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Australian Tax Office rules on Bitcoin

The ATO has just issued a ruling on the GST treatment of Bitcoin. Here: http://law.ato.gov.au/atolaw/view.htm?docid=%22GST%2FGSTR20143%2FNAT%2FATO%2F00001%22

In brief:

1. A transfer of bitcoin is a “supply” for GST purposes.
2. Bitcoin is not “money” under the GST legislation.
3. A supply of bitcoin is not a “financial supply”.
4. If bitcoin are supplied in exchange for goods or services the transfer will be treated as a barter.
5. A bitcoin is not a “voucher” for GST purposes.
6. A secondhand goods input credit is not available on the acquisition of bitcoin.

No real surprises there. This had been well signposted.

We await the NZ IRD view which I wouldn’t expect to be much different.

Iain

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12 GST thoughts of Christmas

12 GST thoughts of Christmas:

1. There’s no GST on gifts (so Santa is probably not GST registered).
2. GST registered businesses can claim back the GST on gifts they buy for staff, suppliers and customers.
3. If you buy someone a gift voucher for Christmas it’s quite likely the IRD won’t get any GST until the person redeems it.
4. If the person you gave the voucher to loses it the IRD might never get any GST.
5. On Boxing Day when you go to the shop to return the present you don’t want the retailer will be able to get a refund of GST from the IRD provided they credit you for the return.
6. However, the retailer will have to pay GST if you use the credit to buy something else.
7. The government gets a double whammy of GST when you buy alcohol for your Christmas festivities or petrol for that family road trip (because GST applies to excise taxes on alcohol and fuel).
8. If you order an expensive gift online from overseas for someone in New Zealand and have it delivered directly to them you may be giving them a GST bill because chances are they’ll have to pay GST on the value of the present before they can pick it up from Customs.
9. Businesses are given an automatic extension of time to file their November GST return so they don’t have to file it on 28 December.
10. GST registered businesses with 31 December balance dates which make exempt supplies may have to come back early from their holidays so they can calculate their annual GST adjustment due on 28 January.
11. If you’re booking an overseas holiday and have to take a domestic flight to get to your departure airport it’s best to book both flights together if you want to save the GST on the domestic flight.
12. There’s no GST on gifts but if someone gives you something expensive while overseas you might have to pay GST when you bring it back with you.

Happy Christmas everyone

Iain

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NZ businesses are getting it wrong

I’m seeing increasing evidence of misunderstanding over how the zero rating rules apply.

From 1 April 2014 non-resident businesses can register for GST in NZ under a new system which allows them to claim GST refunds on business related costs. Historically a business had to supply goods or services in NZ before it could register and claim back GST on its costs here. That is no longer the case.

I’ve been working with a number of overseas businesses wanting to take advantage of the new system.

What’s starting to emerge is surprising. A number of these overseas businesses are looking to reclaim GST they should never have been charged in the first place.

The most common mistake I’ve seen is made by NZ service providers contracting with an overseas business. They’ve charged 15% GST when the transaction should have been zero rated.

To be fair, the zero rating rules are not the easiest in the legislation to follow. There’s quite a lot of case law on them which speaks to some of the complexities.

There seems to be a common misunderstanding that because services are performed in New Zealand (i.e. the work is done here) GST has to apply at 15%. That’s not necessarily the case. Only some services performed here and supplied contractually to a non-resident business are taxed at 15%.

If you’re providing services to overseas businesses I suggest you check how you are dealing with GST. If you’re incorrectly charging it at 15% you may find Inland Revenue comes knocking when your customer tries to register under the new system and claim back GST that should not have been charged.

Cheers

Iain

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NZ GST legislation inadequate

The NZ GST Act inadequately deals with online supplies of services and should be fixed immediately.

I’m referring to how the Act treats those selling products online such as e-books, movies, professional advice, teaching materials, photographs and lots of other digital information.

For businesses selling directly to private consumers the issues are more significant.

In certain situations the legislation requires the supplier to determine where their sales are “physically performed”. This affects how GST applies to them.

The concept of “physical performance” does not sit well with how these products are delivered. Is it the place where the supplier is located, where a server in the delivery chain is located, where the consumer is when they download the relevant product, where the consumer resides or some other place? Is there any “physical performance” at all?

I know these issues are being looked at and no doubt we’ll see some reform at some stage.

However, businesses are having to work out how the law applies to them now and it’s just not clear at all.

Iain

 

 

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VAT and online sales

This is a very good item on the wider business implications of proposed changes in Europe to the VAT treatment of online digital media sales.

http://performance.ey.com/2014/02/20/vat-change-online-sales-just-tax-concern/

Cheers

Iain

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Global VAT alignment edges closer

At the Global Forum on VAT in Tokyo last week 86 countries signed up to the first agreed framework for applying VAT to internationally traded services and intangibles. The new guidelines set out core VAT principles to be applied when taxing services and intangibles, will ensure more consistency between countries, will reduce double taxation and will protect the neutrality of business to business (“B2B”) transactions.

While an important step in the right direction, the more vexing question of how to tax internationally traded business to consumer (“B2C”)services and intangibles has been left for another time.

The Global Forum on VAT occurs under the umbrella of the OECD and provides a platform for global discussions on VAT. The first session took place in November 2012. Last week was the second occasion academics, tax administrators. business representatives and others were invited to discuss VAT policy trends and developments.

The main output from this latest session was a set of new OECD Guidelines on applying VAT across borders.

The Guidelines can be downloaded from the the OECD website – here: http://www.oecd.org/ctp/consumption/international-vat-gst-guidelines.htm

The focus of the Guidelines is B2B transactions. They discuss place of supply rules, the well known “destination principle” (B2B services should be taxed in the country where the customer is located) and mechanisms available to countries to allow non established foreign businesses to recover VAT incurred there.

None of this is startling news for New Zealand. We’re already ahead of this stuff thanks to our super charged GST system. Just this month we’ve seen a new streamlined registration and GST recovery system come into place for overseas businesses incurring GST here.

The really challenging question for New Zealand, and every other country with a VAT, is how do you tax B2C services and intangibles traded across borders? Unlike goods there’s no border control in place to capture internationally traded services and there’s no existing registration system to collect the tax from the customer/consumer.

This really is the more urgent question in my view. Countries are attempting to deal with the issue on their own (eg South Africa and the EU) but global cooperation and alignment are critical. Some States in the USA have implemented mechanisms to apply state taxes to inter-state B2C online sales (such as e-books) and the latest evidence suggests these measures are improving the sales of local bricks and mortar retailers at the expense of online retailers such as Amazon.

Last week’s Forum in Tokyo urged the OECD to finalise work on the VAT treatment of B2C services in time for the next Global Forum on VAT in November 2015. That seems like a long time to wait, but as we all know, achieving global consensus on anything is a slow process.

Cheers

Iain

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At least it’s a start – UPDATE on E-commerce in South Africa

At least it's a start.

An update on the South African proposal to require non-resident e-services suppliers to register for VAT.

The effective date for the new rules has been stretched out to 1 June 2014 (an extension of 2 months) to allow businesses more time to get ready. Registration is open however from 7 April for those wishing to beat the rush.

Following consultation the scope of services caught by the new registration requirement has been narrowed in an attempt to exclude some common business to business transactions. This should eliminate some unnecessary compliance obligations for businesses and the South African tax authority.

This is clearly a work in progress for the South African government, as it is for every other country, so more changes to the detail are expected (such as to the registration threshold for example). They intend to continue with a wider review on the taxation of electronic services, particularly in the financial services sector.

You can read more about this here: http://www.treasury.gov.za/comm_media/press/2014/2014032801%20-%20Press%20Release%20-%20Electronic%20Services%20Regulations.pdf

Iain