Businesses in Costa Rica have only a few months to prepare for the introduction of VAT while we know more about the UAE's planned VAT recovery scheme for foreign businesses. And refund applications to and from the UK will only be possible until 29 March.
TMF Group's global tax team is pleased to bring you a round-up of some key VAT news and wider tax bulletins from the past month. If you have questions or need more information about any of the below, simply make an enquiry with us.
UAE - VAT recovery for foreign businesses
The UAE Federal Tax Authority (FTA) has published further details on the planned scheme to allow VAT recovery for foreign businesses. In the guide the FTA sets out four conditions which foreign firms will be required to fulfil in order to be able to recover the VAT incurred.
- The foreign businesses must not have a place of establishment, or fixed establishment, in the UAE or in any of the other VAT-implementing GCC states.
- They must not be considered a taxable person in the UAE.
- They must be registered as an establishment with a competent authority in the jurisdiction in which they are established.
- They must be from a country that implements VAT and that reciprocates VAT refunds to UAE businesses under similar conditions.
The period of each refund claim shall be a calendar year (eg. 1 January 2018 - 31 December 2018). For claims in respect of the 2018 calendar year, refund applications can be made from 1 April 2019. The opening date for refund applications in subsequent calendar years will be 1 March (ie. for the period 1 January 2019 - 31 December 2019, applications will be accepted from 1 March 2020).
The minimum claim amount of each VAT claim that can be submitted should be AED 2,000 (approx. EUR 480). This can comprise of a single purchase or multiple purchases.
The FTA will issue more detailed guidance on the application process in the coming months although it is expected to resemble the VAT refund scheme in the EU. We will of course keep you updated. Clarification is also still to come on whether original tax invoices (eg. hotel bills) will be required as part of the application, so for now it is advised that these are retained.
Costa Rica - draft regulations for new VAT
Costa Rica's Ministry of Finance has published draft regulations for the implementation of the country's new VAT system. The new system, which was introduced by Law No. 9635 of 3 December 2018, will replace the current sales tax system starting from 1 July 2019.
The draft regulations expand upon the rules introduced in the Law, including detailed rules concerning the scope of supplies subject to VAT, including cross-border digital services, the rules for taxable events and time of supplies, the taxable basis, the rates, the registration and return requirements, tax credits, etc.
The draft regulations also contain certain transitional provisions for going from the sales tax system to the VAT system.
Poland - VAT split payment system
The EU Competitiveness Council has approved a Council implementing decision authorising Poland to introduce a split payment system for the payment of VAT.
Poland's split payment system is meant to reduce VAT fraud by splitting B2B payments so that the VAT due on an invoice at the time of payment is directly deposited into a restricted VAT account supervised by the tax authority, and the net amount is deposited in the supplier's normal bank account.
The system was initially implemented on a voluntary basis from 1 July 2018, with Poland planning to make the system mandatory from 2019. With the implementing decision, Poland is now authorised to make the system mandatory from 1 March 2019 to 28 February 2022. It is expected that rules for making the system mandatory will be issued soon.
Norway - VAT recovery for foreign businesses
The Norwegian Tax Administration has announced, with immediate effect, that foreign businesses will no longer need to provide original invoices to accompany their VAT refund applications. Instead, they will accept copies of invoices, credit memos and print-outs of electronic invoices received by email.
Norway will not return submitted invoices and supporting documents after processing, unless this is specifically requested by the applicant.
Due to the changes the application form, guidelines and website will all soon be updated but until otherwise informed, the current application form should be used. The deadline for refund applications relating to calendar year 2018 remains 2019.
EU and UK - cross-border VAT recovery
As we discussed in a previous article, EU Directive 2008/09/EC (formerly the 8th Directive) allows EU businesses to claim refunds of VAT incurred in other Member States through a coordinated electronic system. If the United Kingdom leaves the European Union without an agreement on 29 March 2019, then UK businesses will no longer have access to this EU VAT refund system. Conversely, EU businesses will no longer be able to make VAT recovery claims to the UK through their national portal.
February saw the publishing of guidance for businesses by tax offices across the EU, including from Her Majesty's Revenue and Customs (HMRC) in the UK. You can read the full details here.
EU - reduced VAT on electronic publications
The Swedish government has submitted a legislative proposal to reduce the VAT rate on electronic publications from 25% to 6%. The 6% rate would apply to the electronic equivalents of publications which, in printed form, are taxed at the 6% rate, including newspapers, magazines, and books. However, publications that that consist mainly of advertising, video, or music content would not be covered by the reduced rate.
As proposed, the reduced 6% rate would apply from 1 July 2019.
This follows similar proposals and legislation by Austria, Luxembourg, the Netherlands and Portugal. All of which follows the decision taken by the European Commission last year, amending the VAT Directive, to allow for the alignment of VAT rates for electronic and printed publications at national level within the EU.
Tax compliance is among one of the biggest challenges for international businesses, and failure to adhere to changing local rules poses a notable threat.
Businesses in Costa Rica now have only a few months to get ready for the introduction of VAT and will need to assess the preparations they need to make.
If you are a company who does a lot of business in the UAE and wish to reclaim VAT incurred on your employee expenses there, you will need to make sure you are in possession of the original invoices/receipts.
Meanwhile, a no deal Brexit would mean electronic VAT refund applications to and from the UK will only be possible until the 29 March.
TMF Group's VAT services team and in-country tax experts can provide you with support in understanding the changing rules, and what they mean for your enterprise.
Contact us to find out how we can help.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.