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February

13
1. Welcome

Hello everyone, welcome to the Value Added Tax Newsletter. We’re in the middle of a non-winter season – skiing here on the U.S. East Coast is largely on man-made snow – unlike most parts of Europe. The classic “Eleven-cities”, 200 mile speed-skating race in the Northern part of the Netherlands is rarely held, and there is a small chance that 2012 will be one of the winter seasons cold enough to sustain the ice for tens of thousands of skaters.

US VAT, Inc. has kicked off the New Year with a couple of new engagements. It is interesting to see that my services fill a requirement that major-brand, global multinationals have, whereas my initial thought was that I would be more attractive to the non-Fortune-100 segment of global operators. My most ambitious expectations have been exceeded and – thanks to you all – I could not have wished for a better start of US VAT Inc.

Mark Houtzager
Principal, US VAT Inc
mark@us-vat.com

2. Online services and VAT in the EU

One of the parts of the “VAT package” that was introduced back in 2010 was a harmonization of the VAT rules for intra-EU e-commerce services, to be introduced in 2015.

At this time, non-EU providers of online services that sell to EU individuals have to account for VAT at the rate of the customer’s country. From January 1, 2015, this rule will be extended to telecom services (including broadcasting) and will also apply to EU-resident service providers.

This means that from 2015 for example a Luxembourg online service provider will have to account for VAT in the country of the individual buyer. By way of simplification, the Luxembourg-based provider will be able to pay these VAT amounts on his Luxembourg VAT return.

The EU has signaled that they are making good progress towards implementation of these new rules, and released a ‘communication’ that provides details on various aspects of the plan. Click here for more information.


3. Country updates

As you know, I update the VAT Blog on a regular basis. After the VAT rate changes on January 1, the news has somewhat slowed, but I expect that activity will pick up soon.

France

France, as most of you know, is in an ongoing discussion to increase the standard VAT rate to offset a relief of payroll tax. Payroll tax is a significant burden to French companies, more (so the French say) than for companies resident in other countries. The thought is that French payroll tax relief would improve France’s exports, and lower the trade deficit. The government has proposed a VAT increase to 21.2%. The interesting twist is that the French elections are coming up, and the introduction of the new rate would be after the elections. Sarkozy’s challenger (Mr. Hollande) has already indicated that he would roll back the VAT increase if elected.

Congo (DRC)

We welcome the Democratic Republic of Congo in the not very exclusive club of VAT countries. Implementation of a VAT system is always a major economic and commercial challenge, and the word on the streets of Kinshasa is that consumer prices have spiked – due to retailers now changing both the new VAT as well as the old sales tax.

Singapore

I mentioned earlier on the VAT Blog that a number of countries have developed support for businesses to streamline their VAT compliance, in return for complete disclosure of errors following an in-depth audit. Singapore has successfully implemented this approach, and also provides financial support for companies to hire a qualified VAT adviser to assist in the audit. The grant would support up to 50% of the consultant’s fees, with a maximum of S$ 50,000.

United States

A ‘national retail sales tax’ (i.e. VAT) remains a discussion topic in the U.S. Mitt Romney, who may or may not be President Obama’s Republican challenger in the November elections, has indicated that he considers a federal VAT as one of the key elements of tax reform. There are also Democrats who believe that VAT is part of the solution to debt reduction. If the President’s legislative record is any indication, I still believe that the political situation – now or after the elections - is much too polarized to deal with substantive tax reform. A VAT in the U.S. won’t happen any time soon.


4. Location, location

If not in Midtown New York, I can still be found regularly in the “Research Triangle Park” in the Raleigh, NC area. Also, I will be in Hong Kong and Singapore in the week of February 20. As always, drop a note if you want to meet. I look forward to catching up!

1. Welcome
2. Online services
3. Country updates
4. Location, location
 
 
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