Globally, we have seen how the Covid-19 pandemic has overhauled the way countries have assessed and deployed fiscal measures considering growing inflation and hardship. We can expect to see a direct impact on fiscal measures countries deploy considering recent events in Ukraine.
Donations of goods and services to persons affected by the armed conflict in Ukraine are to be free of VAT in Romania. We can expect to see bordering countries deploy similar measures.
In the past few months, many European countries have been adopting a range of fiscal measures considering growing inflation. Concerns around inflation have however extend beyond Europe’s borders. Cuba has in response to the growing inflation crisis declared a 10% tax on retail food sales.
This took effect on 8th February 2022 and target self-employed people and small and medium-sized companies in the retail food sector.
The VAT rate for the tourism sector in Ecuador has been reduced from 12% to 8%, from February 26 2022 until 1 March 2022, and from April 15 to April 17 2022.
Further to rising inflation in the country, Turkey has reduced the VAT rate on basic food products from 8% to 1%.
Greece has extended the reduced rate of 13% until 30 June 2022 for the following products:
• Passenger transport;
• Coffee and non-alcoholic beverages;
• Cinema;
• Tourist packages;
• Gyms.
Similarly, the 6% reduced VAT rate has also been extended for products required for the protection of Covid-19, until 30 June 2022.
In line with spiralling living costs across Europe, Bulgaria is introducing further tax measures intended to reduce the burden on taxpayers. To this effect, it has put forward a draft Bill Amending and Supplementing the Value Added Tax Act. It has proposed a VAT reduction on the following items:
• Basic foodstuffs;
• Non-alcoholic drinks;
• Medical products;
• Heating, electricity and gas.
This measure will now be debated in Parliament. It is expected that this measure could come into place as soon as 1st April 2022 if approved.
In line with rising heating costs across much of Europe, the Lithuanian government has temporarily applied to reduce VAT to district heating.
It is proposed that this will temporarily be set to zero VAT.
Last month we communicated that Belgium had taken some VAT-related measures as a direct result of the pandemic.
Belgium has also introduced further VAT reforms – from 1 March 2022 to 1 July 2022, the VAT rate for electricity will be reduced from 21% to 6%.
In line with what we are seeing in many other European countries, France is implementing further fiscal measures as a direct response to the Covid pandemic.
Further to the 2022 French Finance Law, the reduced rate of 5.5% will continue to apply to specific products such as gels and face masks, until 31 December 2022.
The French Finance Law also stipulates that the reduced 5.5% VAT rate will apply to the following products:
• Certain foodstuffs
• Products intended to be used in the preparation of these foodstuffs
• Products intended to supplement or replace these foodstuffs.
The Vietnamese government released Decree 15/2022/ND-CP on 28 January 2022 providing tax exemptions and reductions under Resolution 43/2022/QH15, this aims to support social-economic recovery and development.
One of the key points of this Decree is the temporary reduction on the standard VAT rate:
In the Budget 2022, the Minister of Finance in Singapore announced two steps to increase the GST rate:
The IRAS (Inland Revenue Authority of Singapore) stated that the increased revenue from GST will be used to fund healthcare expenditures for seniors in the country.
Moreover, the GST treatment for travel arranging services will be updated from 1 January 2023, the basis for determining whether zero-rating applies to a supply of travel arranging services will be updated, to be based on the place where the customer (i.e., the contractual customer) and direct beneficiary of the service belong:
In line with what we’re seeing across Europe, Latvia’s governing coalition parties will meet to discuss reducing the VAT on energy from 21% to 5%. This is a significant reduction and shows the pressure governments are under to try and tackle rising inflation, amongst other issues.
This has not yet been implemented but the government should indicate their intentions over the coming weeks.
Slovenia is extending the circumstances under which the reverse charge must be used. From 22nd January 2022, non-established companies will no longer have to charge VAT on their domestic B2B transactions in Slovenia- assuming that conditions are met for the reverse charge. The customer must be a taxable person with a VAT number in Slovenia.
This will mean some companies will avoid VAT registration in Slovenia altogether- this will be particularly advantageous if they have minimal transactions undertaken in Slovenia. Non-established companies will potentially benefit from less administrative tax burdens as a result of the measure.
In 2020, we informed you of the 9% reduced rate that was applied to certain products in Bulgaria:
• Books on a physical carrier or by electronic means;
• Restaurant and catering services, including the supply of food for consumption at home;
• Food suitable for babies and young children;
• Baby diapers and similar baby hygienic items;
• General touristic service, as well as excursions organised by tour operators and tour agents;
• Services for the use of sports facilities.
This reduced rate will now be extended and apply to these products until 31 December 2022.
The Covid-pandemic continues to have a significant effect on the VAT measures countries are undertaking. Circular 2022/C/2 has extended the temporary VAT rate of 6% on the supply, intra-community acquisition and import of mouth masks and hydroalcoholic gels.
The European Commission has launched the public consultation on the “VAT in the Digital Age” initiative. The underlying aims of this initiative include ensuring the proper functioning of the single market, reducing business compliance costs and promoting economic interests of the EU and Member States.
The Commission is seeking feedback on VAT reporting obligations and e-invoicing, VAT treatment in the digital age and single EU VAT registration. The Commission aims to put forward legislative proposal in the latter part of the year to this effect. It is clear that a major initiative of the consultation is to harmonise fiscal measures across Europe.
The public consultation is open for 12 weeks from 21 January 2022 – 15 April 2022.