulfillment business before April 1 2018 will need to apply on or before June 30 2018 and those trading after April 1 2018 will need to apply on or before September 30 2018 The guidance sets out that a business once approved will be put on a register must keep certain records must carry out checks on their overseas customers and of the goods they store and will be charged penalties if they fail to apply and register at the right time The guidance explains what activities are covered by the mechanism how HMRC will undertake due diligence of businesses and the penalties for non-compliance Covered businesses must keep a record for six years of their overseas customers names and contact details their overseas customers VAT registration numbers the type and quantities of goods stored in their warehouse import entry numbers the delivery addresses and notices provided to overseas customers which explain their tax and duty obligations in the UK

Source CCH Global VAT News amp Features UK Issues Guidance On Fulfilment Business Scheme (Nov 20 2017)

Asia Pacific (ASPAC)

Australia Report on GST Low Value Imports Released

On October 31 2017 the Australian Governmentrsquos independent research and advisory body (the PC) published its final report on collection models for GST on low value imported goods The report highlights that the governmentrsquos legislated hybrid vendor collection model although not perfect is likely the best approach Recall effective July 1 2018 remote sellers online marketplaces and re-deliverers will be liable for goods and services tax (GST) on goods valued at less than AUD 1000 ($750) that are imported by Australian end consumers

In its detailed report the PC found that the legislated model is the most feasible among the imperfect alternative models for collecting GST given the short timeframe for implementation While shipper-based collection models could capture more revenue paper-based declaration processes


for international mail would impose high compliance costs Moreover the report found that there is insufficient basis to recommend delaying the implementation of the legislated model to a date after July 1 2018 The report further recommends a comprehensive review of the collection model for 2023 absent exceptional circumstances arising in the interim The report highlights that businesses and online marketplaces selling low value imported goods into Australia will need to make sure that their system setup and terms of business are sufficient to ensure compliance effective July 1 2018

Remote sellers and online marketplaces will likely encounter the following practical issues when implementing the new GST rules (1) valuing goods to identify low value goods sold to Australia (2) differentiating sales to end consumers (B2C) from business customers (B2B) and collecting information to support the position (3) avoiding double taxation where goods or a consignment valued over AUD 1000 are taxed at the Australian border (4) determining how to report returnsrefunds and (5) complying with notification requirements to customers logistics providers and Australian Customs To read a report prepared by the KPMG International member firm in Australia please click here

Malaysia Proposed Amendments to GST Law

On October 27 2017 the Prime Minister of Malaysia presented to the parliament the Budget for 2018 which includes proposed amendments to the goods and services tax (GST) law which if adopted would be effective January 1 2018 unless otherwise specified The Budget would zero-rate reading materials such as magazines journals periodicals and comics Moreover sales made by the local authorities would no longer be subject to GST (effective April 1 2018 or October 1 2018 as opted by the local authorities) Moreover any levy under the Human Resources Development Act 2001 would also be treated as not subject to GST The sale of capital assets due to cessation of business would no longer be taken into consideration when determining whether a person ceases to be liable to be registered The Budget would further expand the power of the Director General to assess the amount of tax and late payment penalty due and payable to cover any person other than a taxpayer (ie any person who is not GST registered or is not liable to be GST registered) Other proposals include (1) an extension period for stamp duty exemption to revive abandoned housing projects (2) GST exemption for management and maintenance services of stratified residential buildings (3) GST relief on construction services for school buildings and places of worship (4) GST relief on importation of big ticket items (5) clarifications on the importation of goods under lease agreement from designated areas and (6) relief of GST on handling services rendered to operators of cruise ships To read a report prepared by the KPMG International member firm in Malaysia please click here

Thailand Update on Taxation of E-Commerce Proposal

The Thai Revenue Department (TRD) recently issued its comments addressing some of the issues and questions raised by the public stakeholders on the proposed tax legislative amendments that will impact foreign e-commerce


players available to the Thai market during the process of public consultation held in July this year (For KPMGrsquos previous discussion on Thailandrsquos proposed e-commerce law please click here)

For the purposes of the proposed e-commerce law a foreign company that operates a business by using electronic media in Thailand is a foreign company that operates through a domain whose name includes ldquothrdquo or uses Thai alphabet (eg ภาษาไทยcom) andor receives payments in Thai Baht from Thailand customers The latter includes simply having the option of payment in Thai Baht on its website (including through a foreign currency translation tool) A foreign company that falls within these conditions would be regarded as having a taxable presence in Thailand (ie a Thai permanent establishment (PE)) and would be subject to Thai corporate income tax on the net profits attributable to that PE The TRD confirmed that tax treaties may provide protection where a PE is created under the proposed E-Commerce law Having a deemed PE in Thailand does not necessarily mean that the foreign company is obliged to register for VAT The TRD also confirmed that the Foreign Business Act restrictions will not be triggered solely due to the PE creation as these laws should be considered separately

The proposed e-commerce law establishes that a foreign company that operates its business by using electronic media will be subject to 15 percent withholding tax on income derived in Thailand from online advertising or provision of space on a webpage The TRD has clarified that this provision will apply to both business-to-business (B2B) and business-to-consumer (B2C) transactions The TRD commented that the Thai tax treaties may be amended in the future to give Thailand the explicit right to tax such income

Under the draft law a foreign company selling intangible goods or rendering services through electronic media to a non-VAT registered person in Thailand will be required to register for VAT in Thailand and will be subject to VAT on its sale within Thailand The TRD clarified that the affected foreign businesses will not be required to issue tax invoices on the sale of intangible goods or provision of services through electronic media Foreign e-commerce businesses registered for VAT in Thailand will not be able to deduct VAT incurred on expenditures against VAT collected on sales The registration process for a foreign operator that is required to register for VAT under the proposed e-commerce law will be amended in order to be simplified and additional guidance will be issued on how to determine the sourcing for VAT purposes Finally VAT registration will not automatically create a taxable presencePE in Thailand for income tax purposes

Trade amp Customs (TampC)

Argentina Simplified Exporter Regime Introduced

On September 21 2017 the tax authority of Argentina (AFIP) published Resolution 725-E2017 and General Resolution (AFIP) 4133-E which set out certain criteria that must be satisfied by ldquosmall exportersrdquo to take advantage of the simplified export system and modifications to the electronic invoicing


that Postal Service Providers must take into account at the moment to issue the export invoice on behalf and order of the exporter AFIF sets out the following conditions for exporters to take advantage of the simplified export system (1) the goods to be exported must be produced in Argentina (2) each individual transaction cannot exceed the FOB value of $15000 (3) the exported goods cannot be subject to specific customs controls or other determinations (eg minerals) (4) temporary imports cannot be cancelled (5) packages may not exceed one meter in height width and length and 100 kilograms in weight and a total shipment weight of 300 kilograms and (6) the annual invoicing amount of exports under this regime cannot exceed the FOB value equivalent to $600000 Exporters that want to apply for the simplified export regime must register through the AFIP website Moreover AFIP clarifies that postal service providers will be responsible for (1) recording the export transaction (2) preparing the final export invoice on behalf of third parties and register the operation in the customs computer system (3) delivering a copy of the export invoice issued to the owner of the goods (4) issuing a bill for its services (5) transferring to users the withdrawals received from the AFIP within 10 business days discounting the respective taxes and (6) informing AFIP of export transactions carried out on behalf of third parties To read a report prepared by the KPMG International member firm in Argentina (Spanish) please click here

European Union Timeline for Customs Duties Refund for Recalls Treated as Defective Goods Extended

On October 12 2017 the ECJ published its judgment in X BV Case C-66115 regarding the customs duties treatment of recalls and warranties In the case at hand X purchased from a manufacturer established in Japan three different types of passenger car (A B and C) and released them for free circulation on the EU customs territory and thus paid customs duties at the time of import The manufacturing seller subsequently asked X to request all the owners of the cars to make an appointment with a dealer in order to have the cars fixed free of charge The recall was due to the possibility that the steering coupling bolts were not correctly tightened and for other types of passenger cars to repair rubber seal and door hinge defects X reimbursed the costs associated with that recall to the dealers The manufacturing seller then reimbursed those costs to X pursuant to a warranty obligation included in the contract of sale concluded with X That reimbursement took place within a period of 12 months following the date of acceptance of the declaration for entry of the cars into free circulation of which the steering coupling bolts were not correctly tightened and after a period of 12 months regarding the cars with rubber seal and door hinge defects X applied for partial repayment of the customs duties which it had paid on the ground that the customs value of the different types of cars had turned out to be lower than the customs value originally established the difference being the amount of the reimbursements made by the manufacturing seller The customs inspector denied the claim arguing (a) the replaced parts of type A were not defective and (b) the repair of type C and D took place more than twelve months after release for free circulation

The ECJ ruled that the concept of ldquodefective goodsrdquo should cover cases where it is established that at the time of acceptance of the declaration for entry into free circulation for specific goods there was a manufacture-related risk that the goods might become defective in use and in view of this the seller pursuant to a contractual warranty towards the buyer grants the latter a price reduction in the form of reimbursement of the costs incurred by the buyer in modifying the goods in order to exclude that risk Moreover the ECJ held that Community Customs Code Implementing Provision (CCIP) insofar as it provides for a time limit of 12 months from acceptance of the declaration for entry into free circulation of the goods within which an adjustment of the price actually paid or payable must be made is invalid This means that recalls and warranty costs will lead to a refund for a period of three years after release for free circulation This is especially of interest to importers who are reimbursed for warranty repairs by the manufacturer of the goods To read a report prepared by the KPMG International member firm in Netherland please click here

Ghana Anti-Fraud Measures for Tax Exemption on Import Duties Introduced

On September 18 2017 the Ministry of Finance of Ghana issued a statement that includes measures which are targeted at addressing identified areas of abuse of the tax exemption regime introduced by the 2017 budget which allows taxpayers with an exemption status to pay import duty and taxes upfront and subsequently apply for a refund The statement provides for the following anti-abuse measures that are effective October 1 2017 (1) an application for exemption must be accompanied with the required supporting documents (2) the exemption status is not transferable (3) imported goods are not exempted from the payment of import duties and taxes unless the original importer of the goods (as stated on the Bill of Lading or Customs Declaration) is an exemptions holder or the goods are generally exempted from import duties and taxes by law (4) non-governmental organizations (NGOs) and benevolent persons or institutions whose imports are entitled to exemptions are required to show a signed agreement entered into with the Minister (of the relevant sector ministry) that the imported goods are distributed by the sector ministry with the facilitation of the NGO or benevolent entity (5) exemption letters from the Ministry of Finance are not issue for the purpose of clearing any consignment of goods imported by exemption holders unless the application for the exemption includes an undertaking (in the standard form) signed by the companys Chief Executive Officer (CEO) affirming compliance of the imports to all applicable laws and requirements (6) the Ghana Revenue Authority is required to institute a post-audit desk to audit exemptions holders for compliance regarding goods that have been cleared under exemptions and (7) the beneficiary company and its CEO may incur criminal charges andor penalties if the post audit review reveals any infractions

Source Ghana ndash Tax exemption on import duties ndash revised measures (19 Sep 2017) News IBFD


In Brief

mdash Australia(i) On October 19 2017 Australiarsquos Parliament passed the Treasury Laws Amendment (2017 Measures No 6) Bill 2017 which amends the countryrsquos GST Act to ensure that sales of digital currency receive equivalent GST treatment as sales of money (previous coverage) effective retroactively July 1 2017

mdash Brazil(ii) On September 27 2017 the Federal Revenue Service of Brazil issued Private Ruling 484 in which it clarified that irrespective of the party paying for the freight expenses in international shipping (whether a Brazilian company or foreign company) the credits of the contribution to the federal social contributions PIS and COFINS cover the costs of shipping of the imported merchandise up to the relevant customs port airport or border

mdash Bahrain(iii) On October 16 2017 the Cabinet of Bahrain approved a draft law for the ratification of the Gulf Cooperation Council (GCC) Excise Tax Framework Agreement (the Agreement) The draft law contains provisions for the application of excise duties to certain harmful goods as per the Agreement has been referred to the legislature for further consideration

mdash Belgium(iv) On November 9 2017 Belgium adopted amendments to the VAT Code based upon to a draft bill that contains various amendments to the Belgium VAT Code which was submitted to the Belgium parliament The amendments to the VAT Code relates to the chargeability of VAT transactions considered the equivalent of services the inward processing rule on import and the VAT exemption for the sale of ships for shipping on the high seas

mdash Costa Rica On September 20 2017 the tax authority of Costa Rica announced that electronic invoicing will be mandatory for the following sectors on the following dates effective January 15 2018 for the healthcare sector effective February 1 2018 for the accounting financial and administrative sectors effective March 1 2018 for the legal sector effective April 2 2018 for the engineering architecture and IT sectors and effective May 1 2018 for all other sectors To read a report (in Spanish) prepared by the KPMG International member firm in Costa Rica please click here

mdash Costa Rica(v) On October 25 2017 the tax authority of Costa Rica released a discussion draft concerning a resolution that would regulate the requirements for invoices of sales subject to VAT that are paid through credit and debit cards The draft resolution establishes that invoices must include (1) the amount of the sale (2) the amount of the VAT (3) the amount of the exempt sale when applicable and (4) the total amount Moreover the draft resolution would require sellers to include in their registry the reference number of any sale for which the payment was made through credit or debit card Taxpayers would further be required taxpayers to provide the tax authority with detailed information of each transaction Taxpayers will have three months from the publication of the resolution to amend the systems in order to comply with the new requirements


mdash European Union(vi) On September 28 2017 the European Commission released its study on the VAT Gap for 2015 The VAT Gap is defined as the difference between the amount of VAT revenue actually collected and the theoretical amount that is expected to be collected given the observed information on the countrys economy and the actual VAT legislation According to the ECs study the EU-28 VAT Gap amounted to EUR 1515 billion ($1785 billion) in 2015 The smallest VAT Gaps were observed in Sweden (142 percent) Spain (352 percent) and Croatia (392 percent) The largest VAT Gaps were registered in Romania (3718 percent) Slovakia (2939 percent) and Greece (2827 percent) Overall half of the EU-27 Member States (EU Member States less Cyprus) recorded a VAT Gap below 108 percent

mdash European Union(vii) On October 5 2017 the ECJ published the Opinion of its Advocate General (AG) in Nidera Case C-38716 regarding whether interest is due on non-paid VAT refunds In the case at hand the taxpayer purchased goods in Lithuania and exported these outside the EU The taxpayer obtained a VAT registration and applied for a VAT refund on the VAT incurred on the domestic purchase of the goods After obtaining the right to claim the VAT following an ECJ decision the taxpayer requested the payment of related interest which the tax authority decided to pay for but only for the period between the ECJ decision and the VAT refund date The AG concluded that the EU VAT Directive in conjunction with the principle of fiscal neutrality must be interpreted as precluding a Member State in circumstances not attributable to the taxpayer from reducing the amount of interest due to the taxpayer in respect of late repayment of VAT overcharges as opposed to the amount to which it would normally be entitled to

mdash European Union On October 26 2017 the ECJ issued the judgment in The English Bridge Union Limited Case C-9016 regarding the definition of ldquosportrdquo within the EU VAT exemption related to sales of services closely linked to sport or physical education by non-profit organizations The ECJ did not follow the earlier Opinion of its AG and held that duplicate bridge is not a ldquosportrdquo for VAT purposes and is thus not VAT exempt under the EU VAT Directive

mdash European Union On October 19 2017 the ECJ published its judgment in Solar Electric Martinique Case C-30316 regarding the applicable VAT treatment of the sale and installation of photovoltaic and solar water heating panels on buildings The ECJ decided to follow the Opinion of its AG and held that it has no jurisdiction to answer the question as it relates to transactions made in the French overseas departments where the EU VAT Directive does not apply (For KPMGrsquos previous discussion on the AG Opinion please click here)

mdash European Union On October 26 2017 the European Commission published a proposal on the conclusion and a proposal on the signing of an agreement (draft agreement) between the European Union and the Kingdom of Norway on administrative cooperation combating fraud and the recovery of claims in the field of VAT According to the draft agreement the respective authorities of the contracting states will


exchange information and set up a communication system to do so with the exception of information that is accessible through the VIES system In addition the draft agreement covers the assistance concerning the recovery of VAT claims administrative penalties fines fees and surcharges and the interest and costs relating to such claims

mdash European Union(viii) On November 9 2017 the ECJ published its decision in AZ Case C C-49916 regarding whether the application of the reduced VAT rate on fresh pastry goods and cakes depend solely on the criterion of their ldquobest-before daterdquo or their ldquouse-by daterdquo In the case at hand the taxpayer produces various pastry goods and cakes Its products include croissants with various fillings and sweet rolls with various coatings Those products have a use-by date exceeding 45 days The taxpayer asked the Polish tax authority for a ruling to determine whether its products could be subject to the reduced VAT rate of eight percent The ECJ held that Member States have discretion to set limitations for the application of a reduced rate of VAT to foodstuffs for human consumption providing such provisions do not contravene the principle of fiscal neutrality However the national court must assess whether in the Polish market there are pastry goods or cakes whose shelf life does not exceed 45 days but which nevertheless are similar in the eyes of that consumer to pastry goods and cakes which have a best-before date exceeding 45 days such as those produced by the taxpayer and which are interchangeable with the latter In such case the principle of fiscal neutrality would preclude such a provision and Poland would be required to amend its VAT law

mdash France(ix) On September 27 2017 the French government submitted the Finance Bill for 2018 to the National Assembly which if adopted would amend several VAT provisions in the Tax Code The Finance Bill would introduce an anti-abuse measure limiting the application of the 21 percent reduced rate for press services to an amount corresponding to the cost of acquisition of the press services Moreover the Finance Bill would exempt certain psychotherapy and psychology services

mdash Ghana(x) Effective October 20 2017 the Ghana Revenue Authority (GRA) revised its guidelines for export and re-export of petroleum products from Ghana requiring that an exporter to (1) obtain an export license from the National Petroleum Authority (2) register with the Customs Division of the GRA as a self-declarant for customs documentation purposes (3) obtain a removal bond from an insurance company in accordance with the established application procedures and (4) comply with all other customs and export processes contained in the guidelines

mdash Ghana(xi) On October 2 2017 the GRA clarified that the VAT flat rate scheme (VFRS) which was implemented on July 1 2017 is only applicable to retailers and wholesalers Under the VFRS eligible persons are required to charge VATNHIL at a reduced rate of 3 percent Thus manufacturers and service providers are required to continue charging the VATNational Health Insurance Levy (NHIL) at the 175 percent standard rate


mdash Hungary(xii) On October 4 2017 the European Commission requested Hungary to bring its national requirements under the Electronic Trade and Transport Control (EKAER) system in line with the EU VAT Directive Under the EKAER system companies are required to provide Hungarian tax authorities with detailed information for VAT purposes about some business-owned shipping vehicles that use public roads According to the Commission the requirements under the EKAER system violate the VAT directive because they primarily affect cross-border EU transactions and impose administrative formalities associated only with crossing borders

mdash India(xiii) On November 16 2017 the Indian Cabinet launched the National Anti-profiteering Authority (NAA) which is intended to stop businesses from unduly profiting from the changeover to the new centralized GST system The NAA has the power to order the business concerned to reduce its prices or return the undue benefit with interest to the recipient of the goods or services If the undue benefit cannot be passed on to the recipient a business will be required to deposit the profit to the Consumer Welfare Fund In extreme cases the NAA can impose a penalty on a business entity and can order the cancellation of its GST registration

mdash Ireland(xiv) On September 25 2017 the Irish tax authority published eBrief No 822017 which updates the VAT registration guidelines and clarifies that except under certain identified exceptions all applications must be submitted online In addition the tax authority reminds that the electronic filing of returns and payment of liabilities is mandatory in all VAT registrations since June 2012

mdash Ireland(xv) On October 19 2017 the government Ireland published the Finance Bill for 2017 which includes the following proposed amendments to the Irelands indirect taxes The Finance Act would increase the VAT rate for sunbed services from 135 percent to 23 percent The Finance Act would further clarify the application of the VAT exemption relating to childrenrsquos or young peoplersquos education school or university education and vocational training and retraining Finally the Finance Bill would introduce a new excise duty on sugar-sweetened drinks effective April 2018 The rate of sugar tax would be 1626 cent per liter on sugar-sweetened drinks which have a sugar content of 5 to 8 grams per 100 milliliters and 2439 cent per liter where they have a sugar content of 8 grams or more per 100 milliliters To read a report prepared by the KPMG International member firm in Ireland please click here

mdash Italy(xvi) On September 25 2017 the Italian tax authority issued Protocol No 1944092017 which simplifies the submission of Intrastat returns Effective January 1 2018 Italy repeals the requirement to file quarterly Intrastat returns for intra-EU acquisitions of goods or services Moreover taxpayers will be required to file monthly Intrastat returns for intra-Community acquisitions of goods or services must be filed for statistical purposes where the amount of purchases is in at least one of the previous four quarters equal to or higher than EUR 200000 ($230000) for goods and EUR 100000 ($115000) for services (currently EUR 50000($58000) for both goods and services) The Protocol further clarifies that the statistical section in the monthly Intrastat returns for intra-EU sales


of goods must only be completed where the amount of such sales is in any of the previous four quarter equal to or higher than EUR 100000

mdash Kazakhstan(xvii) On September 21 2017 the Deputy Minister of National Economy of Kazakhstan presented a draft version of a new tax code to the finance and budget committee of the lower house of the Kazakh parliament which if adopted would introduce VAT exemptions for the automotive sector under special investment contracts (SIC) including a VAT exemption on the import of components and raw materials as well as a VAT exemption on the sale of goods produced under SIC

mdash Malta On October 9 2017 the Minister of Finance presented the Budget for 2018 which if adopted would introduce VAT grouping for regulated groups active in the financial services and the gaming industry Moreover the Budget would increase the VAT threshold for small businesses from EUR 14000 ($16600) to EUR 20000 ($ 23000) introduce a VAT rebate of up to euro 400 ($450) on motorbikes scooters and bicycles with an electric assist motor 4) and reduce the VAT rate applicable to the hiring of bicycles from 18 percent to 7 percent To read a report prepared by the KPMG International member firm in Malta please click here

mdash Moldova(xviii) On September 5 2017 the State Tax Service (STS) of Moldova clarified that where sales are made in a foreign currency the vendor must issue a tax invoice indicating the adjusted value of goods or services on application of the exchange rate at the moment the last payment is made

mdash Moldova(xix) On September 27 2017 the STS clarified that business not registered for VAT purposes are not required to register invoices in the General Register of Electronic Tax Invoices even if the invoice exceeds MDL 100000 ($5700)

mdash Netherlands(xx) On November 23 2017 the lower house of the parliament of the Netherlands adopted the Tax Plan 2018 which proposes to amend the definition of medical transactions such that only medicinal products for which a trading permit has been issued are eligible for the reduced 6 percent rate of VAT Moreover the Tax Plan would limit application of the zero-rating of ships that are used for transportation of passengers cargo fishing and the like to ships that are used at least 90 percent on the high seas

mdash Norway(xxi) On September 29 2017 the supreme court of Norway published its judgment in Skaringrer Syd Holding AS case no HR-2017- 1851-A regarding whether VAT incurred in relation to the acquisition of shares in a special purpose vehicle (SPV) companies is recoverable In the case at hand the taxpayer acquired two special purpose vehicle (SPV) limited property companies included these into a VAT group and deducted input VAT related to the acquisition of the shares in the SPV limited property companies The supreme court held that there is no right to deduct input VAT related to the acquisition of shares in subsidiary SPV limited property companies included in a VAT group since no VAT deduction applies to transactions related to the acquisition of shares in Norway


mdash Norway(xxii) On October 12 2017 the government of Norway presented its Budget Proposal for 2018 to the parliament (Prop 1 LS (2017ndash2018) which proposes to increase the reduced VAT rate from 10 percent to 12 percent on the sale of passenger transport and the procurement of such services public broadcasting companies admission to cinemas sports arrangements amusement parks and museums accommodation in hotels the letting of cabins and holiday apartments by hotels and camping businesses and on the procurement of hotel accommodation Moreover the Budget would exempt from VAT salvage vessels and search and rescue vessels shorter than 15 meters and expand the VAT exemptions for the sales made by charitable and non-profit institutions and associations and for sales of electricity to northern Norway Finally the government is considering to introduce a mandatory Standard Audit File for Tax (SAF-T) system effective January 1 2019

mdash Paraguay(xxiii) On September 29 2017 Paraguay published in the official gazette Decree No 779517 which creates an electronic invoicing system (SIFEN) According to the Decree SIFEN will be implemented gradually and the tax authority will make available to certain taxpayers free software to issue electronic invoices The issuance of electronic invoices import electronic invoices export electronic invoices electronic debit notes electronic credit notes and electronic withholding tax receipts will be subject to the provisions of the Decree Non-compliance with the new e-invoicing requirements will be subject to penalties The tax authority will issue electronic invoicing regulations during the first semester of 2018 outlining the conditions and requirements to start the pilot project to implement the SIFEN

mdash Peru(xxiv) On July 31 2017 Peru published in the official gazette Resolution 184-2017 which details the procedure for the collection of funds from the ad hoc VAT withdrawal account of taxpayers subject to the VAT withdrawal regime effective October 1 2017 (August 7 2017 for ldquomain national taxpayers) According to Peruvian national law the purchasers of certain goods or the user of certain services must withdraw a certain percentage (between 15 percent and 15 percent) of the total amount paid inclusive of VAT The amount withdrawn must be deposited in an ad hoc account of the seller with the Peruvian National Bank used exclusively to pay its tax obligations In case of noncompliance the Peruvian National Bank can initiate the collection of funds from the ad hoc VAT withdrawal account of taxpayers According to the Resolution once the procedure to collect funds is initiated by the Peruvian National Bank the taxpayer receives a notification and has the option to present a complaint in order to discuss the notification within 10 business days The tax authority will process the complaint within 20 business days If the complaint presented is accepted the taxpayer may be exempt from the collection of the funds from its VAT withdrawal account

mdash Singapore(xxv) The government of Singapore is considering expanding the scope of GST for e-commerce Currently GST registered taxpayers in Singapore are generally required to collect GST on e-commerce sales


while digitalized goods and services from an overseas vendor are generally exempt and physical goods are only subject to GST if the value exceeds SGD 400 ($297)

mdash Slovak Republic(xxvi) On September 20 2017 the government of the Slovak Republic proposed amendments to the VAT Law including amendments to the margin mechanism applicable to travel agencies in order to comply with the EU requirements as set out in Commission v Czech Republic Case C-26911 (Sep 26 2013) The government further proposes to allow taxpayers that are not established in the Slovak Republic to appoint a tax representative with respect to the acquisition of goods in the Slovak Republic from other EU Member States for the purpose of further sale to other states

mdash Sweden(xxvii) On September 21 2017 the Swedish government proposed to exempt from VAT sales of ocean-going vessels goods for consumption aboard such vessels and services intended for those vessels effective January 1 2018 In addition the government proposes to extend the VAT filing date for small companies whose annual turnover does not exceed SEK 1 million ($ 12000) beyond the normal filing date (usually the 42nd day after the end of the reporting period)

mdash Ukraine(xxviii) The Ukrainian State Fiscal Service recently published an individual tax consultation in which it clarifies that for services provided by non-residents that are not registered for VAT the recipient of the service is considered the tax agent of the non-resident and is responsible for collecting and remitting the VAT if the place of sale is in the customs territory of Ukraine For the provision of consulting services the place of sale is considered to be the place where the service recipient is registered as a business entity Therefore consulting services provided by a non-resident that is not registered for VAT to a Ukraine resident are subject to VAT with the recipient responsible for collection and payment This applies whether or not the Ukraine resident is registered for VAT purposes

mdash United Kingdom(xxix) On October 12 2017 HMRC launched a consultation to solicit comments on the soft drinks tax HMRC further published on November 3 2017 a guidance cautioning businesses which produce package or bring into the United Kingdom soft drinks with added sugar of the possible need to register for the soft drinks industry levy effective April 6 2018 The guidance defines liable and exempt drinks and establishes the registration and payment procedures

mdash Zambia(xxx) On September 29 2017 the Minister of Finance of Zambia presented the Budget for 2018 which if adopted would exempt from VAT unprocessed and semi-processed tobacco Moreover the Budget would change the VAT return due date from the 16th to the 18th day of the month following the month in which the transaction is made Finally the Budget would introduce penalties for failure to furnish records and to issue tax invoices from an approved computer package a pre-printed tax invoice book or a fiscal cash register To read a report prepared by the KPMG International member firm in Zambia please click here


About Inside Indirect Tax

Inside Indirect Tax is a monthly publication from KPMGrsquos US Indirect Tax practice Geared toward tax professionals at US companies with global locations each issue will contain updates on indirect tax changes and trends that are relevant to your business

i Orbitax Australia Passes Bill to Address Double Taxation of Digital Currency (October 31 2017)

ii Brazil ndash PIS and COFINS credits in international transportation ndash clarified (October 4 2017) News IBFD

iii Bahrain GCC ndash GCC Excise Tax Framework Agreement ndash approved by Bahraini Cabinet (17 Oct 2017) News IBFD

iv Belgium ndash Draft law on various amendments to VAT Code submitted to parliament (September 29 2017) News IBFD Belgium ndash Draft law on various amendments to VAT Code adopted by parliament (16 Nov 2017) News IBFD

v Costa Rica ndash Requirements of VAT invoices when paid through credit and debit cards ndash discussion draft released (31 Oct 2017) News IBFD

vi European Union ndash European Commission reports on EU-28 2015 VAT Gap of EUR 1515 billion (September 29 2017) News IBFD

vii European Union ndash ECJ Advocate Generals opinion (VAT) Nidera (Case C-38716) ndash Overpayment reduction in interest payable (October 6 2017) News IBFD

viii PL ECJ 9 Nov 2017 Case C-49916 AZ v Minister Finansoacutew ECJ Case Law IBFDix France ndash Finance Bill for 2018 ndash submitted to parliament (September 27 2017) News IBFDx Ghana ndash Export and re-export regime ndash guidelines issued (October 3 2017) News IBFDxi Ghana ndash VAT Flat Rate Scheme ndash clarification issued (October 3 2017) News IBFDxii Hungary ndash European Commission Issues Formal Notices to Germany Hungary over VAT

Systems (October 5 2017) tax notesxiii Global Daily Tax News Indian Cabinet Green-Lights GST Anti-Profiteering Authority

(November 20 2017)xiv Ireland ndash Guidelines for VAT registration ndash updated (September 26 2017) News IBFDxv Ireland ndash Budget for 2018 presented to Parliament (October 11 2017) News IBFDxvi Italy ndash Intrastat returns ndash simplification measures issued (September 27 2017) News IBFDxvii Kazakhstan ndash New Kazakhstan Tax Code Presented to Parliament

(September 28 2017) Orbitax Daily Newsxviii Moldova ndash Sales in foreign currency ndash State Tax Service clarifies VAT liabilities

(October 4 2017) News IBFD xix Moldova ndash Mandatory registration of invoices ndash State Tax Service clarifications

(October 6 2017) News IBFD xx Netherlands ndash Tax Plan 2018 ndash VAT and other indirect taxes (September 20 2017)

News IBFDxxi Norway ndash Supreme Court VAT judgment regarding input VAT related to acquisition of

shares in SPV limited property companies (October 6 2017) News IBFD xxii Norway ndash Budget 2018 ndash indirect tax measures (October 13 2017) News IBFDxxiii Paraguay ndash Decree creating electronic invoicing system ndash published (October 5 2017)

News IBFDxxiv Peru ndash Collection of funds from VAT withdrawal account ndash regulation published

(September 19 2017) News IBFDxxv Orbitax Singapore Considering Expanding GST on E-Commerce (Novembre29 2017)


xxvi Slovak Republic ndash VAT amendments to be discussed by parliament (October 13 2017) News IBFD

xxvii Sweden ndash Bill exempting sales of ocean-going vessels from VAT submitted to parliament (October 3 2017) News IBFD

xxviii Ukraine ndash Ukraine Clarifies VAT Obligation for Consulting Services Supplied by a Non-Resident (September 21 2017) Orbitax Daily News

xxix United Kingdom ndash Soft drinks industry levy consultation (October 13 2017) News IBFDxxx Zambia ndash Budget for 2018 ndash details (October 3 2017) News IBFD

Privacy | Legal

You have received this message from KPMG LLP If you wish to unsubscribe from Inside Indirect Tax please click here If you wish to unsubscribe from all KPMG communications please click here

KPMG LLP 3 Chestnut Ridge Road Montvale NJ 07645


The following information is not intended to be ldquowritten advice concerning one or more federal tax mattersrdquo subject to the requirements of section 1037(a)(2) of Treasury Department Circular 230

The information contained herein is of a general nature and based on authorities that are subject to change Applicability of the information to specific situations should be determined through consultation with your tax adviser

The KPMG name and logo are registered trademarks or trademarks of KPMG International

kpmgcomsocialmedia

About Inside Indirect Tax13 22







mdash Lebanon Effective October 1 2017 Lebanon increased its standard VAT rate from 10 percent to 11 percent

The Americas

United States Mississippi Introduces Economic Nexus Standard for Remote Sellers

The Mississippi Department of Revenue recently finalized a new regulation that adopts an economic nexus standard for sales and use tax purposes The rule requires sellers lacking a physical presence in Mississippi to collect and remit use tax on sales of tangible personal property and digital goods if they have a substantial economic presence in in the state Under the rule sellers are considered to have a substantial economic presence if they purposefully or systematically exploit the Mississippi market and have made sales into the state that exceed $250000 during the prior twelve months A nonexclusive list of activities that constitute ldquopurposefulrdquo or ldquosystematicrdquo exploitation includes but is not limited to advertising to or targeting Mississippi customers through various means such as emails texts online banners and apps The rule becomes effective on December 1 2017 and applies to all transactions involving the sale of tangible personal property or digital goods occurring on or after that date However sellers remain liable for any tax collected but not remitted before December 1

Brazil ICMS Liability on Sale of Software in State of Satildeo Paulo Clarified

On September 21 2017 the tax authority of the State of Satildeo Paulo of Brazil issued guidance CAT 42017 in which it held that mass-produced electronic software or software programs are subject to the state value added tax ICMS regardless of how the software is transferred and sold to customers ICMS is due on the import of products and on the physical movement of goods including electricity ICMS also applies on interstate and inter-municipal transportation services and communications services In addition ICMS applies to the resale of products in the domestic market and when products are physically removed from a manufacturing facility As a consequence of the guidance the sale of software whether physically distributed downloaded streamed transmitted accessed through the cloud or otherwise transferred will be subject to ICMS To read a report (in Portuguese) prepared by the KPMG International member firm in Brazil please click here

Brazil State Representatives Agree on Application of ICMS on Digital Goods

On October 5 2017 the National Council of Treasury Policy (CONFAZ) which is composed by a representative of each state and a representative of the federal government approved Convecircnio ICMS 1062017 (the Agreement) relating to the ICMS collection procedure relating to digital goods and


























































































































































In Brief






































































Privacy | Legal







kpmgcomsocialmedia
































































































































































In Brief






































































Privacy | Legal







kpmgcomsocialmedia






































































Privacy | Legal







kpmgcomsocialmedia








Inside Indirect Tax - KPMG Institutes Indirect Tax ... taxes on cross-border sales. ... The validity...

Documents

Transcript of Inside Indirect Tax - KPMG Institutes Indirect Tax ... taxes on cross-border sales. ... The validity...