OECD – BEPS project – Final report on Action 1: Addressing the Tax Challenges of the Digital Economy

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 analytics – PwC Switzerland’s position paper “Business Booster: Data Analytics”

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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EU – Review of the content and format of the EU Commission’s Mini One Stop Shop (MOSS) web Portal – Have your say

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.

Australia – GST treatment of cross-border transactions – GST changes to B2C and B2B supplies – new exposure draft released

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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US – The disparate state and local tax treatment of digital streaming services

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

South Korea – proposed change to the scope of the supply of electronic services – B2B supplies may be excluded

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.

Australia – changes to the GST rules for online sales of goods

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

New Zealand – Taxing by the megabyte – proposed changes to the GST treatment of the digital economy

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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EU – Advocate General Opinion – Bitcoin dealing VAT-free as currency exchange?

ECJ Advocate General Kokott has recommended the Court to consider dealing in bitcoins for a commission to be a service exempt from VAT under the currency dealing provision (link – to the German version of the opinion. In English it is not yet available) .

A Swedish dealer in bitcoins (buying and selling bitcoins in exchange for Swedish kroner) was in dispute with the tax office over the VAT liability on the currency exchange. He maintained that he was providing a VAT exempt service of currency exchange, whereas the tax office disputed the point because bitcoins are not legal tender. It was also pointed out that bitcoins are not subject to any form of government supervision or control and offer no guarantee of continued usefulness to the holder. Find out more

Japan – Tax authorities’ guidelines for the new JCT rules as of 1 October 2015 are now available in English

Further to our previous posts on this topic (here, here and here) the Japanese National Tax Agency (NTA) published on-line its guide in English on the Japanese Consumption Tax (JCT) obligations on the cross-border supply of electronic services.

You can access the English version of the document intended for foreign businesses here. The NTA also published some further documents here on this topic, however please note that all these documents “are used only for explanations”.

For further information please contact Kotaku Kimu of PwC Japan or me.