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New global digital VAT/GST rules introduced since the start of 2020

Since the start of 2020, there have been numerous significant global digital VAT/GST rule changes. Here, we provide a summary of what has happened.

new rules blog 130120

The rate of global VAT/GST rule amendments relating to the cross-border sale of digital services continues at a blistering pace. Since the start of 2020, there have already been numerous significant developments. Here, we provide you with a summary of what has happened:

Algeria

The VAT rules in Algeria changed on January 1, 2020.

We understand that - according to article 39 of Algeria’s 2020 Finance act - electronic services sales (including those from non-residents) are now under the scope of VAT.

However, the administrative comments relating to this rule change have still to be published. There is no information (as of January 2020) about the process to be followed to comply. We will keep you updated on developments there.

Uzbekistan

Uzbekistan’s tax code underwent a considerable overhaul at the end of 2019.

The changes were approved by parliament in late December 2019 and were implemented on January 1, 2020. The changes covered supplies of cross-border digital services supplied to residents of Uzbekistan.

Uzbekistan’s neighbour Kazakhstan was also expected to amend its VAT rules but it delayed the implementation to January 2021.

More here on our blog on Uzbekistan’s VAT rule changes.

Malaysia

Malaysia digital service tax extended to supplies from foreign digital service providers on January 1, 2020, at a service tax rate of 6%.

Here is what is specifically stated in the Guide on Digital Services as issued by the Royal Malaysian Customs Department (click on ‘Digital service’ on the left column in the link that opens):

"Effective 1st January 2020, service tax shall be charged and levied on any digital service provided by a foreign-registered person (FRP) to any consumer in Malaysia."

There is a sales threshold of RM 500,000 (circa USD$120,000). Businesses that exceed this threshold over a 12-month period must register for Malaysian service tax.

More here on our blog on Malaysia service tax rules.

Singapore

Singapore’s new Overseas Vendor Registration (OVR) system started on January 1, 2020, and compels foreign digital companies with customers in the city-state to register, collect, and remit 7% GST rate on their sales there.

Singapore’s new system includes a two-tier threshold. The OVR system applies to foreign suppliers of digital services whose annual global turnover exceeds SGD$1,000,000 and whose sale of digital services to consumers in Singapore exceeds $100,000. The latter threshold is included to minimise the compliance burden on overseas vendors which do not make significant sales to Singapore consumers.

More here on our blog on Singapore’s new GST rules.

Moldova

Moldova’s VAT rules will change on April 1, 2020. Moldova originally intended to amend its VAT rules on January 1, 2020, but in late 2019 the introduction date was delayed to April 1, 2020.

This tax reform is one of the first significant moves of a Moldovan government under new prime minister Ion Chicu. Mr Chicu was officially approved as prime minister by parliament on November 14, 2019.

Affected digital service suppliers will have to register with the Moldovan tax authority to collect and remit VAT on their sales to customers based in Moldova. There is also no sales threshold so suppliers are impacted from the date of their first sale in Moldova.

More here on our blog on Moldova VAT rule changes.

. . . and, finally, Campione d'Italia!

There was a quirky customs status change on January 1, 2020, when the enclave of Campione d’Italia - which is surrounded by Switzerland - was literally handed back to Italy.

As part of this political move, the enclave on the shores of Lake Lugano and home to 2,000 residents has been forced to introduce a consumption tax (it was previously a tax-free region). The new consumption tax should - when implemented - align with the Swiss VAT system at the current rate of 7.7%.

Here’s a Swiss government statement on the move stating: “The exchange of notes confirms the introduction of a local consumption tax in Campione d'Italia which is in line with Swiss VAT, thus avoiding potential distortions of competition in the surrounding border region.”

Other developments

We are also tracking developments in the following tax jurisdictions:

  • Mexico - rule change planned for June. More here.
  • Vietnam - rule change planned for July. More here.
  • Indonesia - the government is looking at rule change. More here.
  • Thailand - an e-commerce tax is planned. More here.
  • Oman - VAT system is due to be introduced in 2021. More here.
  • Kuwait - as in Oman, a new VAT system is due to be introduced in 2021. 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.