Compliance Services

Last month we communicated how countries in Europe, specifically the Benelux countries, were embarking on joint ventures with the aim of reducing VAT fraud.

The European Commission aims to establish a similar incentive with Norway, with the same underlying objective- to reduce the VAT gap.

This is a unique development- it is the first ‘alliance’ of its kind with a non-EU country.

As part of the agreement, tax authorities in both the EU and in Norway can share tax information and partake in activities to help fight VAT fraud similar to those outlined in the EU.

A recommendation from the European Commission plans to extend this joint initiative yet further, proposing new methods to further reinforce barriers against VAT fraud.

Reduction of the VAT gap is the primary objective of e-invoicing mandates, which are expected to be implemented with increasing frequency in the coming years in Europe. By extension, we can envisage the European Commission, and countries of their own initiative, to instigate measures to further reduce the VAT gap in a streamlined and efficient manner.

The recurring trend for the reduction in VAT rates for energy and gas continues unabated across Europe, considering rising inflation and the post-Covid economic recovery.

Ireland is no exception- and the Irish Ministry of Finance has announced a VAT reduction from 13.5% to 9% to take effect from 1 May 2022. This is expected to run until 31 October 2022.

VAT reductions often prove to be costly – and in Ireland, the reduction in VAT rates for energy and gas will come at a cost of 46 million Euros to the government.

In addition to rising inflation, it is likely the measure was introduced to counteract the carbon tax, which is also commencing on 1^st May 2022. Such measures serve to demonstrate that VAT must be viewed as part of a greater intricate framework of taxes within the fiscal structure rather than a tax in isolation and underlines the challenging role of the government to balance and manage the effects of taxation.

Further 200 medicines will be exempt from VAT following the approval of Revenue Memorandum Circular 68-2022 by BIR. These medicines are utilized for the treatment of hypertension, cancer, mental illness, tuberculosis, kidney disease, diabetes and high cholesterol, in addition to other COVID-related medicines and medical devices.

The BIR has published the full list of exempted medicines on its official website.

Vietnam’s General Department of Taxation (GDT) has launched a web portal for foreign suppliers involved in cross-border business activities in Vietnam. The web portal allows cross-border businesses to register, declare, and pay tax without submitting any physical paperwork to the Vietnamese tax authorities.

Through this new portal, foreign cross-border businesses will be able to pay their taxes directly instead of relying upon a third party. The Vietnamese government also seeks to address the shortfall in tax collection, particularly from foreign businesses on Vietnam-sourced income.

While the Bahrani Cabinet is reviewing the proposed suspension of VAT, the National Bureau of Revenue has launched a survey to estimate the volume and nature of VAT invoicing, which included a mandatory questionnaire on invoicing patterns and the use of e-invoicing. It is likely that this information will be used in the preparation for electronic invoicing.

Bahrain is likely to follow Saudi Arabia’s lead in implementing e-invoicing in a pre-clearance model, which will require VAT-registered businesses to submit their sales invoices to the NBR for approval before sharing them with customers.

Inflation is soaring worldwide due to Covid and the Russian-Ukrainian conflict; the situation in Bahrain is no different.

10 Bahraini MPs, led by Mahmood Al Bahrani, have put forth an urgent proposal to tackle the burden of inflation on the nation. The proposal suggests suspending the 10% VAT temporarily as well as doubling the anti-inflation allowances for Bahrainis. “Inflation has hit the world hard, and today’s prices are threatening global economies”, Mahmood AI Bahrani added.

The proposal will be forwarded to the Cabinet for further reviews.

Oman introduced VAT in April 2021 as part of the GCC Common VAT Agreement, with a standard VAT rate of 5%.
Recently, Oman Tax Authority expressed its interest in introducing e-invoicing in a gradual phase, opening it up to VAT taxpayers on a voluntary basis initially, and subsequently on a compulsory basis. It is unclear when the e-invoicing system will be implemented, but we can expect it to be implemented during 2023.

In line with recent updates, you will be aware that the CFDI 4.0 and the Payment Receipt 2.0 in Mexico will become mandatory to use from 1st July 2022.

CFDI 3.3 will not be compliant from 1st July 2022 onwards, which means that it will be rejected on and after this date. To this effect, it’s imperative that businesses are prepared to accommodate CFDI 4.0 in advance of 1st July 2022 onwards. Tungsten will support the new version.

Inflation continues to bite in many European countries. Latvia is no exception – and has been forced to address its fiscal operations considering this.

To this effect, the Latvian Parliament is considering a VAT reduction on basic foodstuff to 5%.

If passed in Parliament, this VAT reduction is expected to come into force on 1^st July 2022 and last for some duration- until 30 June 2024.

Rising inflation across Europe has forced many countries to assess the deployment of VAT rates, particularly in relation to energy.

Netherlands is no exception, and a combination of socio-economic factors has meant that the government has addressed ways it can compensate low- and middle-class families affected by rising costs.

To this effect, the VAT on energy will be reduced from 21% to 9%.