Worldwide: November VAT Roundup: Updates From Russia, Germany, Bahrain And New Zealand

Last Updated: 12 December 2018
Article by Rob Hutchinson

Bahrain's VAT registration deadline is fast-approaching while Russia is introducing VAT on B2B digital supplies. And operators of online marketplaces in Germany face new obligations from January.

TMF Group's global tax team is pleased to bring you a round-up of some key VAT news and wider tax bulletins. Have questions or need more information about any of the below developments? Simply make an enquiry with us.

Bahrain - VAT registration deadline

As we informed you in our October round-up, the Kingdom of Bahrain will be the third Gulf Cooperation Council (GCC) member state to introduce VAT when it comes into force from 1 January 2019.

Further details have now been released. These include:

  • The VAT rate for Bahrain is set at the standard GCC rate of 5%, however a zero rate and exemption can apply in certain cases. VAT may also be suspended if imported goods are under a customs suspension.
  • Companies supplying taxable goods or services in Bahrain must register, as set out in the GCC unified agreement, when annual revenue is more than USD 100,000. Those with annual revenue between USD 50,000 and 100,000 can optionally register whilst voluntary registration is possible if expenses exceed the threshold. The voluntary registration option is designed for start-up businesses with no turnover to enable them to register for VAT.
  • Contracts signed to provide taxable supplies to the government sector should be treated as zero-rated supplies, even if they will be fully or partially submitted after the start of VAT in Bahrain. This zero-rating should continue until the contract renewal date, or 31 December 2022.

You can read a full summary here, and register to access our on-demand webinar on VAT in the GCC.

Russia - VAT on B2B digital supplies

Russia has amended its VAT rules to abolish the reverse charge that applies for the supply of digital services to Russian business customers (B2B) - for example, music, videos, cloud software and storage, online advertising - by foreign suppliers.

Under the existing rules, foreign companies supplying B2B digital services don't need to register with the Russian tax authorities. In these cases, VAT is payable by Russian business customers via the reverse charge mechanism.

However, from 1 January 2019, non-residents of Russia that supply B2B digital services will be subject to tax registration and local VAT filing requirements, as they are already required to do for B2C digital services supplied to individual Russian consumers.

EU - alignment of VAT rules for publications

The European Economic and Financial Affairs Council has announced the adoption of a Council Directive allowing for the alignment of VAT rules for electronic and physical publications.

Under current rules, electronic publications ('e-publications' or 'e-books') are considered electronically-supplied services that must be subject to standard VAT rates, while physical publications may be subject to reduced rates.

With the new Directive, EU Member States will be allowed to apply the reduced, super-reduced, or zero VAT rates to electronic publications that they apply to physical publications.

You can read the full press release here.

Germany - VAT liability for online marketplaces

The German Federal Cabinet has approved the Annual Tax Act 2018, effective from 1 January 2019. It includes the introduction of a VAT liability for operators of online marketplaces and the obligation to keep records regarding certain vendors without a German VAT number.

This will require the owner of an electronic marketplace to record additional information including the full name and address of the suppliers on the marketplace, place of dispatch and arrival of the supply of goods and, importantly, the beginning and end date of a newly introduced certificate proving the VAT registration status of the supplier in Germany (issued by the responsible German tax office, valid for at most 3 years).

The online platforms will be held liable for any unpaid VAT unless they adhere to the information collection requirements or exclude non-compliant third-party sellers from the platform

European Commission - November VAT Infringements Package

The European Commission has released its latest infringements package. Reasoned opinions and letters of formal notice have been sent and we can address some of those relating to VAT.

  • Infringement proceedings on tax breaks being applied in the yacht and aircraft sectors of Italy and the Isle of Man, which the EU believes generate major distortions of competition. As such, the Commission has sent a letter of formal notice to Italy for not levying the correct amount of VAT on the leasing of yachts. It has also sent a reasoned opinion over Italy's system of exemptions for fuel used to power chartered yachts in EU waters. Meanwhile, a letter of formal notice was sent to the UK concerning the Isle of Man's VAT practices regarding supplies and leasing of aircraft. For more information, please refer to the full press release.
  • The Commission has sent a letter of formal notice to Romania for applying a split payment mechanism for VAT. Since 1 January 2018, Romania has applied this alternative VAT collection mechanism where VAT is paid to a separate blocked account, causing a major administrative burden for companies doing business there. This arrangement is mandatory for certain businesses, which are required to open a separate, blocked VAT bank account. Their customers must split the payment of the invoice by paying the VAT separately to the VAT account of the supplier. The measures run against both EU VAT rules (Council Directive 2006/112/EC) and the freedom to provide services.
  • The Commission sent a letter of formal notice to Italy as its legislation on the price of fuel in the Lombardy region does not respect EU law. Italian tax rules allow for a reduction of the VAT rate applied to fuel the closer the refuelling station is to the border with Switzerland. This results in two different VAT rates on the same product depending on where the product is purchased. Such legislation generates distortions of competition and runs against the provisions of common EU rules (VAT Directive, Council Directive 2006/112/EC).

New Zealand - GST legislation for offshore suppliers

New Zealand Inland Revenue has announced that legislation for the introduction of new rules for Goods and Sales Tax (GST) on low-value imported goods has been introduced in Parliament. The new rules include requirements for offshore suppliers to register, collect, and return New Zealand GST on goods valued at or below NZ$1,000 when supplied to consumers in New Zealand.

The Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill proposes that when an offshore supplier, such as a website or an online marketplace, has annual sales to New Zealanders above the NZ$60,000 GST registration threshold, they will have to register for GST. The change would apply to imported goods valued up to NZ$1,000 and is proposed to come into effect from 1 October 2019.

Key takeaways

With tax compliance among one of the biggest challenges for international businesses, failure to adhere to changing local rules poses a notable threat.

Businesses in Bahrain with annual revenue above US$100,000 now have less than a month to prepare for the introduction of VAT, and will need to assess the preparations they need to make.

If you are a business that supplies B2B digital services to Russian companies, you will be subject to tax registration and local VAT filing requirements from 1 January 2019.

Meanwhile, should you be an online marketplace in Germany you will need to prepare for your new obligations which also begin in the new year.

Our VAT services team and in-country tax experts can provide you with support in understanding the changing rules, and what they mean for your enterprise.

Contact us today to find out how we can help.

Learn how our accounting and tax services help drive efficiency for our global clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions