On 6 May the EU Commission announced its strategy for Digital Single Market. The aim is to further simplify and harmonize the applicable VAT and legislative rules to e-biz and e-commerce (in particular re telecommunication and copyrights) as well as to reduce the administrative burden companies are facing in this field.
Korea joins the group of countries which require non-established companies to register and account for on their B2C sales of electronic service into South Korea.
The VAT law has recently been amended to apply VAT to the supplies of electronic services (e.g. applications, games, music, films, electronic documents, software, etc.) purchased from non-resident service providers (i.e. offshore app developers or through offshore open markets app stores).
The Belgian tax authorities submitted questions to the VAT Committee regarding the notion of electronically supplied services as referred to in the EU VAT Directive and the Implementing Regulation, the possible interaction of this type of services with other services and the issue of VAT exemption of such services.
On 1 January 2015, the new EU 2015 VAT rules came into effect changing the place of taxation in respect of all supplies of telecommunications, broadcasting and e-services to consumers in the EU, from the (single) place where the supplier is located to the (multiple) places where the customers belong.
Following the recent National Budget speech in South Africa, various proposals were tabled for consideration including a proposed amendment to the Electronic Services Regulation No. 37489, dated 28 March 2014.
Albania joined the group of countries which require non-established e-service providers to register for VAT for supplies made to private individuals.
Effective from 1 January 2015 the Albanian VAT legislation deems the place of supply of “telecommunication, transmission and electronic services” to non-taxable persons to be where the non-taxable person receiving the service is “placed, has a permanent address or resides usually”, regardless of the place where the supplier is established.
The court held that, in line with the VAT Directive and Implementing Regulation, e-books qualify as electronically supplied services, and as such reduced VAT rates cannot be applied. Therefore, the VAT treatment of printed books (or more precisely, “books on of all physical means”, according to the VAT Directive), which are taxable at the reduced VAT rate in most EU countries, cannot be extended to e-books. In this respect, the ECJ also quoted its previous decision in the Finnish K Oy case, in which the court decided that the reduced VAT rate may be used for the sale of books on CDs or USB siticks, as these are “physical means”.
Accepting the ECJ’s argumentation and strict interpretation of the relevant legislation, the only option to use the reduced VAT rate for e-books as well, is to change the legislation. This is likely to be done as part of an overall review of the VAT system, which will be a longer process.
The Swiss Federal Council has published its commentary to the partial revision of the VAT Law. If the draft legislation is approved by the Swiss parliament, the changes will come into effect on 1.1.2016. Among other changes we set out below those which are most relevant for ebiz & e-commerce.
In Iceland the reduced VAT rate applicable to e-books and electronically published music increased from 7% to 11% as of 1 January 2015. Therefore, it must be ensured that you account for VAT on such sales at the appropriate rates. You can access further information of the overall Icelandic tax rules in 2015 here.
2015 seems to start with book related VAT news in the EU. After the ECJ’s judgment in the K Oy case (C-219/13) which we previously discussed, the Finnish Supreme Administrative Court (“SAC”) delivered its ruling at the end of December. The SAC held that the standard Finnish VAT rate (currently 24%) applies to books on other physical means of support such as a CD, CD-ROM or memory stick.The ECJ left it to the national courts to decide whether fiscal neutrality (i.e. the same VAT treatment) is applicable to printed books and books published on other physical means. Even though the ECJ judgment also appreciated that this can also be impacted by the level of penetration of new technologies in the various EU Member States.
The SAC followed the argumentation of the ECJ and held that books on other physical means of support are not similar to printed books. According to the Finnish court the other physical means do not satisfy the same needs of the average consumer and therefore they cannot be subject to the reduced VAT rate. The SAC argues that books on physical means of support have a closer link to e-books downloadable from the internet, to which reduced VAT rates cannot be applied based on the EU legislation. As a result the SAC concluded that the different VAT treatment of printed books and books on other physical means of support does not offend the principle of fiscal neutrality.