VAT News

Sri Lanka finally implement VAT Changes

As of the 1st of November 2016 the VAT rate in Sri Lanka has risen from 11% to 15%. There has been a lot of confusion over the last few years as to what changes the Government were going to make, as they have announced several proposals previously that have fallen though at the eleventh hour see our previous post here – Will Sri Lanka implement an increased VAT rate?. This is one reason why it is essential to have an adaptable and manageable indirect tax solution.

With this standard VAT increase there have also been several other VAT changes implemented. A range of 81 basic foodstuffs and other products are now Zero-rated. These changes fall inline with the monetary programme set out by the IMF.

Egypt Ratifies VAT Law

Egypt Ratifies VAT Law

Egypt’s President Abdel Fattah el-Sisi has approved the VAT law completing the ratification procedures needed to bring in the introduction of VAT.

Egypt have been talking about making this change for a while now so for many it is a surprise that is has finally been ratified. This change to a VAT system from their current Sales Tax system will be a big change for Egypt, the bylaws for the new legislation will be issued within 30 days. The rate will come in at 13% for 2016/17 fiscal year then rise 1% to 14% the following year.

One of the governments aims with this VAT law is to increase VAT compliance and decrease Tax evasion. The VAT scheme will be implemented as a traditional VAT scheme where VAT is gathered at every stage of the production chain rather than just as a one-off at the end of the chain as is implemented now. There will still be a list of exempted goods/services.

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IMF welcomes UAE’s VAT plan

 

The United Arab Emirates (UAE) has announced plans to introduce a VAT regime and increase excise taxes, a move that has been welcomed by the International Monetary Fund (IMF).

The UAE Finance Minister has announced that Value Added Tax (VAT) will be introduced at an expected rate of 5% with around 100% items expected to be exempt. The UAE and the other Gulf Cooperation Council (GCC) members have been negotiating a proposed pan-GCC VAT for more than a decade and finally settled on a draft plan last year.

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Adding Real Time Analytics to your Tax Department’s Indirect Tax Toolkit

eBiz Answers have recently added Real Time Tax Analytics to their indirect tax toolkit,  the application has designed specifically with the tax department in mind.   Real Time analytics is a user friendly web application which will inform the tax department of a transaction with a potential tax issue within seconds of it being entered.   This allows the tax department to identify and correct issues at source and empowering the tax department to be involved in the end to end process.

The ever increasing use of technology by Tax Authorities for tax compliance is directly impacting the inner workings of the tax department.     The VAT landscape is changing rapidly across the globe as Tax Authorities introduce technology to crackdown on tax avoidance and ensure corporate tax transparency.    From South American to Europe,  tax authorities are passing regulation to ensure companies provide accounting data in a standardised format, direct from their ERP applications on a monthly basis.  The tax authorities can then check the file, validate the data and ensure compliance.   Poland has introduced electronic filing with SAF-T files from the 1st July to join Portugal, Luxembourg, Austria and Lithuania who are already using the SAF-T filing format.

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Oman to introduce VAT in 2018

The Omani government has announced its plans to introduce a VAT regime, previously said to be as early as 2017, it’s now believed this will come into affect on the 1st of January 2018, giving businesses more time to acclimatise.

The VAT rate is expected to come in at 5%, which although low by European standards, is expected to generate OMR250 million a year. These extra funds are needed to cover the gap caused by the recent and continued drop in oil prices which are affecting many of the Gulf states. The Omani government have also stated that they will introduce a zero rate for many essential and basic goods and services.

For more information click here (note it goes to our new Innovate Tax site)

Puerto Rico VAT Plans blocked

Puerto Rico’s plans to introduce VAT on the 1st June 2016 appear to have been scrapped.

Earlier this month legislators voted against the introduction of VAT to replace the current Sales and Use Tax, with an almost unanimous vote of 21 to 1.

However, there is still much confusion as to what will happen with Puerto Rico’s indirect tax regime as they are still in dire need of a way in which to raise funds to cover their rising debt, so a VAT regime could still be on the cards?

Confirmed – Greek standard rate VAT to increase to 24%

On the 22nd May 2016, the Greek Parliament confirmed that the standard rate of VAT will rise from 23% to 24% on the 1st June 2016.

This is part of a group of measures, agreed to after 6 months of negotiations with is creditors, Greece hopes will help unlock bailout funds needed to repay loans and cover the gap in the 2017-18 budget forecast. It is estimated that the rise will generate between €400m and €500m additional revenue.

However there is still much scepticism as to whether the Tax hike will be counterproductive or not, as Greece are still in a recession many believe that raising VAT is one of the worst things they could do right now, especially after the previous VAT hikes and scrapping of the lower rates for some Greek Islands.

This could also lead to Tourists and companies going else where.

 

Japan to increase Consumption Tax and introduce other reduced rates

The Japanese government has recently announced an increase of Consumption Tax from 8% to 10%, along with the introduction of a reduced rate of 8% that will be levied on basic foodstuffs and beverages.

This is currently due to take effect on the 1st of April 2017, however this rise has already been delayed once in 2015 and because of the current lack luster economy there is potential for it to be delayed yet again.

The decision to bring in a reduced rate on basic foodstuffs and beverages is being considered to ease the burden on consumers after recent similar rate increases pushed the economy back into a recession. This was the case in 2014 when Consumption Tax was increased from 5% to 8%, raising indirect tax from Yen 8 trillion to Yen trillion in just two years.

Nevertheless, this time it appears that they will still go ahead as Mr Aso, the Finance Minister, told parliament “Without attaching conditions about the state of the economy, we will certainly raise consumption tax to 10 per cent in April 2017”. So companies should start preparing for this as soon as they can to be ready for the tax rate increase and the introduction of a reduced rate early next year.

Hungary to cut VAT on Restaurants and Basics

The Hungarian government has announced its plans to cut VAT on restaurants, café services, milk, eggs and poultry by 2017.

According to this recent proposal as from the 1st of January 2017, the VAT on food basics – milk, eggs and poultry will be cut from the current rate of 27% down to 5%. In addition to this the VAT on restaurant and café services will drop from 27% to 18% with plans to cut this further to 5% in 2018. This is a follow on from early cuts which brought the VAT on pork down from 27% to 5%.

Whilst this will bring a shortfall in revenue for the government they believe that it will have no operational deficit as this loss will be covered by higher expenditure and faster growth, with GDP expected to pick up to 3.1% next year from 2.5% expected this year.

There is also the potential that internet will also be cut from 27% to 18%.

Puerto Rico Delay VAT Implementation Until June 1st

Puerto Rico aimed to introduce the implementation of Value Added Tax (VAT) or ‘IVA’ (its Spanish equivalent) on April 1st 2016, however, the Puerto Rican Treasury Department issued an Administrative Determination (DA16-04) on March 8th officially postponing this change until June 1st 2016. It is believed by some that the introduction of VAT could be postponed altogether.

The main reason for this postponement is so that the Legislature and Governors’ office have time to review a number of proposals for a tax reform that may supplement or replace the implementation of VAT altogether. Another issue that has affected the decision is the increasing concern shown by many businesses operating out of Puerto Rico at not being able to comply with their VAT requirements by April 1st. A 60-day grace period established within Act 72-2015 has allowed for this delay to be officially enforced.

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Romania VAT cut timeline

Romania confirm VAT cut timeline

There has been lots of changes with regards to how much the VAT cut would be for Romania and when the implementation would take place, suggested cuts have switched between 4% and 5% over the last year with debates seen for both cuts. However within the last few weeks the Romanian Government has announced that in 2016 the VAT rate will drop by 4% to 20% and then in 2017 it will fall a further 1% to 19%. The parties agreed on this after concerns were raised over the viability of such a big VAT cut, and it was felt best to lower it in stages after the IMF was opposed to a one stage 5% cut.

See all previous eBiz Answers posts:

Romanias potential new reduced VAT rate and the success of the foos VAT rate drops.

Romanias confirms 5% VAT rate cut

Romania to cut VAT on food to 9%

UAE in talks to introduce VAT

UAE in talks to introduce VAT

Recently the federal Government of the UAE has announced the planned introduction of a federal value-added tax (VAT). The Ministry of Finance (MoF) confirmed that it has been conducting studies into the implementation of a VAT draft along with the other Gulf Cooperation Council (GCC) countries.

The draft law is still pending and under negotiation due to the absence of a final agreement between GCC countries on the tax rate and a list of tax exemptions, but a draft bill could be on the cards very soon. Once a draft has been created an announcement will be made immediately and the country will be given 18months grace period after the implementation to implement the VAT, if it were to go ahead. The VAT is expected to be implemented at a low rate of around 5%.

Israel to cut VAT

Possible VAT cut in Israel

The Prime Minister of Israel, Benjamin Netanyahu has recently announced plans to reduce the current rate of VAT from 18% to 17% to help promote economic growth, following a higher than expected tax collection in recent months. Speaking earlier this month, Prime Minister Netanyahu is quoted as saying  “An economy burdened by high taxes doesn’t grow, so in order to encourage growth I have decided, with Finance Minister Kahlon, to cut taxes.” Continue Reading

Nigeria confirm VAT rise

Nigeria to raise VAT to 10%

Nigeria have confirmed plans to increase the VAT rate to 10%, making it double the current 5% VAT rate, with changes expected to come into affect later in the year.

This increase is due to the recent slide in oil prices that has seen the price drop 100% in the last 14 months alone, this drop has had a big impact on the Nigerian economy as 80% of the governments income comes from petroleum exports, the current war with Boko Haram is also proving costly to the country. This was recently confirmed after talks with stakeholders took place earlier this year, see our previous post  Nigeria propose VAT increase.

Newfoundland – Canada to raise its HST rate in 2016

Canada’s rising Harmonised Sales Tax

The Canadian province of Newfoundland and Labrador is planning to raise its Harmonised Sales Tax (HST) rate from 13% to 15% on the 1st of January 2016. HST is a combined tax made up of federal Goods & Services Tax (GST) and local Provincial Sales Tax (PST), the GST rate will remain at 5% but the PST will increase from 8% to 10%.

The recoverable amount will also be changing in 2016 and 2017; Municipalities and local service districts will receive a partial rebate on the provincial portion of the HST of:

• 25% effective January 1, 2016
• 57.14% effective January 1, 2017

So this will only be effective on the 10% PST.