When we talk about “electronically supplied services” we mean:
• Website supply, web hosting, distance programme and equipment maintenance.
• Software supply and upgrades.
• Supply of distance teaching.
• Supply of film, games and music.
• Supply of artistic, cultural, political, scientific and sporting as well as entertainment broadcasts and events. Read more
For many businesses moving to Ireland, especially I.T. companies, a considerable amount of research and planning into our tax regime is usually carried out in advance. From experience, however, the question these companies rarely ask themselves is “what are the key VAT issues affecting our company if we locate to Ireland?
The current Irish VAT rules are as follows:
• The place of supply for businesses established in the E.U. who provide electronically supplied services to private consumers within the E.U. is the E.U. member state in which the supplier is established. For example, if an I.T. company established in Ireland supplies digital materials via the market to a private consumer living in France, the place Read more
The first and very important note to make, in dealing with South African tax issues: tax year 2014 ends on the last day of FEBRUARY 2014. The South African tax year for most individuals, are 1 March until the last day of February in the next calendar year. Corporates can change their tax year-end to align with the last day of their financial year-end, yet Trusts partners in a JV or partnership, are obliged to file assuming a tax year-end on the last day of February, despite their financial year-end being the last day of another month.
Yes, sadly this date, Friday 28th 2014, is not even listed on the SARS webpage on important dates, yet is an extremely important tax deadline.
SARS has two webpages namely: www.sars.gov.za and www.sarsefiling.co.za. Read more
The current tax rules underpinning practically every tax code around the globe are derived from a “bricks and mortar” or manufacturing based economy. What this means is the underlying concepts were developed when all world economies were based on building physical products that were bought and sold (think industrial revolution). For example, the tax treaty phrase “permanent establishment” was actually developed by League of Nation’s negotiators during their preliminary discussions to develop a working tax treaty framework. Compare this to today’s digital economy where “products” are actually multiple lines of computer code that exist in cyber-space (or a trademark or patented item) or where a “store front” (the old “permanent establishment”) is in fact a web site located halfway around the globe on a server in a tax haven. This mismatch between the underlying concepts of the old Read more
The pilot VAT program put in place in January 1, 2012 was expanded nationally on August 1, 2013. The long-awaited administrative measure on VAT exemption for cross border services would now allow companies in China to follow the prescribed procedures to obtain VAT exemption on previously non-zero-rated service revenue from cross-border international transportation and “modern services” within the scope of the pilot VAT program.
Services that may benefit from this new administrative measure include R&D and design services provided to foreign service recipients.
Certain services such as consultancy services in respect of immovable properties or goods located in China are fully subject to VAT even if provided to foreign service recipients.
Services such as exhibition and advertising services are VAT exempt only if performed overseas and regardless of whether the service recipient is Chinese or foreign.
International transportation services are either zero-rated or VAT exempt depending on whether the service provided is a general VAT taxpayer with relevant licenses or a small-scale VAT taxpayer.
Zero rating means that service provider in China does not have to charge output VAT on cross-border services and also can apply for a refund of its related input VAT. Read more
Both Sales Tax and Value Added Tax (VAT) can present a number of challenges to tax practitioners who are well versed in one, but not the other. To begin, the basic structures of how sales tax and VAT are imposed are largely different. But once you delve a little further into each one, you may notice that the terminology used looks foreign and unfamiliar. Sales tax and VAT have different terms for essentially similar concepts, but sometimes the concepts themselves are handled altogether differently. We’ll take a look at some of the language and terms used in sales tax and VAT, how they’re similar and what makes them different.
In the U.S., nexus is the basic concept of whether a company has sufficient presence in a state which then requires them to collect sales or use tax. Nexus refers to links, connections, or contacts between a political jurisdiction and a taxpayer. If a taxpayer has sufficient nexus with a state, it is deemed to be “doing business” in that state and will be liable for the state taxes. In VAT countries, a permanent establishment for VAT purposes is a factual inquiry. It could include: having a facility located in the country, bookkeeping facilities located in the country, and the ability to Read more
Finance Act 2013 saw a number of changes to the VAT regime in Ireland. The main changes are as follows:
1. The threshold for Accounting for VAT on the money’s received basis has been increased from €1m to €1.25m with effect from 1st May 2013.
2. The flat rate addition for unregistered farmers was reduced from 5.2% to 4.8% with effect from 1st January 2013.
3. From 1st January 2013 the services threshold for VAT registration (i.e. if the turnover from the provision of services exceeds €37,500 there is an obligation to register for VAT) applies to the provision of sporting facilities and physical education facilities by public bodies. This means that public authorities will not be obliged to register for VAT unless they exceed the threshold amount of €37,500 but they can elect to register for VAT if they so choose.
4. Existing VAT legislation in relation to vouchers with a redeemable value provides that VAT arises at the time the voucher is supplied and not when the voucher is redeemed. Anti Avoidance legislation was introduced in the 2013 Finance Act which confines this special rule to situations where vouchers are supplied to businesses that are established in the state. For vouchers sold to businesses outside Ireland for onward supply they are not taxable on sale but when the redemption of the voucher takes place.
5. The Finance Act brought in a number of changes with regard to receivers and liquidators in the context of supplies of services.
a) New provisions were introduced to clarify that a receiver or liquidator who supplies taxable services Read more
This is a ten-part Worldwide Tax Blog Series on a cross section of amendments in the Irish Tax System and a general overview:
Universal Social Charge – Part 1
The Remittance Basis for Income Tax – Part 2
The Remittance Basis for Capital Gains Tax – Part 3
Taxation of Certain Social Welfare Benefits – Part 4
Mortgage Interest Relief – Part 5
Donations To Approved Bodies – Part 6
Farm Restructuring Relief – Part 7
FATCA – The US Foreign Account Tax Compliance Act – Part 8
Close Company Surcharge – Part 9
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This new relief announced in the 2013 Budget enables individual farmers to obtain relief from CGT (Capital Gains Tax) where there is a sale or exchange of agricultural land where other agricultural land is being purchased or acquired under an exchange.
This is subject to Ministerial Order to take effect.
To qualify for the relief the following conditions must be fulfilled: Read more
If you’re planning to move to Ireland, it is essential that you’re aware of the tax implications at this point so that you don’t incur hefty and unnecessary tax liabilities and penalties at a later stage.
The first point to draw your attention to is that there is no wealth tax in Ireland.The main taxes are Income Tax, PRSI (Pay Related Social Insurance), USC (Universal Social Charge), C.G.T. (Capital Gains Tax), C.A.T. (Capital Acquisitions Tax), V.A.T. (Value Added Tax) and Stamp Duty.
In your first year, it is most likely that your charge to tax will be limited to Irish source income (i.e. Irish salaries, profits from a business operated in Ireland, rental income from properties situated in Ireland, etc.) and gains (i.e. from the sale of assets located in Ireland).If you have income and gains arising from outside Ireland you will not accrue any liability to Irish tax providing you don’t remit these funds into Ireland. Read more
The business models of many enterprises have radically changed over the last years and have become increasingly complex.
SAP, however, has failed to keep up, which has resulted in the standard functionality of SAP being no longer sufficient for complying with VAT obligations. Practical solutions must be found within the flexibility and static structure of SAP regarding indirect tax.
Because of this, SAP Indirect Tax Consultants in the market can only patch up the existing SAP framework. Regarding indirect tax, the structure of native SAP has hardly, if at all, changed over the last 20 years.
As a result of globalization, the business models, on the other hand, have considerably changed. With the aim of creating new sales markets and achieving cost savings, business activities are spread all over the world. Cross-border chain transactions with third parties or within a company (intercompany transactions) have become the rule rather than the exception.
This results in a highly diverse mix of transactions in which drop shipments – deliveries to the final customer of the purchasing party – are often the main point of focus. Transactions between different international stock locations of one and the same legal entity (plants abroad) take place more and more often.
At the same time, cost considerations lead to a high degree of centralization of administrative functions, whereby compliance and purchase more frequently take place via Shared Service Centers. Many companies also deal with the outsourcing of the production of parts and components of the final products to mostly low-wage countries such as India and China.
Enterprises set up their business models and transactions in such a way that they can allocate the profits in the fiscally most beneficial way. The advantage of this is a low tax burden for the corporate tax. The indirect tax is typically late, if at all, incorporated in this fiscal strategy.
The consequence of worldwide business practices, the emerging complexity of business models and the centralization of financial functions is that companies get VAT obligations in multiple countries. Combined with the lack of harmonization of regulations in different countries, maintaining the VAT position is extremely complicated.
Without the right VAT regulations, regular ERP systems are not able to process data correctly, thereby risking incorrect calculation of VAT, failure to comply with local VAT obligations, and transactions that cannot be commercially executed.
Automatic determination of VAT obligations in chain transactions is not possible in the standard functionality or regular ERP systems, such as SAP. This is due to the fact that essential tax parameters are missing and that it is not possible to link the different transactions in the entire chain (sale-purchase-sale). In actual practice, these flaws in SAP are often patched up in order to keep the system running.
These emergency patches usually focus solely on one specific problem instead of the entire flow of goods within the company or concern. In that case, the emergency patch is a pre-defined configuration (hard-coding) of assumptions about how transactions will take place. This entails definitively prescribed VAT determination and the risk that this might not match reality.
A delivery from a different stock location in a different country or from a different supplier then results in an incorrect VAT determination. These risks can be eliminated by adding missing tax parameters and linking master and transaction data of all relevant transactions to each other. This paves the way towards automatic determination of VAT obligations.
When this is combined with a Tax Control Framework for real time fiscal monitoring of transactions, companies can eliminate VAT risks.
Beside the highly improved preventive controls regarding risk management, they lay the foundation for more efficient business processes and increased productivity.
Richard Cornelisse, Director Strategy & Sales at Taxmarc™
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