On February 5, 2018, the European Commission backed Italy's e-invoicing mandate by recommending the EU Council approve Italy's derogation request from the EU VAT Directive. By way of background, Italy's mandate (which would become effective in two stages starting on July 1, 2018) requires taxpayers to provide, in real time, electronic invoices through the Italian Revenue Agency's tax platform (Sistema de Interscambio). Italy argues that this requirement is worthy of a derogation given the enormous potential to combat VAT fraud and evasion. It’s also worth noting that a number of EU Member States already require e-invoicing as part of their public procurement process.
As written, Italy's e-invoicing mandate violates Articles 218 and 232 of the EU VAT Directive. Article 218 requires that member states accept invoices in both paper and electronic form. Article 232 provides that electronic invoice shall only be used when affirmatively accepted by the customer. Italy remains hopeful of a permitted derogation prior to their July 1 start date. What remains to be seen is how widely and quickly e-invoicing requirements will spread across the rest of the continent should a derogation be granted.
The Colombian Tax Administration (DIAN) definitively declared its intention to impose a wide-ranging eInvoicing mandate via the issuance of Resolution 000010/2018. In summary, the resolution requires large taxpayers to issue and report electronic invoices by September 1, 2018, with an effective date substantially sooner than expected.
This resolution comes as no surprise as the DIAN issued a draft resolution with substantially similar requirements in late 2017, but the speed at which Colombia has elected to move towards adoption is striking. In sum, the final resolution removed two phased deadlines for compliance based on invoice volumes. Now, all businesses will be required to complying by September 1, 2018.
If you are looking for a copy of the resolution, it may not be easy to find as Colombia appears to have elected a path of selective distribution. However, Sovos expects the resolution to be widely available in short order.
The Mexican Tax Administration (SAT) decided to postpone again the date to implement the Complemento de Pagos (Supplement of Payments). Apparently, the new postponement is caused by the new technical difficulties in the integration of the new Complemento de Pagos with other aspects of the CFDI and the Contabilidad Electronica. This new Complemento was previously scheduled to take effect on April 1, 2018. At this point, the new effective date for the mandatory use of the Complemento de Pagos will be September 1, 2018.
The announcement of the postponement by the SAT is also contained in Third (Tercero) paragraph of the Anticipated Version of First Resolution of Modifications to the Miscellaneous Resolution for 2018, which is found at: http://www.sat.gob.mx/informacion_fiscal/normatividad/Paginas/RMF_2018_versiones_anticipadas.aspx
The Panama Tax Administration (DGI) has issued a massive regulation detailing the requirements surrounding a new eInvoicing mandate that will be imposed on select taxpayers pursuant to a six month pilot program. The pilot will ultimately set the stage for a comprehensive eInvoicing requirement.
The new publication (Resolution 201-0697/2018) which is more than 200 pages long, describes the formats, procedures and standards that will be used in the deploying the mandate. In addition to all the requisite technical specifications (schemas, .xml and .xsd file formats etc.) the Resolution also lists the 43 companies that will be required to participate in the pilot.
Companies participating in the pilot will be required to sign, issue, receive and report electronic invoices. According to the Resolution, the Panamanian mandate will follow a pre-clearance model, but only for business to business transactions. More detail regarding the mandate and the pilot program can be found at the following link: https://www.gacetaoficial.gob.pa/pdfTemp/28460_A/GacetaNo_28460a_20180206.pdf
South Africa's Finance Minister, Malusi Gigaba, presented the 2018 Budget to the National Assembly February 21, 2018. In his speech, Minister Gigaba announced several tax measures to address the budget deficit currently faced by the South African Ministry of Finance. Notably, the Minister has proposed an increase in the VAT rate from 14% to 15%. If the budget bill, as proposed, is signed by the President this new rate will go into effect on April 1, 2018.
The Spanish tax administration published yesterday all the technical documentation required for the implementation of version 1.1 of the Immediate Supply of Information system, locally known as SII. This new version 1.1 will be effective July 1, 2018, and is intended to correct several problems that have been spotted during the first seven months of implementation of the SII. The new version also introduces changes intended to facilitate taxpayer compliance. Version 1.1 of the SII is regulated by an order that still has not been formally enacted. For more information, the above mentioned Project of Resolution can be found on the AEAT site.
The UK Parliament is currently debating a bill that could greatly impact how businesses in the UK handle cross-border supplies of goods post-Brexit. The bill, titled Taxation (Cross-Border Trade) Bill 2017-19, had it's second reading in front of the House of Commons on January 8, 2018, and is now open for further debate. The primary purpose of the bill is to create a customs regime, which would apply following Brexit, to account for the import VAT that would become due upon goods crossing the border into the UK. Under the current language of the bill, for goods that are intended to enter free circulation in the UK, a customs declaration will be required by the importer of record. The person in whose name the declaration is made is the person liable to pay the import duty with respect to those goods; this means that the importer of record will be liable for the VAT on the goods. Upon acceptance by HMRC of this declaration, import VAT will become due immediately, which is a shift from the current system of goods entering the UK.
These changes proposed under this bill would create a cash-flow disadvantage for the designated Importer of Record, as VAT would be required to be paid immediately upon receiving notice from HMRC that the customs declaration has been accepted. The import duty would need to be paid before the goods were discharged from this new customs regime. This bill, as written, does not provide for any special import schemes, such as deferred payments; however, there is language in the bill that allows HMRC to create regulations specifying special scenarios for importation, including allowances for arrangements with countries or territories outside the UK. As the bill continues to move through Parliament, Sovos will closely monitor how this post-Brexit shift would impact our clients in the UK, and will continue to publish updates on this new customs regime.
For further details, including the official text of the Bill, as it is currently published by Parliament, click here.
On February 14, 2018, the U.K. Upper Tribunal released their decision on an appeal filed by Nestlé UK Ltd., regarding the VAT treatment of strawberry and banana flavoured Nesquik, The ruling validates tax rule applying varying VAT treatment based on the particular flavours.
Specifically, Justice Snowden affirmed HMRC and First-Tier Tribunal (FTT) findings that although chocolate flavoured Nesquik is properly zero-rated, strawberry and banana flavoured powders (as well as other flavours aside from chocolate) are properly taxed at the standard rate.
In short, the decisions rest on the fact that the non-chocolate products do not fit into the "Items Overriding the Exceptions" listed in Schedule 8 of the Value Added Tax Act. In comparison, the Tribunal noted that cocoa is so listed and as such is properly zero-rated.
For more information on this flavourful decision, please see the case ruling here.