Uber agrees to resolve a probe into unpaid VAT, Portugal prepares to harmonise VAT laws for domestic and foreign businesses, and more.
Uber and HM Revenue and Customs have struck a £615 million ($707 million) settlement over an investigation into unpaid VAT.
The ride-sharing and food delivery company got embroiled in a fight with HMRC over the tax after arguing that its drivers were independent contractors and therefore exempt from VAT.
Nevertheless, the England and Wales High Court ruled in December 2021 that Uber drivers were employees with rights, as opposed to independent contractors, and that the company was responsible for VAT collection.
"We have settled all outstanding HMRC VAT claims pertaining to periods preceding our model shift on March 14, 2022," the company stated in a Form 8-K filing with the US Securities and Exchange Commission on October 31.
The corporation projected that the £615 million payment will be made in the fourth quarter of current year.
However, not everyone is convinced of the deal's validity.
Jolyon Maugham, director of the Good Law Project in the United Kingdom, has questioned the settlement sum since it looks to be too low.
“There are some very serious unanswered questions about why HMRC appears to have settled the dispute with Uber for such a low sum,” he stated on Twitter.
Others were more encouraging.
Alex Cobham, chief executive officer of Tax Justice Network in the United Kingdom, noted that this is a prime example of a civil society-initiated litigation that has generated hundreds of millions of pounds in revenue for the United Kingdom.
“There could barely be a better case for corporate tax transparency so the public can hold accountable multinationals and the tax authority,” he said.
In a statement to ITR, an HMRC spokeswoman highlighted that this was in reality a favourable outcome for UK taxpayers and one that they could have been anticipated to achieve in court.
“HMRC never compromises on its view of the law in order to secure a tax agreement. We will not settle for any amount less than we would reasonably expect to obtain from going to court,” it added.
Portugal will impose delayed VAT regulations
Portugal has established a new timeframe for implementing its plan to ensure that international companies registered for VAT in the country will be subject to the same regulations as domestic businesses.
The Portuguese Tax and Customs Authority (AT) asserts that the plan will harmonise VAT legislation and level the playing field between local and non-resident enterprises. This will become effective as of January 1, 2023.
The measures mandate 1) the use of approved invoicing software that enables the use of a unique ATCUD code – a unique document code for invoices; 2) the use of SAF-T billing for monthly invoice reporting; and 3) the inclusion of QR codes on all PDF and paper invoices.
Lexmark's worldwide VAT head in Geneva, Gorka Echevarria, stated that Portugal's strategy of imposing additional VAT responsibilities on foreign firms is unique among its European peers.
"It may appear to be the proper thing to do in order to avoid discriminating [against] foreigners in comparison to locals, but at the same time, organisations with VAT registrations are likely identified for VAT on limited operations."
These corporations may have an established presence in Portugal as domestic enterprises, and Echevarria questioned if the digital reporting requirements, particularly SAF-T, would be challenging for non-resident companies.
“Portugal is becoming a country with a lot of red tape compared to other EU countries, with probably the sole exception of Poland,” he added.
AT must give ATCUD codes for bills that will be processed on certified billing systems.
PDF or paper invoices will also be required to include QR codes; however, this requirement does not apply to companies who employ electronic data interchange, an automated communication method between entities.
Beginning on January 1, 2023, foreign enterprises will be required to submit invoices in Portugal using SAF-T. However, enterprises will have the choice of adopting monthly SAF-T billing or manually sending invoices to AT.
France is implementing electronic invoicing standards for B2B transactions.
The French General Directorate of Public Finances has produced new e-invoicing rules to assist taxpayers and their agents in preparing for the 1 July 2024 introduction of business-to-business electronic invoicing.
On October 7, the authority provided technical specifications and recommendations for frequently asked questions. These pertain to the transmission frequency of invoices and payment information over three monthly submission dates.
The measures also compel taxpayers and certified agents, known as PDPs, to include information on the delivery or supply of goods or services, the SIREN number of clients - an identity number for commercial entities – and information on advance VAT payment.
Sabine Studer, head of group tax at the Swiss metal processing company Bystronic, stated that despite the advantages of uploading e-invoices to authorised platforms, there are still some questions regarding the plan.
Due to the fact that taxpayers are forced to provide data three times per month, there is little time to validate the transaction data, according to Studer.
She explained that the data requirements, which include a SIREN number, will likely require taxpayers to cleanse and update their master data sets for consumers and their own company-related information for vendors.
“The list of accredited platforms will only be published in February 2024 or later, [so] it will be difficult for taxpayers to establish the required IT tools in case the technical requirements are unavailable before this date.”
The update also provides information on intra-Community supplies and provisions on PDP applications, as well as implementation dates ranging from 1 July 2024 to 1 January 2026.
In addition, the tax authority provided technical specifications about e-invoicing in B2B transactions and the transmission of transaction-level information in Decree No. 2022-1299 on October 7.
The regulations address the issuance, transmission, and reception of electronic invoices. They also concentrate on transmitting invoices and payment information to the tax authority.
Companies must submit invoices through the State Financial IT Agency. Alternately, taxpayers may utilise dematerialization systems permitted by agents.
Significantly, the decree opens the registration process six months earlier, on 1 April 2023, for companies registering directly or through PDPs. The debut of B2B e-invoicing and business-to-consumer (B2C) invoice reporting is scheduled for July 1, 2024.
Studer highlighted the advantages to taxpayers of being able to upload their transaction data to accredited platforms for both B2C and B2B transactions, should their clients fall into both categories.
“This will simplify the invoicing process for the taxpayer,” she said.
She emphasised, however, that the data required for B2C transactions differs from that required for the e-invoicing process of B2B transactions.
There will also be a phased implementation of the measures: 1) large businesses with over 5,000 employees, €1.5 billion ($1.48 billion) in revenue, or €2 billion on their balance sheet will have a deadline of July 1, 2024; 2) the deadline for medium-sized firms will be January 1, 2025; and 3) small businesses with fewer than 250 employees and revenues not exceeding €50 million, or €43 million on their balance sheet will have a deadline of January 1, 2026.
“It is positive that small taxpayers have more time to implement the e-invoicing and e-reporting processes in their ERP systems,” Studer added.
Companies risk fines ranging from €15 per invoice to a maximum of €15,000 per year for failing to send electronic invoices.
Penalties that could be assessed to certified agents who submit on behalf of certain businesses range from €15 per invoice to €45,000 per year.
Through an exemption from Articles 218 and 232 of the VAT Directive, the European Commission has also given France the go-ahead to implement e-invoicing procedures for some B2B transactions.
India expands its GST net for B2B taxpayers to combat VAT leakage.
Beginning January 1, 2023, the Income Tax Department of India will require taxpayers to digitally authenticate sales invoices for goods and services tax if they exceed Rs 5 crore per year, down from Rs 10 crore ($1.21 million).
Effectively increasing the number of taxpayers necessary to register on the site for invoice registration.
Mohan Nusetti, senior vice president and head of indirect tax at the pharmaceutical giant Lupin India in Mumbai, stated that the effort will require smaller enterprises to provide mandatory electronic invoices.
“By expanding the applicability of e-invoicing, the government intends to enable small businesses to embrace technology and plug leakages around tax compliance, including tax evasion,” said Nusetti.
The government initiated a staggered implementation of required B2B government pre-clearance of e-invoicing in October 2020, beginning with enterprises with an annual turnover of more than Rs 500 crore.
In January 2021, a second phase dropped this barrier to include enterprises with annual sales exceeding Rs 100 crore. Beginning in April 2021, the third phase reduced the requirement to accommodate enterprises with revenues exceeding Rs 50 crore.
In October 2022, the threshold was reduced for the fourth time, from between Rs 20 crore and Rs 50 crore in yearly sales to Rs 10 crore.
The actions have been justified as an effort to close the GST deficit, prevent fraud, and increase compliance. Electronic invoicing has aided the revenue services by granting them access to transaction-level data submitted by businesses.
According to Nusetti, this proposed change may first appear burdensome to small businesses, but it will dissuade them from generating fraudulent invoices and improve compliance.
By fLEXI tEAM