Resources Library

Digital tax trends: International plans to tax the digital economy

Tax trends indicate a move to destination-based taxes and non-resident digital suppliers being liable for VAT/GST. Here's a sample list of such plans.

Across the globe indirect VAT/GST rules are being amended to ensure that foreign digital suppliers become liable for the collection and remittance of these taxes.

Here we provide a list of tax jurisdictions that are planning to extend their VAT/GST laws to the consumption of cross-border digital services:

1. Thailand

The Thailand VAT legislation was approved in early June 2020. The next step in the process was for a Thailand government vote and the announcement of a start date for the new legislation. More here.

2. Ukraine

Ukraine has revealed draft plans of a proposal to tax non-resident digital businesses from the start of 2022. The plan contained in a bill before parliament has yet to be considered in parliament but details are available on its official website. More here.

3. Paraguay

Paraguay's new VAT rules in relation to digital sales provided by foreign businesses to domestic customers have been postponed for six months until January 1, 2021. In common with other South American rules, the burden of the settlement and collection of the VAT due (Paraguay’s standard VAT rate is 10%) will be on the local bank, the issuer of the payment card used in the purchase. More here.

4. Brazil

Brazil’s government has presented a reform of its federal indirect tax regime with the aim of creating a new, simplified ‘VAT-like’ system. The contents of the Bill are essentially a simplification plan for Brazil’s complex web of indirect, state, and federal tax systems. The CBS would be applied at a flat rate of 12% and replace the maze of varying federal taxes that currently apply. More here.

5. Canada

The Canadian provinces of Québec and Saskatchewan already tax the cross-border supply of digital services by non-resident businesses, but there is no federal Canadian approach at the moment. It is increasingly likely that Canada will move to change how the supply of digital services by foreign companies is taxed from 2021. Any move may follow the path of Québec and Saskatchewan. More here.

6. British Columbia (Canada)

In early September 2020, the Canadian province of British Columbia (B.C.) confirmed April 1, 2021, as the date for its plan to start taxing foreign-supplied digital services. The plan was previously postponed due to the impact of COVID-19. More here.

7. Oman

Oman plans to implement a VAT system in April 2021. In mid-October the Gulf State issued its VAT law that will come into effect 180 days after its publication in the Official Gazette. As the exact introduction date for the new VAT system is 180 days from the day the rules were officially gazetted on October 18, 2020, this means the date of implementation will be April 16, 2021. More here.

8. Bangladesh

In June 2018 Bangladesh proposed a 5% VAT on all types of ‘virtual business’ in its 2018-19 budget. The term ‘virtual business’ was later clarified to mean digital platforms such as Facebook, YouTube, and Google. Here at Taxamo we have been following developments in Bangladesh very closely. You can learn more about what has happened, and what is planned, here.

9. Philippines

A House Bill has been designed to tax the digital economy in the Philippines. The standard 12% VAT rate is to apply to affected digital services. More here.

10. Israel

In a significant move, back in April 2016, the Israeli Tax Authority (ITA) proposed to change its VAT legislation so that foreign tech firms would have to register in Israel to account for VAT on digital services sold to Israeli consumers. In September 2018 the ITA issued a ruling (6369/18) allowing a streamlined procedure for B2B e-commerce supplies by foreign businesses to Israeli businesses. There has been no movement, however, on B2C supplies by foreign businesses to Israeli-based customers.

11. Kazakhstan

According to proposed changes, a foreign digital service supplier with customers in Kazakhstan will be required to register for VAT. These suppliers will also be obliged to regularly remit VAT on their sales in Kazakhstan based on the turnover of services rendered. The rule change is planned to come into effect on January 1, 2022. More here.

12. Fiji

Fiji has revealed plans to tax the sales of digital services, or remote services as they are referred to in the Fiji VAT Bill that is before Parliament. Such a move will trigger VAT registration obligations for affected digital service suppliers and electronic marketplaces. More here.

13. Mauritius

The Mauritius Government has revealed a plan to extend the scope of its VAT system to digital and electronic services provided by non-resident businesses to customers based in Mauritius. More here.

PLEASE REMEMBER THAT THIS INFORMATION HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT PRESENTED AS SPECIFIC TAX OR LEGAL ADVICE. ALWAYS CONSULT A QUALIFIED TAX OR LEGAL ADVISOR BEFORE TAKING ANY ACTION BASED ON THIS INFORMATION. VERTEX INC. ACCEPTS NO LIABILITY FOR ANY LOSS RESULTING FROM ANY PERSON ACTING OR REFRAINING FROM ACTION AS A RESULT OF THIS INFORMATION.