Slovakia increases VAT 1% to 20% +++ +++ EU - 2009 VAT refund deadline delayed from Sep 2010 to Mar 2011 +++ Poland - 1% VAT increase to 23% +++ Australia - Victoria Fire Service Levy to be scrapped in July 2012 +++ UK - VAT to increase from Jan 2011 +++ Romania - increases VAT 5% to 24% +++ UK - confusion on UK 1% IPT increase +++ Andorra - 4.5% VAT to be introduced +++ India - GST to be implemented April 2011 at three standard rates +++ Bulgaria - to introduce insurance premium tax at 2% +++ Finland - VAT and IPT raised to 23% +++ Belgium - the 9.25% insurance premium tax on credit insurance has been withdrawn +++ Canada - HST introduced in British Columbia and Ontario +++ Hungary - implements insurance premium tax +++ Bulgaria - Intrastat reporting thresholds increased +++ UK - HMRC backs down on VAT on InsuranceWide comparison website +++ France - changes requirements for fiscal rep on insurance +++ Bulgaria - New proposals being pushed with the World Bank to introduce mandatory Catastrope Fund to cover earthquakes etc. +++ +++ EU adopts new VAT Directive on electronic invoices +++ Portugal - increased VAT by 1% to 21% +++ New Zealand - increases GST to 15% +++ Spain - VAT rate increases to 18% +++ Croatia - a 10% motor 3rd party liablitiy risk premium will be charged from 2009 to cover traffic accident costs +++ Czech Republic - new rules on non-resident traders extends the requirement to VAT register +++ Greece in second emergency VAT increase from July +++ Hungary - increased VAT rate to 25% +++ Czech Republic - proposal to change VAT payment point to when cash received +++ Mexico - simplification of VAT reporting +++ EU - ECJ court ruling imposes VAT on salary sacrifice schemes and vouchers +++ Italy - extends reverse charge on VAT for foreign companies +++ Denmark - extension of VAT reverse charge on services from non-resident suppliers +++ Panama - increases VAT to 7% +++ Denmark - overhaul of VAT registration process to comply with EU employment law +++ Estonia - reduced VAT increased from 5% to 9%; many items now on standard rate +++ France - National Guarantee Fund levy on insurance premiums is rising +++ Mexico - increases VAT 1% to 16% +++ Estonia - 2% increased VAT from July 09 to help combat financial crisis +++ EU - New proposals to force all EU member states to switch to monthly VAT reporting to help combat fraud +++ EU - more proof required for VAT import exemptions for onward supply relief +++ EU - Revised Mutual Assistance Directive issued to assist tax authorities share information on VAT and IPT +++ EU - new electronic service to verify authenticity of VAT numbers +++ Finland - Traffic Safety Charge for 2009 will be Euro 7.2m +++ France - Tough new invoice requirements to help combat fraud +++ Taiwan - introduces VAT refunds for non-resident businesses +++ France - French Motor Insurance Parafiscal Charge hike from 0.1% to 0.6% +++ France - Natural Disaster Compensation Scheme has increased again from 8% to 12% +++ France - New information requirements for foreign companies applying for non-resident VAT registrations +++ Taiwan - introduces VAT refunds for non-resident businesses +++ France - Confirmation of changes to ACOSS levies, which are now managed by URSSAF +++ Germany - New IPT levy on Surety and Financial Guarantee reinsurance +++ India - sets CENVAT at 10.3% Germany - valid VAT number may not be sufficient evidence alone to allow for zero rating on intra-community supply +++ Germany - proposal to scap the requirement for annual VAT returns +++ Greece - withdrawal of Stamp Duty underway; Life and Damage insurance now exempt +++ Hungary - rules on tax point (now when invoice paid) creates risks for VAT recovery +++ India - many new activities brought into Service Tax regime +++ Hungary - Aircraft hull and aviation liability is now exempt from the 1.5% Fire Brigade Charge +++ Ireland - New retrictions on VAT relief on bad debts +++ Ireland - government insurance levy on non-Life increases from 2% to 3%; new 1% levy on Life +++ Mexico - simplification of VAT reporting +++ Italy - Hunting Accident Victims' Fund changed to 5% of 94% of premium +++ Italy - Scraping of the requirement on VAT-registered businesses for the annual filing of lists of customers and suppliers +++ Italy - Court ruling that VAT reclaims deadline should be two years +++ Italy - potential to defer VAT payments to point where cash received +++ Latvia - standard rate VAT increased by 3% to 21% from Jan 2009 +++ Latvia - 2% VAT increase to take standard rate to 23% from 2010 +++ Luxembourg - Fiscal representation revived for importers of goods +++ Luxembourg - international shipping vessels registered in Lux are IPT exempt +++ Netherlands, The - Tax authorities increase IPT rate from 7% to 7.5% +++ Poland - Potential for quarterly VAT returns +++ Poland - Plans for reverse charge on consignment stock +++ Poland - New 12% Parafiscal Charge on Motor Liability contracts to cover medical care at accidents +++ Poland - improved import VAT set-off scheme for established importers +++ Poland - Polish insurance chamber of commerce says 12% levy on 3rd party motor insurance to go +++ Poland - motor liability insurance is now exempt from the Fire Brigade Tax +++ Romania - Proposals being drawn up with the World Bank for new compulsory national catastrophe program +++ Romania - invoice issuing deadline has been extended to 15 days after the month of the taxable supply +++ Slovakia - adoption of the Euro brings new VAT return form +++ Slovakia - calls for increased VAT rate from the IMF +++ Spain - switch from quarterly to monthly VAT returns proposed +++ Spain - online submissions for non-residents; local bank account still required +++ Sweden - IPT now introduced at 32% of gross premiums on 3rd party liability risks +++ Sweden - group life insurance from Swedish or EU insurers is exempt from IPT +++ Switzerland - VAT rate increase to 8% in 2011 +++ Ukraine - VAT e-filling obligatory +++ United Kingdom - VAT registration threshold increased to GBP70k +++ Seychelles - introduction of VAT at 10% in 2012 +++ Jersey - call for rise in 3% VAT rate +++ Romania - imposes intra-community supply registers +++ India - GST implementation now planned for April 2011 +++ UK - wins ECJ case on restricting VAT refunds to non-EU banks and insurers +++

Tax Analysts: Italy VAT reverse charge on goods

Sonia Piazonni, TMF VAT, Milan, Italy

Click here to read the original article 18 January 2010 (pdf)

Foreign companies selling goods in Italy under a local VAT registration may suffer huge cash flow delays following new proposals currently making their way through the Italian Parliament.

The extension of the mandatory ‘reverse charge’ procedure is intended to help simplify reporting requirements and comply with EU Directives. However, it will also result in many foreign businesses being left with large VAT credits which can take years to recover from the Italian tax authorities. This will undoubtedly lead to some companies having to change their business arrangements or even cease trade in Italy.

Whilst these changes have not been formally included in Italian tax legislation, the tax authorities have indicated that they will apply from 1 January 2010. These proposed changes come in addition to the EU 2010 VAT Package, which changed the place of supply of services rules.

Italy seeks to conform with other EU countries

Currently, foreign companies buying and selling goods within Italy are generally required to register for and charge Italian VAT of 20% to their customers. Following the deduction of any Italian input VAT incurred in buying any goods or services locally, the trader must pay over the net VAT to the Italian tax authorities.

Over the past few years, a number of other countries within the EU have introduced various simplifications to the above process, including shifting the collection and reporting of VAT from the supplier to the customer. Unfortunately, these changes vary in the detail, only adding further complexity to the EU rules. For example, in Spain the responsibility for the VAT on goods transactions is with the recipient, even if the recipient does not hold a Spanish VAT number. In the Netherlands this applies only if the recipient is a Dutch resident company. Many of these measures have been implemented to simplify bureaucracy and reduce VAT fraud.

Italy has now brought forward draft legislation to introduce a similar mechanism. The proposals would mean that non-resident companies supplying goods locally would no longer charge VAT to Italian resident companies. They would still be required to charge VAT to other non-resident companies or private individuals. This last category would apply to the rapidly expanding international internet retail industry whereby the seller is required to charge local consumers with Italian VAT once they pass the Italian distance selling threshold of €35,000 per annum. These non-resident traders will still be required to pay VAT on goods and services purchased in Italy.

Under this new regime, any company selling only to Italian resident companies will almost certainly be required to deregister for Italian VAT, and recover any input VAT through an 8^th Directive claim.

Aside from non-residents providing goods to other non-resident customers and private individuals, there are a number of other situations where foreign traders would not deregister, including:

Intra-community acquisitions and dispatches, which covers the sale of goods to and from Italy from other EU member states; and
Exports and imports from outside the EU.

Foreign companies facing years of cash flow delays

Under these proposals, non-resident companies would still be charged VAT on any local purchases of goods. However, where they will no longer charging VAT, they will now be left with potentially large VAT credits to be reclaimed from the Italian tax authorities. This will create a long cash flow delay since, unlike most EU Member States, the Italian tax authorities usually take between one and five years to repay VAT credits.

The VAT credit procedure in Italy is further complicated by the process of applying for the refund. A company which is VAT registered in Italy may only request credit repayment in February of the year following the receipt of the purchase invoice. Following a full VAT inspection a three year bank guarantee is also required, from an Italian bank (or authorised foreign bank), for the value of the credit plus an estimation of interest.

For many large corporations, operating international commissionaire supply chain-type operations, this could easily run into millions of Euros being trapped with the Italian authorities. Many smaller traders may simply walk away from their Italian trade since such delays would make the business unsupportable.

For non-resident companies which have to deregister, they will be required to use 8^th or 13^th Directive VAT reclaims to recover any Italian VAT incurred. Although the EU time limit is now 4 months reduced from 6 in January 2010, Italian reclaims nevertheless frequently take 18 months or more.

Implementation date uncertain

The original proposals were approved by the Italian Senate in mid-December 2009. However, they missed the planned approval in time for 1 January, 2010 - there is a widespread expectation that they will be passed before the end of January.

The Tax Office (circular 58/E, 31/12/2009) has indicated that this change is now in force even though the Italian legislation has not yet been updated.

At present, many companies, especially the large supply chain operators are reviewing strategies to avoid being left with large tax credits or reclaims. This includes forming local companies to switch to a resident status, and thus permitting the continuation of collecting VAT on sales. However, there are strict rules on permanent establishment that need to be considered, and companies should tread with caution.