Bitcoin – the rise of virtual currencies and their VAT implications

In the last couple of years virtual currencies become more popular. Recently we can see that more and also well established businesses are accepting this as payment method every day, e.g. Dell, Overstock.com or Expedia – just to name a few completely different businesses. We already posted some updates on virtual currencies (here, here , here and here). In this update we focus on bitcoin, being one of the most widely known virtual currency and the VAT questions it has already triggered.
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Czech Republic – introduction of reduced VAT rate from 1 January 2015

The Czech Republic is going to introduce a new VAT rate into its VAT legislation with effect from 1 January 2015.

On 6 November, the president of the Czech Republic signed the amendment to the current VAT law introducing a VAT rate of 10% from 1 January 2015. As a result of this, the Czech VAT law will have two reduced VAT rates.
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EU 2015 VAT Changes – Results of PwC’s 2015 Impact and Readiness Survey

As indicated at our recent B2C 2015 work group event in Brussels PwC recently conducted a “2015 Impact and Readiness Survey” for which we invited businesses from across all sectors (telecom, broadcasting and eservice providers) and all geographical regions.We launched this survey with the aim of gathering data on the impact of the EU 2015 VAT changes on affected businesses. The survey also testes how ready businesses feel to be able to deal with the imminent changes.

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Czech Virtual Currency – Another Distribution step

The Czech virtual currency, Czech Crown Coin (officially named by the authors “CZC”) which started the distribution of the pre-mined CZC in August 2014, is distributing a next set of 100,000 CZC to the first 1,000 EU based individuals who have registered and obtained the so called “myID” via the official website of CZC. This should increase the amount of CZC in the circulation as well as to support its usage and importance on the global level.

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France – B2C 2015 VAT chages – free event in Paris – 3 November 2014

The French tax authorities together with the Enterprise Europe Network Paris Ile-de-France Centre and the European Commission will held a free of charge conference in Paris on 3 November 2014 to provide guidance on the new EU rules which will apply from 1 January 2015 regarding the B2C supply of telecommunication services, television and radio broadcasting, and electronically supplied services.

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Hungary – Creative taxation: Internet Tax proposed

Earlier this week the Hungarian government submitted its proposed tax bill for 2015. One of the most interesting changes is the proposed introduction of the “Internet tax” that will be imposed on Internet service providers at a rate of HUF 150 (approx. USD 0.60) for every gigabyte of data or part thereof. By way of example, downloading a movie in HD quality (8.5 GB) would attract a tax charge of approx. USD 5 or the download of a 6GB game would have an additional cost of approx. USD 4 according to the original version of the proposal. You may expect that providers will try to recharge this cost to their customers, which makes surfing even more expensive.

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Japan – Legislation proposed for new Japanese consumption tax (JCT) on cross-border service transactions

Current Rules

Japan’s current JCT regime was established in 1989 – before the rise of the digital economy. Accordingly, the taxation of B2C supply of eservices by non-established companies to Japanese customers was not considered and currently these are not subject to JCT.

This provides an unfair advantage to non-established eservice providers compared to Japanese businesses in this field, which has become more apparent since the JCT rate increased form 5% to 8%, with another increase to 10% estimated from 1 October 2015.

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Belgium – Bitcoin Trading Exempt from VAT … for now

In a recent decision issued for an online Bitcoin trading platform, the Belgian tax authorities have confirmed that the trading of Bitcoins and other virtual currencies is similar to the activity of an intermediary negotiating in securities and other negotiable instruments and, as a consequence, is exempt from VAT under the Belgian VAT code provision implementing Article 135(1)(d) of the EU VAT Directive. As a result, the activities should be treated as exempt from VAT and Bitcoin and alike trading platforms should not charge VAT to their customers with respect to their exchange services. On the other hand, those platforms have no right to deduct the input VAT paid in relation to their exchange activity.
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USA – Internet Tax Freedom Act (ITFA) temporarily extended through 11 December 2014

On September 18, 2014, President Obama signed House Joint Resolution 124, which includes provisions extending the Internet Tax Freedom Act (ITFA) through December 11. The Act was previously scheduled to expire November 1, 2014, and the extension gives Congress a chance to consider the ITFA’s long-term future during the lame-duck session after the midterm elections.

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October 1 – Pre-registration period for MOSS scheme starts

On 1 October 2014 the pre-registration period in which EU and foreign suppliers alike can register for the Mini One Stop Shop regime has started. This pre-registration can be made on the website of the tax authority of the EU Member State that is chosen by ebusinesese for MOSS registration.

For non-EU suppliers, this could be practically any country in the EU. For EU entities, the country of establishment will be the country of MOSS registration.

The websites of tax authorities from several countries are already up and running, however there are still EU countries, where the online registration is still not possible.

Any registrations made in the pre-registration period, will be effective from 1 January 2015.