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November 2013 International Indirect Tax Updates

Blog, Indirect Tax, News, ONESOURCE, Sales and Use Tax, VAT Tax Rates November 1, 2013

Horses graze under sunny autumn skies on Honey Acres Farm near Dickerson Maryland

As a result of  current economic developments the following VAT changes came recently into effect.

Pakistan

New sales tax of 3% was imposed on fabrics. A 2% additional sales tax will be charged from manufacturers.

On October 4th, 2013 the Government of Pakistan Ministry of Finance Tax Department issued a notice amending Notification No. S.R.O. 1125(1)/2011 and imposing a 3% sales tax on import and supply of fabrics and a value added tax of 2% on commercial imports of fabrics. In response to the requests from  the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the Karachi Chamber of Commerce and Industry (KCCI) and Trade Associations, the Federal Board of Revenue (FBR) agreed in its Notification S.R.O. 896 (I)/2013 not to charge manufacturers sales tax on the retail price basis on goods like household gas and electrical appliances, tiles, tires etc. The concept of charging sales tax on the basis of retail price is based on collecting the sales tax of the entire supply chain from the manufacturers until the retail stage upfront from the manufacturer. As a result manufacturers were faced with difficulties by fulfilling the requirements of printing retail price on every item to be sold due to varying market prices. The FBR accepted the request and introduced a 2% additional sales tax to be paid by the manufacturers which will be charged on the basis of actual value addition in the chain from manufacturer until retailer. The FBR highlighted that it is not a new tax or enhancement of existing rate but a different way of collecting tax which otherwise was payable by the supply chain.

In Europe and Asia the following countries remained their VAT rates at current level.

Belarus

The 20% standard VAT rate will remain unchanged.

The decision was made by the government as announced on October 31st, 2013.  According to Belorussian Deputy Prime Minister Piotr Prokopovich, the tax burden cannot be increased because it is already on a high level. Increasing the rate would not make the VAT rates more competitive with Russia or Kazakhstan, as stated by Prokopovich. The rate of the profit tax will remain unchanged as well.

France

The reduced VAT rate of 5.5% will not decrease to 5%.

Article 68 of the Amending Finance Law no. 2012-1510 of 29 December 2012 provides for an increase in VAT rates on 1 January 2014.  The standard rate will go up from 19.6% to 20% and the intermediate rate from 7 % to 10%. The reduced rate of 5.5% was originally scheduled to decrease to 5%. However, as a result of the National Assembly vote on the 2014 Budget,  the reduced rate of 5.5% will be maintained at the current level. The decision to keep the 5.5% VAT is expected to generate 750 million Euro which will partially finance a reduction in VAT in other sectors, including thermal renovation and social housing construction services.

Ireland
The reduced VAT rate for tourism related services will remain at 9%.

Pursuant to the provisions announced in the 2014 Budget Statement of 15 October 2013, the 9% reduced VAT rate, which was introduced in 2011 as part of the Government Jobs Initiative for tourism related services will be retained. The reduced rate was due to revert to 13.5% on 31 December 2013. According to Minister of Finance Michael Noonan the reduction from 13.5% had helped creating over 15,000 jobs as well as protecting existing ones. Keeping the reduced rate of 9% will allow to support and encourage growth in small businesses in the tourism sector.

Poland
The current VAT rates will remain unchanged.

On October 3rd, 2013 Polish Prime Minister Donald Tusk submitted to the Sejm (lower house of parliament) a draft bill to the VAT Act that will keep the 23% standard and the 8% reduced VAT rate in force until the end of 2016. The VAT rates were temporarily increased on 1 January 2011 and were scheduled to take effect until 31 December 2013. Effective 1 January 2014 the VAT rates were supposed to return to their previous level. Based on the information provided by the Government Information Centre (CIR), the extension of the current higher rates was caused by the need to reduce imbalances in public finances, as well as by a weak demand in major export markets. Both factors are limiting the economic growth. The CIR added that remaining the VAT rates at the current level was already included in the in April 2013 adopted “Update to the Convergence Program for 2013″ and in the “Long-term Financial Plan for the years 2013-2016″.

Thailand

VAT rates will not change at least until after fiscal year 2014.

On October 29th, 2013 the Deputy Finance Minister Bencha Luicharoen confirmed that the VAT rates won’t change as government’s revenue collection is progressing as expected. Despite concerns relating to the government’s future investments, including the 2 trillion baht infrastructure plan, there is no policy to raise the VAT level from the current 7%. The enforcement of the current rate until the end of fiscal 2014 has been already extended.

Sources:

http://www.fbr.gov.pk/PressRelease.aspx?view=Press

http://budget.gov.ie/Budgets/2014/2014.aspx

http://bip.kprm.gov.pl/kpr/form/r917,Projekt-ustawy-o-zmianie-ustawy-o-podatku-od-towarow-i-uslug.html

http://www.franceinfo.fr/economie/budget-2014-le-taux-reduit-de-tva-ne-baissera-pas-1180875-2013-10-18

http://charter97.org/be/news/2013/10/31/78890/

http://thainews.prd.go.th/centerweb/newsen/NewsDetail?NT01_NewsID=WNECO5610300010001