Australia, as well as many other jurisdictions including New Zealand and Switzerland, are implementing new rules regarding the application of the goods and services tax (GST) or value added tax (VAT) to the supply of low value goods to consumers.
A significant GST matter reflecting brave new policy globally
The NZ Government announced last week that it is seeking consultation on the best way to collect GST on online purchases, by private NZ consumers, of imported low value goods (LVGs) under NZ$400 (approx. USD 280). If enacted, the new rules will apply from 1 October 2019.
This is a significant issue which has been discussed by the OECD, governments and regulators around the world. If enacted as currently proposed, the new LVG rules will be broadly consistent with the introduction of NZ’s remote services rules (implemented in October 2016).
The NZ remote services (RS) rules have been in force since 1 October 2016 and are regarded as a remarkable success by NZ Inland Revenue. Over 150 offshore sellers have registered and more than NZ$125 million of annual GST has been generated – the GST collected is more than 4 times the original estimates. NZ Inland Revenue deserves credit for the informative education campaign on the RS rules and efficient service when the rules first came in.
On 9 November 2016, India`s Central Board of Excise and Customs (CBEC) announced the new arrival of the service tax on cross-border business-to-consumer (B2C) services via cross-border e-commerce transaction.
The new digital tax regime came into effect on 1 December 2016, whilst foreign companies are yet to be effected by the service tax rules for digital content, their Indian counterparts have incurred a 15% charge.
In accordance with our posts (here and here) on the new GST rules proposed to be effective form 1 October 2016 we would like to update you that PwC New Zealand has recently been advised by New Zealand Inland Revenue Policy that the standard legislative process will not be followed and the passage of the law will be accelerated.
As next step it is expected that the proposed draft legislation will be passed by the New Zealand Parliament under urgency in April 2016. We do not expect major changes to the draft law so businesses can already start / continue with their preparation for the new rules now. For convenience, please see below updated timeline until the go live date of 1 October 2016. Find out more
The Danish Government has widen the Tax Authorities’ information collection powers, by enabling it to be able to request payment information in connection with foreign suppliers who supply goods via distance selling, on-line e-commerce or supply electronic services to private individuals in Denmark. The law was accepted by parliament the 21 December 2015 and is in force as of 1 January 2016.
The intention behind the law is to protect the Danish VAT revenue and to ensure that Danish companies are able to compete on pricing with their foreign counterparts and to minimise VAT leakage.
Russia can be the next in line to join the countries that impose VAT on the B2C supply of electronic services by non-established service providers. A draft legislation that would require foreign companies to start charging VAT on internet / digital services provided to individuals is currently being considered by the Russian State Duma.
According to the draft law, digital services provided by foreign companies to Russian individuals should be regarded as subject to Russian VAT even if currently such companies are not tax registered in Russia.
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.
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.