Further to our previous post the New Zealand Government submitted its legislative proposal in relation to the GST law reform on offshore online purchases of services.
The Government has followed the modern VAT/GST practices and OECD recommendations and has decided to reform the GST system. The reforms focus on two main areas:
- Digital products and cross border services, in respect of which draft legislation proposes imposing GST on digital products and other services purchased by New Zealand private consumers from offshore sellers. The new rules will apply from 1 October 2016.
- Low value imported goods, where a consultation paper is being worked on regarding the options to impose of GST and duties on low value imported goods. PwC New Zealand expects the document to be released in April 2016.
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The Court of Justice of the European Union delivered its judgment earlier today in the long-awaited case on whether Bitcoin exchange services are considered to be VAT exempt services. The Court followed the earlier opinion of the Advocate General and confirmed that the exchange of Bitcoins into conventional currencies and vice versa in return for a exchange commission falls within the VAT exemption for transactions concerning currency, bank notes and coins used as legal tender provided by the European VAT Directive.
This judgment was made on the grounds that Bitcoin (as a virtual) currency has no other purpose than to be a means of payment and that it is accepted for that purpose by certain operations.
You can access the judgement here.
The OECD’s Base Erosion and Profit Shifting (BEPS) project started in 2013 amid growing concern of tax planning used by multinational enterprises (MNEs) to artificially reduce taxable income / shift profits to low tax countries by benefitting from discrepancies between country specific tax rules.
OECD members and G20 countries defined an Action Plan of 15 items to address the key taxation challenges of today’s global economy. After two years of intensive work and consultation with different stakeholders all actions are now completed.
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Data and big data have been a hot topic for a while. The increased spread of the Internet in the past decades generated a wealth of data, which can be of tremendous value and it is essentially a new asset class for businesses, if utilized properly.
Data-savvy businesses are using data analytics to increase the speed and quality of their decision making process.
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As part of the current efforts to support the smooth implementation of the 2015 Place of Supply rules (Council Directive 2008/8/EC) and the functioning of the MOSS portal, the Commission is looking for inputs and suggestions to improve the quality of the information presented on the MOSS web Portal.
The quote is from the EU Commission’s survey site where you can submit your comments by Friday, 30 October 2015. The participation in the survey should not take longer than 15 minutes.
Treasury has released a second exposure draft (ED) legislation on the Government’s integrity measures to extend the GST to imported digital products and other services. The ED also seeks comments on provisions to give effect to the announced measure relating to GST cross-border business to business transactions and the ‘connected with Australia’ rules.
Treasury has noted that as a result of feedback from consultation (including feedback from a number of international suppliers that have had experience in dealing with similar provisions in other jurisdictions), changes have been made to the content of the earlier exposure draft. This is especially in relation to the Australian Consumer test and also the operation of the intermediary provisions.
There is still an opportunity to make submissions on these measures and given that Treasury has appeared to take onboard a lot of the feedback obtained, impacted taxpayers should use this opportunity to make any further comments on the ED to Treasury by Wednesday 21 October 2015.
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In recent months, multiple jurisdictions have issued guidance regarding the taxability of digital streaming services. These developments signify a growing trend by states to address whether and how such products and services should be taxed. Similar to other trending areas, such as Software as a Service (SaaS), states and cities must initially determine how to classify digital streaming based on existing state and local tax rules. As the following recent developments illustrate, companies offering digital streaming services, as well as consumers of such services, should be aware of the potential for divergent tax determinations across the different states. Find out more
We reported in our initial post on the South Korean VAT rule changes regarding the supply of electronic services by non-established service providers (effective from 1 July 2015), that the legislation subjected both B2B and B2C supplies to VAT under the new rules. There has been controversy whether the legislation really intended to apply the same treatment to B2B supplies, as to B2C.
The recently submitted Korean tax reform proposal for 2015 brings clarity in this regard by inserting a provision that B2B supplies of electronic services (as defined) will not be subject to the new VAT rules and they remain taxable by Korean business customers under the reverse charge mechanism.
For further details on the above and other proposed tax changes please refer to PwC Korea’s newsletter. Alternatively, please contact Changho Jo of PwC Korea or me.
The Australian Federal Treasurer announced yesterday that it will be discussing GST measures with State Treasurers today with a view to announcing changes to the Australian GST rules for online sales of goods into Australia. You may be aware that currently goods sold into Australia under A$1,000 (approx. USD 730) are not subject to GST or duty.
At this stage, we do not have any details of the precise changes, but on the basis of statements made by the Treasurer, it is assumed that the measures are likely to involve a requirement for a non-resident seller to register and account for GST on the sales of all goods into Australia. Such a change may not impact on the current import rules, potentially meaning that goods imported into Australia below the current A$1,000 low value threshold could continue to remain free of customs duties. Find out more
As widely anticipated, the Government of New Zealand has released a discussion document on the GST treatment of digital products and other services purchased online by New Zealand consumers. The analysis in the discussion document is based on the OECD guidelines for applying GST to cross-border services and intangibles (e.g. music, movie, and game downloads).
In relation to imported goods, the Government has indicated that various challenges exist to devising a solution for low value goods imports (covered by the current so-called $400 threshold or the minimum duties / taxes $60 concession). Although the goods solution is expected to take more time, work is progressing on a solution for collecting duty / GST on imported goods in the most efficient way.
According to PwC New Zealand the discussion document demonstrates that the Government and policy makers have a desire to keep the GST model current for the digital economy. This is in line with recent OECD guidelines and developments in Australia, Europe, Japan, South Korea, and South Africa. The document also addresses matters of sound tax policy, tax leakage (estimated at $180 million per annum and growing) and fairness. The measures will go a long way to ensuring that consumption in New Zealand is taxed in the same way as domestic purchases of goods and Services.
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