Featured article: Taxation of B2C Telecom Broadcasting and Electronic Services under EU VAT from 2015

On 21 June 2013, the European Council reached political agreement on implementing rules for taxing B2C telecommunications, broadcasting and electronically supplied services from 1 January 2015.

In this article, Sophie Claessens and Ine Lejeune give an overview of the new implementing provisions and what additional guidance can be expected from the Explanatory Notes that are currently being drafted by the European Commission.

Publisher/Publication: IBFD, International VAT Monitor, 2014 (Volume 25), No. 1; first published online on 16 January 2014.

South Africa: Update on new VAT rules for eservice suppliers

In line with the new VAT legislation, set to take effect on 1 April 2014, electronic/digital services (“eservices”) supplied by a business outside South Africa to a recipient in South Africa will require the supplier to register for Value-Added Tax in South Africa.

The recipient is deemed to be located in South Africa if:

  • that recipient is a resident of South Africa or
  • where payment originates from a bank registered or authorized in terms of South African law.

It is important to realize that this definition applies supplies made both to B2B (Business – to – Business) and B2C (Business – to – Consumer).

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Luxembourg: Infringement procedure on VAT rates for ebooks

Not long ago we have updated you about the EU Commission’s infringement procedure against France related to their application of the super reduced VAT rates for ebooks. France and Luxembourg share the opinion that ebooks should be taxed as their physical contra-parts (as books), whereas the EU Commission has the opinion that under the current VAT Directive rules ebooks should be regarded as all other eservices and therefore taxed with the standard VAT rate.

Following the published case against France two weeks ago, the Court of Justice of the European Union (“ECJ”) has also published the EU Commission’s infringement procedure against Luxembourg. Some more information are available at GlobalVATonline.

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France: Infringement procedure on VAT rates for ebooks published

We have been discussing the developments about the EU Commission’s infringement procedure against Luxemburg and France related to their application of the super reduced VAT rates for ebooks several times in the past (last time here). The EU Commission is of the view that under the current VAT Directive rules ebooks should be regarded as all other eservices and taxed with the standard VAT rate. Luxemburg and France are of the opinion that ebooks should be taxed as their physical contra-parts – i.e. as books.

As reported on PwC’s GlobalVATonline, the Court of Justice of the European Union (“ECJ”) has recently published the EU Commission’s infringement procedure case against France. There is no official news about the infringement procedure case against Luxembourg available at this moment.

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Featured article: EU – small change, big impact

The start of 2015 will bring the biggest single change to the EU VAT regime that telecom operators, broadcasters and others that provide eservices have seen in decades.

The legislation is expected to have a profound impact on e-services providers, particularly on their pricing and commercial strategy. As providers of these services take steps to adapt to the new legislation, the result will be either a sharp increase in the prices charged to many consumers or a cut in suppliers’ profit margins – neither of which is a desirable outcome.

In practice, companies based in the EU will be affected the most, as the rules change mostly for those suppliers. The changes will also affect non-EU suppliers. The legislation is expected to have a profound impact on eservices providers, particularly on their pricing and commercial strategy

Stephen Dale, Martin Blanche and Johnathan Davies provide an overview on the changes the new EU VAT rules will bring to telecom operators, broadcasters and other providers of eservices from 1 January 2015. Their article “EU: small change, big impact” (originally published in Tax planning international – Indirect taxes: Volume 11, Number 10, October 2013) focuses on possible outcomes for eservice providers.

USA: Taxing Internet commerce: What global retailers need to know

With the availability of high speed Internet access, smart phones, and tablets, it is not surprising that the global retail industry is experiencing a fundamental shift in how individual consumers research, select, and eventually purchase products. Individuals are shopping through a variety of different channels, some physical, some virtual, making for an easier and more streamlined shopping experience. E-commerce has quickly become a key channel for retailers to reach their customers. This embrace of digital technology and social media is creating a new landscape for retailers as they ensure that their policies and practices support these changes. These shifting business models are creating unique consumption tax issues for global retailers selling within and into the United States.

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USA: Illinois Supreme Court rules click-through nexus law pre-empted by Internet Tax Freedom Act

On October 18, 2013, in a 6-1 decision, the Illinois Supreme Court ruled that the state’s click-through nexus law is pre-empted by the federal Internet Tax Freedom Act’s ban against ‘discriminatory taxes on electronic commerce.’ The court did not reach the issue regarding whether the click-through nexus provision violated the US Commerce Clause. [Performance Marketing Association, Inc. v. Hamer, Ill. Sup. Ct., #114496 (10/18/13)]

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