VAT

Sri Lanka finally implement VAT Changes

As of the 1st of November 2016 the VAT rate in Sri Lanka has risen from 11% to 15%. There has been a lot of confusion over the last few years as to what changes the Government were going to make, as they have announced several proposals previously that have fallen though at the eleventh hour see our previous post here – Will Sri Lanka implement an increased VAT rate?. This is one reason why it is essential to have an adaptable and manageable indirect tax solution.

With this standard VAT increase there have also been several other VAT changes implemented. A range of 81 basic foodstuffs and other products are now Zero-rated. These changes fall inline with the monetary programme set out by the IMF.

Egypt Ratifies VAT Law

Egypt Ratifies VAT Law

Egypt’s President Abdel Fattah el-Sisi has approved the VAT law completing the ratification procedures needed to bring in the introduction of VAT.

Egypt have been talking about making this change for a while now so for many it is a surprise that is has finally been ratified. This change to a VAT system from their current Sales Tax system will be a big change for Egypt, the bylaws for the new legislation will be issued within 30 days. The rate will come in at 13% for 2016/17 fiscal year then rise 1% to 14% the following year.

One of the governments aims with this VAT law is to increase VAT compliance and decrease Tax evasion. The VAT scheme will be implemented as a traditional VAT scheme where VAT is gathered at every stage of the production chain rather than just as a one-off at the end of the chain as is implemented now. There will still be a list of exempted goods/services.

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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%.

UAE in talks to introduce VAT

UAE in talks to introduce VAT

Recently the federal Government of the UAE has announced the planned introduction of a federal value-added tax (VAT). The Ministry of Finance (MoF) confirmed that it has been conducting studies into the implementation of a VAT draft along with the other Gulf Cooperation Council (GCC) countries.

The draft law is still pending and under negotiation due to the absence of a final agreement between GCC countries on the tax rate and a list of tax exemptions, but a draft bill could be on the cards very soon. Once a draft has been created an announcement will be made immediately and the country will be given 18months grace period after the implementation to implement the VAT, if it were to go ahead. The VAT is expected to be implemented at a low rate of around 5%.

Israel to cut VAT

Possible VAT cut in Israel

The Prime Minister of Israel, Benjamin Netanyahu has recently announced plans to reduce the current rate of VAT from 18% to 17% to help promote economic growth, following a higher than expected tax collection in recent months. Speaking earlier this month, Prime Minister Netanyahu is quoted as saying  “An economy burdened by high taxes doesn’t grow, so in order to encourage growth I have decided, with Finance Minister Kahlon, to cut taxes.” Continue Reading

Nigeria confirm VAT rise

Nigeria to raise VAT to 10%

Nigeria have confirmed plans to increase the VAT rate to 10%, making it double the current 5% VAT rate, with changes expected to come into affect later in the year.

This increase is due to the recent slide in oil prices that has seen the price drop 100% in the last 14 months alone, this drop has had a big impact on the Nigerian economy as 80% of the governments income comes from petroleum exports, the current war with Boko Haram is also proving costly to the country. This was recently confirmed after talks with stakeholders took place earlier this year, see our previous post  Nigeria propose VAT increase.

Greek bailout agreement reached

Greece agree bailout deal

An agreement was finally reached last Monday for a €86B bailout deal for Greece, the terms of the new bailout included implementing by Wednesday 15th July to pass laws that:

• Implement VAT hikes.
• Cut pensions.
• Take steps to ensure the independence of Greece’s statistics office is maintained.
• Put measures in place to automatically slash spending if Greece fails to meet its targets on primary surpluses (revenue minus expenditure excluding debt servicing costs).

And by Wednesday 22nd July to:

• Overhaul its civil justice system.
• Implement the Bank Recovery and Resolution Directive (BRRD) to bring bank resolution laws in line with the rest of the EU.
• Market reforms with a clear timetable for implementation of all OECD recommendations, including Sunday trade, sales periods, pharmacy ownership, milk and bakeries, except over-the-counter pharmaceutical products, which will be implemented in a next step.
• Privatisation of the electricity transmission network operator (ADMIE), unless replacement measures can be found that have equivalent effect on competition.
• Labour market policies should be aligned with international and European best practices.
• Adopt the necessary steps to strengthen the financial sector. Continue Reading

Greece presents new bailout proposals

Greece new bail out proposals

Greece have outlined their latest VAT proposals since the ‘No’ referendum last Sunday, so far their main points include:

• Cuts to military spending.
• VAT changes.
• Corporate tax increases.
• Raising retirement age to 67.
• Crack down on tax fraud.
• Increase tax on shipping companies.

The key VAT points are:

• 30% relief for Greek islands to be scrapped – only the most remote islands will keep these tax breaks.
• Restaurants and catering services VAT will rise from 13% to 23%.
• Reduction of the 6.5% to 6%, now only applicable to books, theatre admission and certain medicines.
• A Reduced 13% tax on basic foodstuffs. Continue Reading

Poland plan to cut VAT

Poland VAT cut

Today Poland’s ruling Civic Platform (PO) party announced plans to lower the VAT rate from 23% to 22% starting from the 1st of January 2016. The VAT rate was raised in 2011 to raise budget income during the financial crisis, when its GDP reached 10%, a rate of 3% or lower is required to stay in the Euro currency. However Poland fared well during the financial crisis being one of the only countries not to go into recession, and latest figures show that it could now reach the Euro currency figure comfortably, with the PO currently being pro-EU. This drop in VAT is expected to affect the budget as bringing it down by 1 percentage point will cost the budget an estimated 5 to 6 billion zlotys.

However nothing is yet set out as there will be a general election in October and the PO’s current strongest competition has not laid out any plans for a VAT cut but have proposed plans to stay out of the Euro zone.

Mexico VAT Scope change

Mexico raises VAT rate on ready made snacks and foodstuffs

The Mexican Government has re-categorised ready-made-foods from the reduced rate of 0% to the standard rate of 16% effective from the 1st of July 2015.

In agreement with the Mexican law, any food that is prepared ready to eat at point of sale is considered as ready made and is now subject to the new vat rate. This includes any ‘Fast food’, sandwiches, rolls etc. Previously, only food prepared by restaurants has been subject to VAT, under current VAT law, which remains unchanged, the supplies of supermarkets and convenience stores should also have been subject to VAT, rather than the 0 percent rate that applies to food in general.

Romania confirms 5% VAT rate cut

Romania confirms 5% VAT rate cut

The Romanian Government has now confirmed that the planned VAT rate cut is going ahead, a drop from 24% which is one of Europe’s highest to 19% which is one of the lowest. It has recently been uncertain as to whether the cuts would go ahead due to some political unrest when the opposition accused the Government of going in the wrong direction with the budget and calling for a re-election which would have put the VAT plans in jeopardy.

However earlier this month the Government confirmed the VAT cut was to be implemented by 1st January 2016, and at a greater rate than was expected. In February they announced a cut to 20%, this is based on a quicker than expected return to growth in the country.

Furthermore in addition to this they also confirmed that draft beer will drop from 24% to 9% following in line with the earlier cut to food products.

Yet with this measure potentially impacting the budget revenues by some EUR 2.6 billion both the EU and the IMF have expressed doubts over the sustainability of such deep tax cuts in Romania.

IMF call on Spain to raise their VAT rate

IMF call on Spain to raise VAT

The International Money Fund has called on Spain to raise its VAT rate, even though they said they are pleased with the progress that Spain has made so far it still needs to see more improvements especially on the high levels of unemployment, currently at 24%.

Spain’s economy is gaining momentum and is expected to grow by 3.1% this year however they still need more revenue to boost their economy and the IMF believe they can best do this by raising their VAT rate. In addition they also say other reforms were needed, such as an overhaul of employment contracts and the introduction of healthcare co-payments.

So far the Spanish Government says it had no plans to raise the VAT rate, but it is something that could be a possibility in the near future if they are to listen to the IMF.

Greece plan flat 18% VAT rate

News coming out of the EU suggests that Greece is planning on implementing a flat VAT rate of 18% and also reduction in their list of exemptions. Greece currently has one standard VAT rate of 23% and two reduced rates of 13% and 6.5%, these would be combined so there is only one rate of 18% meaning that the standard rate will fall by 5% but the reduced rates will see a significant rise. Medicines would be the only exemption, although tourism VAT rate is also expected to stay at 13%. The special status granted to Aegean islands, with a 30% discount on VAT rates, will be abolished.

This is part of the Greeks government’s negotiations with creditors to start reducing their high levels of national debt, and increase revenues. Nothing has as yet been approved and the rate would not be implemented till late 2015 at the earliest.

Austrian budget announces increased reduced rate

Austrian budget announces increased reduced rate

Austria has announced that it will increase its reduced rate of 10% to 13%. Most goods and services – including livestock, seeds, cultural services, museums, zoos and hotels – will see the rate go up to 13%, from the current 10%. However Pharmaceuticals and food will still be subject to the 10% rate, essentially meaning that they will have two reduced rates.

The changes will take effect from 1 January 2016; VAT on hotel accommodation will increase from either 1 April or 1 May 2016.

The change was announced in Austria’s 2016 budget, precise details of the Budget measures are not yet known, it is expected that certain anti-fraud measures will also be introduced; mandatory electronic cash registers for small businesses, as well as other unspecified measures to combat VAT fraud in general and specifically in the case of distance sales.

South Africa potential VAT rise

South Africa is continuing to struggle with its budget deficit, this means it is facing a potential credit downgrade, meaning a rise in South Africa’s borrowing costs, leading to calls for a 2% increase in VAT rate from its current 14% to 16%, a one-percentage point increase in VAT could contribute in excess of R16 billion to government revenue annually.

The VAT rate has not increased since 1993, when it saw a 2% increase, which means its tax rate is lower than the average for Africa with the average standard rate of VAT across 28 African countries is 16.2%, while in the European Union it’s 21.5%. Meaning the increase would bring it in line with the African average. This non movement in VAT rates could be one of the reasons that ministers have failed to close the national deficit and have in fact even seen an increase in recent years.

On the other hand as South Africa impose their VAT on all but basic food stuffs many experts have questioned the impact on the poor, meaning they could also look at introducing a reduced rate, as they currently only have a standard and zero percent rates, to impose on more food stuffs.

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