VAT news 2020. Which changes of the VAT system enters into force on the first of January 2020? Which changes in the VAT rates will there be in 2020? Which goods and services will get changed VAT rates in 2020? Which countries will change the VAT rates in 2020? VAT 2020? What will happen to the EU VAT in the upcoming years? Which countries will raise or lower VAT in 2020? How does VAT change in 2020?
VAT changes in 2020
We will start with some changes to the VAT system in the European Union and then move on to VAT rate changes in individual countries in Europe and around the world.
EU VAT changes 2020
Chain transactions between companies within the EU: New guidelines which specify who should be considered responsible, but the risk of interpretation problems remain.
Sales of goods as call-off stock: Harmonisation of EU rules for call-of stock storage. Transfers to these warehouses no longer need to be regarded as sales. Only when the goods are transferred to the end customer, the sales are deemed to happen, but you can continue to apply the current (old) rules in the future if you want to.
The VAT registration number for EU trades: At first, it was a requirement, then it was interpreted as a recommendation, and now it becomes a requirement again. When you sell goods without VAT with reverse charge liability to companies in another EU country, you must specify the customer company’s VAT number, which most companies already do. It becomes a must requirement instead of “I guess so” requirement.
Stricter evidence requirements for goods being transported across national borders: The evidence requirement for transports become sterner with at least 2 docs (e.g. transport, insurance or CMR document).
New VAT system in the EU: Initial launch of the new “definitive” VAT system with the destination principle that will cause significant administrative problems for small businesses in Europe. The severe problems arrive in 2021 and 2022 when you need to invoice with the customer’s VAT rate for both services and goods. This will apply to B2B transactions too but there is an option on the table to continue using reverse charge without VAT if you want to (will require a good standing status with your tax authority – Certified Taxable Person). This is the same regulation that is already in place for digital services since 2015.
The whole world is moving towards a destination-based VAT system now. But if you are a translator you can get customers from all around the world and to sell your services to for example a customer in Russia you need to first apply for VAT registration to be able to invoice your customer. Hopefully, most countries will have high thresholds avoiding small companies getting trapped in an impossible bureaucratic nightmare.
EU VAT rate changes 2020
Bulgaria – Implements new items at reduced rates. 9% for medicinal (covered under the National Health Insurance Fund) and dietary foods for special medical purposes. 5% for meat, milk, eggs, flour, and flour-based food products.
Croatia – Standard VAT is reduced from 25% to 24%, as well as lowered to 13% for hotels and tourism.
Czech Republic – A number of items and services will get reduced to 10% VAT rate (1 April 2020): Catering services, serving draught beer, e-books, audiobooks, water distribution, and sewer charges, hairdressing, barber services, repairs of bicycles/footwear, reparation of clothing.
France – Also implements liability for marketplaces to check VAT numbers of sellers, international (non-EU) sellers will need to appoint a local representative in France
Greece – The standard VAT rate is reduced from 24% to 22% (preliminary), and Greece’s reduced VAT rate is lowered to 13% for childcare articles and safety helmets. Reduced rate lowered from 13% to 11% but may be moved to the second half of 2020 or 2021? Contradictory info exists.
Hungary – Lowers hotel VAT to 5%.
Italy – Possible VAT increase 22% to 25,2% (uncertain as always), VAT liability for digital marketplaces (already from October 2019).
Lithuania – Standard VAT is reduced from 21% to 18% (dubious).
Netherlands – Have changed the VAT numbers for sole traders. If you sell B2B to a Dutch sole trader, you will need to update your recorded VAT number for the periodic reporting (EC sales list). E-books and e-publications will get 9% VAT rate in 2020.
Poland – (1 April 2020): All kinds of bread and cakes, soups, broths, homogenized and dietetic foods will get 5% VAT 1 April 2020. All fruits will also get 5% (currently some have 8%..). Infant foods, toddlers, pacifiers, nappies, hygiene products, and car seats will be reduced from 8% to 5%. Mustard, sweet pepper, some processed spices are reduced from 23% to 8% but others like cumin and turmeric (unprocessed spices) will be raised from 5% to 8%. Lobsters, octopus, crustaceans, mollusks, crabs, crawfish, shrimps and preparations made of them, caviar, and dishes sold in catering establishments are raised to 23% VAT rate.
Romania – (postponed) The standard VAT rate is reduced from 19% to 16%, and the reduced VAT rate of 5% is applied to all foodstuff.
Spain – E-books and feminine hygiene products will get 4% VAT rate.
Austria – will apply the reduced VAT rate of 10% for digital publications like e-books.
Corona VAT changes
Germany – Corona package: VAT rates temporarily falls between 2020-07-01 and 2020-12-31. The standard rate of 19% sinks to 16% and 7% becomes 5%.
Austria – Corona package: Non-alcoholic beverages decreases from 20% to 10% from May.
Czech republic – Corona package: Hotel rates drop from 15% to 10%.
Belgium – Corona package: Catering reduced from 12% to 6% June – 31 December.
Portugal – Corona package: Gym reduced to 6%.
UK :
Digital publications will be VAT free from 1 May 2020.
A new temporary reduced VAT rate of 5% is applicable from 15 July 2020 to 12 January 2021.
ATTRACTIONS: shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions, similar cultural events and facilities. NOT sporting events.
https://www.gov.uk/guidance/vat-on-admission-charges-to-attractions
CATERING & TAKEAWAY FOOD: For on-site, not external delivery. Catering services for consumption off-premises remain standard-rated as well as alcohol. https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091
HOTEL: Hospitality, hotel, and holiday accommodation. See further explanation about deposits and VAT-rate dates in the comment section below. https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions
Cyprus – Corona Package: Hotel rates fall from 9% to 5% (July – 10 January 2021).
Here are the VAT changes from 2019
Current VAT rates in EU (table)
Selected VAT changes 2020 in the rest of the world
What is relevant for European companies is primarily the changes to VAT on digital services, which means that if you sell files that can be downloaded from your website (or similar electronic services) you may need to invoice with the customer country’s VAT if you exceed the country’s threshold limits for these services. This means you will need to update yourself on the VAT rules and regulations in more and more countries around the world. This also implies you will need to register for VAT in each country you become eligible to pay VAT in. Potentially you will need to file VAT returns for all countries in the world each month or quarter, an administrative impossibility for a small company. Fortunately, many countries have thresholds, and if you sell below this you don’t need to handle VAT domestically in that country. But there are countries without thresholds making you eligible for VAT at the first sale.
Uzbekistan introduces 15% VAT on foreign e-service providers.
Uganda extends 18% VAT to foreign e-service providers (>37.5 million UGX/ 3 months or >150 million UGX/12 months).
Ecuador applies 12% VAT on digital sales and it’s the responsibility of certain financial institutions which act as custodians to collect and handle the VAT. The probable launch date is 1 January 2020.
Singapore now requires 7% VAT for foreign digital service providers, with a possible increase to 9% in 2021. Fortunately, the business-friendly country of Singapore relieves small businesses from this requirement. Global revenue >$1million and value of digital services supplies to consumers in Singapore must be over $100000 (approx. 73000 USD or 66000 Euro).
Paraguay extends 11% VAT to foreign e-service providers.
Mexico initiates 16% VAT for foreign digital service providers including B2B.
Malaysia impose 6% VAT on foreign e-service providers for B2C, >RM 500,000.
Norway cancels the VAT exemption for imports below 350 NOK, i. e. all products to Norwegian customers will now be subject to toll tariffs and import VAT for the consumer if you do not have a NUF or have a presence on Norwegian soil which would require you to handle the import VAT.
Kazakhstan introduces 12% VAT on foreign e-service providers.
Chile imposes 19% VAT on non-resident service providers of electronic services.
Good afternoon! Thanks for the information. I study the tax system and VAT rates of different countries. I can use the data from your article in my work.
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Hi, if a service (e.g. a short stay at a holiday resort) is purchased and paid for, and the VAT rate changes between the dates the service is paid for and the date the service is delivered (e.g. the date of the actual holiday) then what is the correct VAT rate to use? Should the purchaser be entitled to a refund of VAT already charged (or required to pay the additional VAT applicable, as may be the case)?
As a general rule for VAT rate changes, you must apply the current VAT rate in force at the actual supply date of the services. If customer books when the VAT rate is higher but pays on arrival when the VAT rate is lower the receipt should be with the lower VAT rate. Supply of a physical product is VAT-rated at the time of supply (delivery date). Continuous supplies are split on the VAT rate change date. Due to the nature of rapid changes during Corona-epidemic, and corresponding help packages, several countries (like Germany) allows a transition period when you can use both rates since it takes time to update and change accounting programs and systems. UK help package (15 July 2020 to 12 January 2021): Hotel deposits received before the VAT rate change, but the actual stay occurs after the change, can be subject to 5% VAT (but at the option of the business owner). The general rule under normal circumstances is that the VAT rate applied on pre-payments should be made with the actual VAT rate in force on the pre-payment date. Booking fees are treated in the same way as a deposit.
https://www.gov.uk/government/publications/revenue-and-customs-brief-10-2020-temporary-reduced-rate-of-vat-for-hospitality-holiday-accommodation-and-attractions/guidance-on-the-temporary-reduced-rate-of-vat-for-hospitality-holiday-accommodation-and-attractions
https://www.gov.uk/guidance/hotels-holiday-accommodation-and-vat-notice-7093
VAT charged on all non-refundable deposits after 1 March 2019:
https://www.bdo.co.uk/en-gb/insights/tax/vat-and-indirect-taxes/vat-to-be-chargeable-on-all-non-refundable-deposits
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