In accordance with the Turkish VAT Law, importation of goods and services is subject to VAT, and the taxpayer for the importation is defined as the importer. In other words, the importer of record is the party which imports the goods. Please note that tax ID is required for importation procedures; therefore, only a Turkish resident entity may conduct importation. Continue reading
Category Archives: Tax Knowledge
UK: Only the owner of the imported goods can deduct the import VAT as from 15 of July 2019
HMRC is aware of incorrect treatment by businesses whereby import VAT has been incorrectly deducted as input tax by non-owners of the goods. As from 15th July 2019, HMRC will only allow claims for input VAT deduction if the owner is the importer and pays the UK import VAT. In case the non-owner is the importer and pays the UK import VAT, HMRC will not allow an input VAT deduction. A transitional period to 15th July 2019 has been put in place for businesses to make any necessary changes and implement correct procedures. This is especially important for toll manufacturer, who are acting as importer and recover the import VAT paid. These toll manufacturer does not own the goods.
Toll operators import goods, process them and distribute them within or outside of the UK but to other EU countries (for instance for clinical trials). The toll operator does not take ownership of the goods and does not resell them. The only supply by the toll operator is of its services to its client not resident and not registered for VAT in UK (the owner of the imported goods).
Title to the goods at all times remains with the owners. However, the toll operator acts as ‘importer of record’ on UK import declarations, pays the import VAT to HMRC and receives the import VAT certificate (C79). HMRC has become aware that a number of UK toll operators who have paid import VAT on behalf of their not resident and not VAT registered customers have also claimed a corresponding deduction for input tax under section 24 of the VAT Act 1994. However, there is no provision in UK law for such deduction.
There is no evidence to suggest that the businesses concerned have knowingly applied the wrong treatment. In all cases seen by HMRC, the toll operator has dealt with the importation and paid or claimed the import VAT to provide an administrative and cash flow benefit to their customers, as part of the overall service they provide.
The correct procedure is for the owner to be the importer of record and reclaim the import VAT, either in accordance with section 24 of the VAT Act 1994 (if registered for VAT in the UK) or under the Thirteenth VAT Directive (86/560/EEC).
For further details please see here >
Image source: unsplash.com
KSA: 50 – 100% Excise Tax introduction on certain products
The General Authority of Zakat and Tax (“GAZT”) of the Kingdom of Saudi Arabia (“KSA”) announced recently that it will start applying a 50% Excise Tax on Sugar Sweetened Beverages (“SSBs”) and a 100% Excise Tax on electronic devices and equipment used for smoking, as well as the liquids used in electronic devices and equipment used for smoking.
The amended Excise Tax Implementing Regulations have been published in the Official Gazette on 15 May 2019, and enters into force with immediate effect, with the exception of the Excise Tax on SSBs, which will await a further decision by the GAZT Chairman. A GAZT spokesman has informally anticipated that the Excise Tax on SSBs is expected to take effect from 1 July 2019. Continue reading
CANADA: No more surtax on steel and aluminium as from 20, May 2019
On May 17, 2019, Global Affairs Canada released a joint statement with the United States, announcing the elimination (which became effective May 20, 2019) of all tariffs imposed by the United States under section 232 of the Trade Expansion act of 1962 (19 USC §1862) – duties on steel and aluminum, and all retaliatory tariffs imposed by Canada
Both countries have also agreed to terminate all pending litigation between them in the World Trade Organization, with respect to the section 232 duties on steel and aluminum and Canada’s retaliatory surtax. Continue reading
POLAND: Mandatory split payment as of September 1, 2019
On May 16, 2019 the Polish legislator published draft of amendments to the VAT act aimed at introducing mandatory split payment mechanism for selected goods and services in Poland. This is a follow up to derogation decision that granted Poland right to introduce mandatory split payment. Find below the most important information resulting from the draft legislation:
- the obligatory split payment applies only to transactions made between taxpayers (B2B), which are subject to VAT in Poland and with value exceeding 15 000 zł,
- the obligation to use the split payment mechanism will cover selected goods and services,
- foreign entities settling transactions by means of bank transfers subject to VAT in Poland will be obliged to open a bank account in Poland,
- new invoice layout requirements will be introduced in order to mark an invoice documenting delivery of goods / services subject to the mandatory split payment method,
- it will be possible to cover multiple invoices with single split payment operation (collective payment),
- funds accumulated on VAT account can be used to pay other tax liabilities (PIT, CIT, excise, customs duties) as well as social security (ZUS).
Goods and services covered by the mandatory split payment
According to the annex to the draft legislation, the split payment mechanism will obligatorily be applied to 150 product and service groups defined in accordance with the Polish Classification of Products and Services (PKWiU) from 2008.
In general, the following groups of goods and services can be distinguished:
- steel products, precious metals, non-ferrous metals;
- waste, scrap, recyclable materials;
- electronics, specifically: processors, smartphones, phones, tablets, net-books, laptops, game consoles, inks, toners, hard drives;
- fuels for cars, fuel and lubricating oils;
- greenhouse gas emission rights;
- building and constructions services;
- coal;
- sale of car and motorcycle parts.
Sanctions for lack of compliance
There are numerous sanctions that can be imposed for lack of compliance with using split payment when it is required. In case of:
- failure to include on the invoice information that transaction is subject to mandatory split payment regime, the invoice issuer may receive a fine of 100% of the VAT value resulting from such invoice,
- failure to pay in the mandatory split payment regime, the buyer may receive a penalty equal to 100% of the VAT value resulting from such invoice,
- failure to pay in the mandatory split payment regime, the buyer will not be entitled to treat such cost as tax deductible (from CIT / PIT perspective),
- failure to pay in the mandatory split payment regime, the person responsible for the occurrence of such a situation will be subject to sanctions resulting from the fiscal penal code (up to 720 daily rates).
Important matters
Taking into account the risk of imposing significant sanctions, both on the part of the supplier and the buyer, it will be crucial to properly identify the transactions covered by the obligatory split payment method and then comply with this regime. However, there are doubts about the transaction value, i.e. how to determine what triggers the 15 000 zl transaction limit (is this amount based on individual invoice, transaction group, payment) and how to identify certain goods and services covered by the mandatory split payment. Specifically, the way car and motorcycle parts were mentioned (as a reference to type of activity being wholesale and retail trade) will cause significant interpretation troubles for automotive industry.
Entry into force
The legislator planned that rules on the obligatory split payment become effective from 1 September 2019. Some provisions (for example PIT / CIT sanctions related with not using split payment) will take effect from January 1, 2020.
Necessary actions
In order to avoid sanctions and possible personal liability, every taxpayer who purchases or sells oods or services covered by the mandatory split payment should be prepared for introduction on this regime.
Such preparation should include at least:
- identification of goods and services for which split payment will have to be used (AP),
- identification of goods and services for which a VAT invoice issued should contain the
- information “split payment mechanism” (AR),
- establishing rules on recognizing when 15 000 zł threshold is exceeded,
- aligning payment and invoicing processes in order to achieve compliance with split payment rules.
If your booking, invoicing or payment processing is done via SSC, it will be particularly important to initiate changes of these processes early enough.
Another important matter is solvency. With cash flow impact by receiving only net values on regular accounts, funds accumulated on VAT account could become significant challenge over time. Especially business that are on VAT refund position should be aware of this.
For further details please contact
Tomasz Kassel, Partner
Tel. + 48 502 184 846
tomasz.kassel@pwc.com
Tomasz Pabiański, Director
Tel. + 48 502 184 952
tomasz.pabianski@pwc.com
Jakub Matusiak, Director
Tel + 48 502 184 468
jakub.matusiak@pwc.com
Image Source: unsplash.com
NEW ZEALAND: Proposed changes in Goods and Services Tax for telecommunications
The New Zealand Government has proposed to make changes to the goods and services tax (GST) telecommunications rules. The move is designed to bring New Zealand into line with OECD and international trends in relation to the provision of telecommunications services with focus on the customer’s usual place of residence. The Minister’s release (on 17 May 2019) and the officials’ issues paper can be viewed here. Continue reading
BANGLADESH: Implementation of the VAT and Supplementary Duty Act 2012 as of July 1st 2019
The reduced VAT rate and tariff value system are to be revoked in order to implement the single VAT rate system. However, it has been reported that the National Board of Revenue may implement multi-tier VAT rates instead of a single rate. Continue reading
