BDO Indirect Tax News

• Canada: Effective 13 May 2024, the Canada Revenue Agency transferred responsibility for managing import/export number registrations to the Canada Border Services Agency. The change is significant for businesses involved in import and export activities in Canada (click here for an alert prepared by BDO in Canada).
• Denmark: The government and stakeholders have agreed on plans to reduce greenhouse gas emissions in the agricultural sector by introducing a CO2 tax on emissions from livestock. If approved, the tax is slated to apply as from 2030.   

A digital streaming bill (called a “cultural contribution”) passed in May 2024 introduces a 2% base levy on a media service provider’s Danish gross revenue, with an additional 3% levy applying to streaming service providers that invest less than 5% of their gross revenue in Denmark.
An air travel passenger tax will apply as from 1 January 2025. The amount of the tax will depend on the length of the flight and will range from DKK 30 up to DKK 410, subject to some exemptions (e.g., transit passengers). The air carrier will be responsible for paying the tax and will have to register with the Danish customs and tax administration. The bill adopting the passenger tax was published on 12 June 2024.

• European Union: On 8 July, the European Commission released a proposal to amend the EU VAT directive to require certificates for diplomatic VAT exemptions to be electronic certificates rather than hard copies.

On 24 May, the EU Council formally adopted the Corporate Sustainability Due Diligence Directive (CSDDD), which introduces legal obligations on large corporations to conduct human rights and environmental due diligence in their global supply chains. This is the last step in the decision-making procedure. After being signed by the President of the European Parliament and the President of the Council, the directive will be published in the EU official journal and will enter into force on the 20th day following publication.

• Finland: A proposal to transpose the amended VAT directive regarding the special scheme for small enterprises was presented by the government on 16 May 2023. Once the measures are adopted, the following changes would apply as from 1 January 2025: (i) small businesses established in another EU member state and that do not have a permanent establishment in Finland would be able to opt for the VAT exemption if their annual EU turnover does not exceed EUR 100,000; (ii) the special scheme providing relief for small entrepreneurs would be abolished; (iii) a business would have to register for the special scheme only in the EU member state in which it is located; and (iv) small entrepreneurs with turnover exceeding EUR 15,000 would be required to register for VAT purposes on the date the monetary threshold is exceeded (rather than at the beginning of the accounting year under current rules).

The standard VAT rate will increase from 24% to 25.5% on 1 September 2024.

• Hungary: Starting 1 July 2024, taxpayers can use the eVAT system (rather than the General Form Filing Program) to revise and correct previously submitted VAT returns.
• Iceland: The VAT act has been amended to align the supply of services to nonresident businesses that do not have a fixed establishment in Iceland with the EU VAT Directive and the OECD VAT Guidelines.
• India: The 53rd GST Council meeting held on 22 June resulted in recommendations to reduce the tax and legal burdens on taxpayers, and to introduces measures to facilitate trade. The recommendations will be implemented via circulars, notifications or statutory amendments (see the alert on the council’s recommendations prepared by BDO in India).
• Italy: The plastic tax will not become effective until 1 July 2026 and the sugar tax on 1 July 2025. Both taxes were slated to enter into effect on 1 July 2024 (for prior coverage, see the item in the Bytes column in the January 2024 issue of Indirect Tax News and the article in the February 2023 issue of Corporate Tax News). The delay was announced in a law decree converted into law in May and became effective on 29 May following publication in Italy’s official gazette.
• Kenya: The president declined to sign the Finance Bill 2024, which had been approved by parliament, following widespread protests against proposed rate hikes, particularly in the area of VAT. The bill has been sent back to the National Assembly. It should be noted that the Finance Bill did include the repeal of the digital services tax and the introduction of a “significant economic presence” tax that would be due by nonresident individuals earning income from services provided through a digital marketplace in Kenya.
• Latvia: The Ministry of Finance has launched a public consultation on proposed changes to the Accounting Law that would require businesses to issue e-invoices in B2B transactions starting in 2026 and business-to-government transactions starting in 2025.              
• Nepal: The budget for fiscal year 2024-25, presented on 28 May 2024, includes several tax proposals that would affect businesses operating in the country, including the following:
  • Introducing mandatory e-invoicing for VAT-registered taxpayers and taxpayers with transactions exceeding NPR 250 million annually;
  • Expanding the scope of a permanent establishment to include the situation where a nonresident has a “substantial digital presence” in Nepal for at least 90 days during the previous 12-month period;
  • Introducing a green tax on imports of petroleum and coal products with a view to reducing carbon emissions; and
  • Developing a model tax treaty that would be used to conclude more tax treaties.

If approved, the indirect tax proposals would apply immediately and the direct tax proposals would apply as from 16 July 2024.

• Pakistan: A “significance economic presence” (SEP) test has been introduced for nonresidents. Under this rule, which is included in the Finance Act 2024 (gazetted on 29 June), a nonresident’s business income will be treated as Pakistan-source income if it is directly or indirectly attributable to "a business connection" in Pakistan, which includes a SEP in the country. A SEP will arise where a nonresident engages in transactions relating to goods, services or property with a person in Pakistan, and includes the downloading of data or software in Pakistan, and the systematic and continuous soliciting of business activities or interacting through digital means with users in the country.
• Poland: The government announced on 26 April 2024 that the mandatory centralised e-invoicing system (KSeF) will commence on 1 February 2026 rather than 1 July 2024 (for prior coverage see the article in the April 2024 issue of Indirect Tax News). Introduction of the system has been delayed several times. The KSeF is a portal in which businesses will be required to generate e-invoices; the portal will be used to verify the structure and accuracy of the e-invoices, which will then be time-stamped and assigned a number.
• Slovenia: A public consultation is being held on several proposed changes to the VAT law, including an increase in the annual turnover threshold for VAT registration from EUR 50,000 to EUR 60,000 and the introduction of VAT grouping rules.
• South Africa: The Constitutional Court ruled on 12 April that a VAT deduction is not allowed for payments made under a loan granted to customers without consideration (for an analysis of the case, see the alert prepared by BDO in South Africa).
• Spain: The 0% reduced VAT rate applicable to basic foods that was due to expire on 30 June 2024 is being extended until 30 September and then will be phased out. The VAT rate on basic foods will increase to 2% during the period 1 October 2024 through 31 December 2024.
• Sri Lanka: The government is expected to impose VAT on digital services and eliminate income tax exemptions on service exports.
• St. Lucia: The government announced on 28 May 2024 that import duty and excise tax concessions on hybrid vehicles and those operating on sustainable fuels are extended to 30 November 2024 (originally due to expire on 1 September 2024).
• Switzerland: Beginning 1 January 2025, all VAT returns will have to be filed electronically using a designated portal.
• Vietnam: On 13 June 2024, the National Assembly approved a proposal to further extend the application of the 2% VAT rate reduction (down to 8%) for specified goods and services to 31 December 2024, rather than 30 June. The reduction applies to goods and services other than those related to, for example, telecommunications, financial or banking activities, securities, insurance, real estate sales, metal and prefabricated metal production, mining (excluding coal mining), etc.
• Zambia: Effective 1 July 2024, VAT-registered taxpayers are required to issue e-invoices using the "smart invoice" system.