Compliance Services

We previously communicated that the European Commission was busily engaged with a public consultation on the ‘VAT in the Digital Age’ initiative. The underlying aim of the initiative, as the name suggests, deals with how the EU’s fiscal, and specifically VAT rules, can be adapted alongside a more digitised working mechanism, and how technology can circumvent tax fraud, which in turn will reduce VAT gaps. It is hoped that a digitised platform can counter these problems and output a streamlined, automated and efficient working mechanism, coupled with cost benefits.

The public consultation covered multiple facets of the vision to fully digitise VAT.

On a high level, the following observations were collated during the public consultation:

• Most stakeholders negatively regard the current Digital Reporting Requirements (DRRs), implying that reform is a necessity
• Progress in the digitisation era is regarded slow, and EU intervention is paramount to accelerate progress in this area.

In terms of requisite action:

• Most stakeholders supported the introduction of EU level DRRs for intra-community transactions, with or without the inclusion of domestic transactions.

Clear consensus was not reached on the following issues:

• Recording data on VAT transactions in a standard digital format
• Adopting non-binding commission recommendations to introduce uniformity regarding reporting obligations across the EU
• Removing the requirement for Member States to request an explicit derogation for the introduction of B2B e-invoicing mandates.

The following specific issues were highlighted by respondents during the public consultation:

• Member States applying different VAT treatments, ranging from different rates, different treatment of electronically supplied and intermediary services, to different thresholds for the application of VAT to SMEs
• Problems with either double-taxation or non-taxation
• Problems concerning the definition of supplies, the status of the supplier and customer, and the place of supply
• Problems attributable to platform providers, for example, due to a lack of appropriate invoicing from their side, or the application of an erroneous VAT rate.
• Problems when dealing with non-EU counterparts, such as uncertainty over whether VAT should be applied, and if so, what rate this would be.

While the virtues of the One Stop Shop (OSS) and Import One Stop Shop (IOSS) were not extolled, it was acknowledged that these implementations have enjoyed moderate successes. OSS specifically allows online businesses to report certain B2C EU supplies in a single Member State. Similarly, the IOSS allows a taxable person to register in a single Member State and pay VAT on imported goods. Both schemes endeavour to reduce the compliance burden on taxpayers.

The schemes were commended for the following:

• minimising the need for businesses to hold multiple VAT registrations
• simplifying and facilitating VAT compliance
• reducing fraud and increasing VAT revenue
• modernising the VAT rules.

In terms of policy options:

• The strongest agreement among stakeholders was for the option to extend the OSS to cover all B2C supplies of goods and services by non-established suppliers. Only slightly less respondents agreed with extending the OSS to intra-Community supplies and acquisitions of goods, and to B2B supplies of goods and services, together with the introduction of a deduction mechanism into the OSS.
• More than half of responses were in favour of making the reverse charge available for all B2B supplies conducted by non-established suppliers, and with removing the 150 Euros threshold for the IOSS.
• However, the option of making the IOSS mandatory, either for all distance sales of goods above a certain threshold or for marketplaces only, did not have majority agreement.

The Commission’s summary report on the consultation can be accessed via the following link:

https://circabc.europa.eu/ui/group/cb1eaff7-eedd-413d-ab88-94f761f9773b/library/caee6205-b1d0-4705-8f64-213f4050e06a

A list of more detailed reports can be found below:

• Final report. Volume 1, Digital reporting requirements
• Final report. Volume 2, The VAT treatment of the platform economy
• Final report. Volume 3, Single place of VAT registration and import one stop shop
• Final report. Volume 4, Consultation activities.

All reports can be downloaded from the following website:

https://op.europa.eu/en/publication-detail/-/publication/a07ffdc4-0966-11ed-b11c-01aa75ed71a1/language-en

We recently communicated that the UK government was undergoing a public consultation relating to reporting rules for digital platforms. This was expected to provide a complex and detailed insight into the envisaged legislation relating to digital platforms.

The public consultation has now concluded. As previously indicated, the response is detailed and can be found here.

There are multiple reasons why a country may want to increase its VAT registration threshold. In June, we communicated that the Bulgarian government raised the VAT registration threshold to combat rising inflation.

The Czech government is proposing a bill to double the VAT registration threshold by a sizeable margin- from CZK 1 million to CZK 2 million (c. 85,000 Euros) per annum. The European Council has provided permission for the Czech government to raise its VAT registration threshold.

If successfully implemented, this would take effect from 1^st January 2023 until 31 December 2024.

The threshold does not apply to non-resident businesses, who must register immediately if providing certain supplies.

We previously communicated that Switzerland is proposing to increase its VAT rates.

To this effect, Switzerland will hold a further referendum to determine whether the VAT rate increase will be implemented.

Tungsten Network is monitoring any tax rates changes in Switzerland. Switzerland is a compliant market at Tungsten and our solution will support any new tax rates introduced by the Swiss government.

Greece is introducing a considerable number of tax rate changes from 1^st July 2022. These are summarised below.

For the following goods, the rate is set at 6% until 30 June 2022 but will change to 24% from 1^st July 2022:

• Protective masks and gloves for medicine (to protect against viruses and prevent the transmission of diseases – hospital and private use)
• Soap and other preparations for personal hygiene
• Antiseptic solutions, antiseptic wipes and other antiseptic preparations
• Denatured ethyl alcohol which is intended as a raw material to produce antiseptics
• Pure ethyl alcohol of undenatured agricultural origin with an alcoholic strength of 95%, available bottled for retail sale.

The following goods are currently set at 13% until 30 June 2022 ; this rate will be extended until 31 December 2022:

• Non-alcoholic beverages. The rate of tax on goods of these tariff classes was previously set at 13%.

The following items are set at 13% until 30 June 2022 and will be set to 24% starting from 1^st July 2022:

• The introduction of objects of art, collections or antiquities
• The delivery of specific objects of the artistic value

Relating to specific services, rates can be observed as per the following:

• Movie tickets are set at 13%
• Tickets for theatrical performances and concerts for which the tax rate is set at 6%
• The carriage of persons and their luggage are set at 13%
• Tickets for zoos set at 13% currently
• The operation of cafes, cafes, patisseries, restaurants, steakhouses, wineries and other related businesses, with the exception of entertainment establishments, with the exception of the supply of beverages containing alcohol in any proportion are also set at 13%.

All the above-mentioned services receive the extension until 31 December 2022.

Greece currently does not have a Business-to-Business (B2B) e-invoicing mandate, although in the Business-to-Government terrain, Directive 2014/55/EU made it mandatory for the central government to receive e-invoices from private sector suppliers.

However, there has been recent clarification from the Greek tax authorities, the Independent Authority for Public Revenue (IAPR) which has shifted some of the e-invoicing obligations to Greek suppliers.

This clarification provides that suppliers who have elected to use Electronic Data Provider Services and have submitted the Declaration of Excusive Data Issuance through a Provider must issue e-invoices. In effect, this imposes a partial B2G mandate on select suppliers.

From 1^st July 2022, supplies of goods and services between Italy and San Marino will be subject to mandatory e-invoicing. Up to this point, e-invoicing was optional between the two countries.

The mandatory e-invoicing will be facilitated via the Sistema di Interscambio (SdI).

The San Marino tax office will validate invoices received via the SdI and, if compliant, transmit these to San Marino customers.

There will be some changes required to the XML submitted to the SdI to accommodate supplies to San Marino, including changes to the Codici Destinario, as invoices may now be directed to the San Marino Tax Office.

Tungsten Network can assist with transactions relating to supplies of goods and services to San Marino.

Inflation continues to soar across Europe, driving governments to address their fiscal operations and enact temporary VAT cuts.

Considering rising inflation across the country, Italy has further extended the temporary VAT reduction on gas until 30 September 2022.

The Italian tax authorities have introduced some changes relating to the stamp duty deferment threshold for e-invoices.

Semplificazioni Law Decree no. 73/2022 states that for e-invoices issued with effect from 1 January 2023, the threshold for deferment of payment of stamp duty for the first two quarters of the year will be raised from 250 Euros to 5,000 Euros. This will affect the timeframes within which stamp duty can be paid.

Provided the amount related to stamp duty on electronic invoices issued in the first quarter does not exceed 5,000 Euros, it can be paid within the deadline for the payment of the second quarter liability (i.e. 30 September).

If the amount relating to stamp duty on electronic invoices issued in the first and second quarters does not exceed 5,000 Euros, it may be paid by the deadline for payment of the third quarter liability (i.e. 30 November).

Italy has extended the scope of taxpayers subject to mandatory e-invoicing in line with the following:

• 1^st July 2022: E-invoicing is mandatory for all businesses exceeding a turnover of 25,000 in the preceding year
• 1^st January 2024: E-invoicing is mandatory for remaining businesses.

Tungsten Network implemented the e-invoicing solution to facilitate domestic transactions in Italy via the Sistema di Interscambio (SdI) in January 2019.