Archive for April, 2016

Japan to increase Consumption Tax and introduce other reduced rates

The Japanese government has recently announced an increase of Consumption Tax from 8% to 10%, along with the introduction of a reduced rate of 8% that will be levied on basic foodstuffs and beverages.

This is currently due to take effect on the 1st of April 2017, however this rise has already been delayed once in 2015 and because of the current lack luster economy there is potential for it to be delayed yet again.

The decision to bring in a reduced rate on basic foodstuffs and beverages is being considered to ease the burden on consumers after recent similar rate increases pushed the economy back into a recession. This was the case in 2014 when Consumption Tax was increased from 5% to 8%, raising indirect tax from Yen 8 trillion to Yen trillion in just two years.

Nevertheless, this time it appears that they will still go ahead as Mr Aso, the Finance Minister, told parliament “Without attaching conditions about the state of the economy, we will certainly raise consumption tax to 10 per cent in April 2017”. So companies should start preparing for this as soon as they can to be ready for the tax rate increase and the introduction of a reduced rate early next year.

Hungary to cut VAT on Restaurants and Basics

The Hungarian government has announced its plans to cut VAT on restaurants, café services, milk, eggs and poultry by 2017.

According to this recent proposal as from the 1st of January 2017, the VAT on food basics – milk, eggs and poultry will be cut from the current rate of 27% down to 5%. In addition to this the VAT on restaurant and café services will drop from 27% to 18% with plans to cut this further to 5% in 2018. This is a follow on from early cuts which brought the VAT on pork down from 27% to 5%.

Whilst this will bring a shortfall in revenue for the government they believe that it will have no operational deficit as this loss will be covered by higher expenditure and faster growth, with GDP expected to pick up to 3.1% next year from 2.5% expected this year.

There is also the potential that internet will also be cut from 27% to 18%.

Will Sri Lanka implement increased VAT rate?

Sri Lanka’s Ministry of Finance have recently announced that they will be increasing the current VAT rate of 11% to 15% as of 2nd May 2016. This announcement causes some confusion and doubt as similar recent proposals have been scrapped at the 11th hour. In 2015 it was announced that from the 1st January 2016 the flat rate of 11% would be replaced by 3 different tax rates;

1. All Services to be subject to 12.5% VAT
2. All Goods to be subject to 8% VAT
3. The export of all Goods and Services for foreign currency receipt, subject to 0% VAT. Continue Reading

Canada – New Brunswick increase HST

The Canadian province of New Brunswick has announced plans to increase its Harmonized Sales Tax (HST) rate from 13% to 15% as of 1st of July 2016 in a hope to bring in about $300 million in revenue for the cash-strapped provincial government. They are also increasing Corporate Tax from 12% to 14% in order to draw in more revenue to cover their large budget deficit.

HST is a combination of Canadian Federal Goods and Services Tax, currently 5%, plus the local provincial tax, this is the part that New Brunswick are increasing from 8% to 10%. See the governments recently released transitional rules for the HST increase for further information on the subject.


Puerto Rico Delay VAT Implementation Until June 1st

Puerto Rico aimed to introduce the implementation of Value Added Tax (VAT) or ‘IVA’ (its Spanish equivalent) on April 1st 2016, however, the Puerto Rican Treasury Department issued an Administrative Determination (DA16-04) on March 8th officially postponing this change until June 1st 2016. It is believed by some that the introduction of VAT could be postponed altogether.

The main reason for this postponement is so that the Legislature and Governors’ office have time to review a number of proposals for a tax reform that may supplement or replace the implementation of VAT altogether. Another issue that has affected the decision is the increasing concern shown by many businesses operating out of Puerto Rico at not being able to comply with their VAT requirements by April 1st. A 60-day grace period established within Act 72-2015 has allowed for this delay to be officially enforced.

More on Act 72-2015 Continue Reading