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Tax authorities in Italy have accused Amazon of evading €1.2 billion in Value Added Tax (VAT) on sales from China and other non-EU countries between 2019 and 2021.
The claim suggests that goods sold via Amazon’s platform avoided proper VAT reporting, allowing sellers to underpay tax or avoid it entirely.
This case is part of a larger crackdown on digital platforms suspected of facilitating tax avoidance through complex supply chains and offshore structures.
This isn’t the first time tech giants have clashed with European tax authorities.
The EU has been tightening VAT compliance rules in response to concerns that e-commerce giants give an unfair advantage to overseas sellers by allowing them to avoid local tax obligations.
If Amazon is found guilty, the case could have major implications for online marketplaces operating in the region.
The Italian Guardia di Finanza (tax police) and the Agenzia delle Entrate (Revenue Agency) claim that between 2019 and 2021, Amazon acted as an intermediary for thousands of non-EU sellers, predominantly from China, who were not properly registered for VAT in Italy.
This allegedly allowed sellers to undercut local competitors, as they were selling goods at VAT-free prices.
Amazon has denied wrongdoing, stating that it complies with all applicable laws and has invested in systems to identify and block non-compliant sellers.
However, tax authorities argue that the company should have done more to ensure sellers were VAT-registered before listing their products.
Italy has previously targeted other e-commerce giants, including Alibaba and eBay, for similar VAT issues.
In 2019, it was estimated that VAT fraud in the e-commerce sector cost EU governments over €5 billion annually.
VAT fraud in e-commerce is a significant issue across Europe, as platforms like Amazon have allowed non-EU sellers to access the market without the same tax burdens as domestic businesses.
The EU has introduced new VAT rules, including the One Stop Shop (OSS) system and Marketplaces as Deemed Suppliers regulations, to prevent platforms from facilitating VAT avoidance.
If Italy succeeds in its case, Amazon could be held liable for the unpaid VAT, which might force other countries to take similar legal action.
The case also highlights broader tax policy challenges in the digital economy, particularly who should be responsible for ensuring VAT compliance—the seller or the platform.
If Amazon is found guilty of VAT evasion in Italy, the consequences could be significant for the entire e-commerce industry.
More platforms may face pressure to enforce stricter tax compliance rules, and non-compliant sellers could be blocked from EU markets altogether.
For businesses and consumers, this case serves as a reminder that tax compliance in the digital economy is becoming more scrutinised.
If you have any queries about this article on Amazon VAT Evasion Allegations in Italy, or tax matters in Italy more generally, then please get in touch.
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The UK’s tax authority, HMRC, has come under fire for allegedly failing to address substantial tax evasion by Chinese companies operating through “burner” firms.
This practice involves setting up temporary companies that exploit weaknesses in VAT registration and import rules to avoid paying taxes, resulting in significant losses for the UK Treasury.
Critics argue that HMRC’s oversight has allowed these practices to proliferate, undermining public trust and fiscal stability.
Chinese firms have reportedly been using short-lived companies to import goods into the UK, often underdeclaring their value to avoid VAT and customs duties.
These firms typically dissolve before HMRC can collect unpaid taxes, leaving the Treasury with significant revenue gaps.
The estimated losses run into millions of pounds annually, with the e-commerce and import-export sectors being particularly affected.
HMRC has acknowledged the challenges in tracking and prosecuting such cases due to the transient nature of these firms.
However, critics argue that the authority has not allocated sufficient resources or implemented effective measures to address the problem. Recent calls for reform include:
The alleged oversight has broader implications for the UK’s tax system:
To combat this issue, experts suggest the following measures:
The criticism of HMRC highlights the importance of robust enforcement mechanisms to ensure fair and effective tax collection.
As global trade becomes increasingly digital, authorities must adapt their strategies to address new challenges and protect public finances.
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Brazil is known for having one of the most complex tax systems in the world, which often poses challenges for businesses trying to operate efficiently.
The country’s VAT system, or Value Added Tax, has been a significant area of concern due to its multilayered structure.
Recognising this, the Brazilian government has introduced new reforms aimed at simplifying VAT compliance and making it easier for businesses to navigate the tax system.
These reforms are intended to enhance Brazil’s competitiveness in the global market by reducing the administrative burden on companies.
VAT is a tax on the value added to goods and services at each stage of the production and distribution process.
In Brazil, VAT is administered at multiple levels—federal, state, and municipal—each imposing different taxes.
This makes compliance difficult and costly for businesses, as they need to keep track of various tax rates, deadlines, and regulations depending on the jurisdiction they operate in.
Brazil’s VAT system includes a combination of taxes, such as:
The multiple layers of taxation often lead to confusion, especially for companies that operate across state lines or provide services in different municipalities.
The complexity also results in frequent disputes between businesses and tax authorities, which can delay business operations and increase costs.
The existing VAT system has long been criticised for being overly complicated and inefficient.
The reform aims to simplify the process by reducing the number of taxes and consolidating the different tax rates into a more uniform structure.
This will not only reduce the administrative burden on businesses but also encourage compliance and reduce the likelihood of tax disputes.
The VAT reform is also seen as crucial to improving Brazil’s standing in the global business community.
As Brazil looks to attract more foreign investment, simplifying the tax system is an important step in making the country more appealing to multinational corporations.
Brazil’s VAT reforms are a welcome development for businesses operating in the country.
By simplifying the tax system, the government hopes to reduce the administrative burden on companies and encourage greater compliance.
These changes are expected to improve Brazil’s competitiveness in the global market, attracting more foreign investment and helping local businesses grow.
If you have any queries about this article on Brazil’s VAT reforms, or tax matters in Brazil, then please get in touch.
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The UK tax authority, HMRC, has released new guidance for businesses on VAT compliance.
These guidelines aim to help businesses avoid common mistakes when dealing with VAT, which is a tax applied to most goods and services in the UK.
By following these guidelines, businesses can ensure that they comply with tax laws and avoid penalties.
This article will walk you through the importance of the new guidance and the areas it covers, such as transfer pricing and VAT controls.
VAT (Value Added Tax) is a consumption tax that is charged at each stage of the supply chain. It is ultimately paid by the end consumer but collected by businesses.
Most businesses need to register for VAT once their taxable turnover exceeds £90,000 per year (before 1 April 2024 it was £85,000).
There are different VAT rates in the UK, depending on the product or service being sold. Some goods are taxed at the standard rate of 20%, while others, like children’s car seats or home energy, are taxed at a reduced rate of 5%.
Certain items, such as most food and children’s clothes, are zero-rated, meaning they are not taxed at all.
VAT is one of the most complicated taxes that businesses have to deal with.
Many businesses struggle with issues like applying the correct VAT rate or filing their VAT returns on time.
In response to these difficulties, HMRC has issued updated guidelines that clarify how businesses should handle VAT.
The guidance provides specific advice on common pitfalls such as incorrect invoicing or not registering for VAT when necessary.
Additionally, HMRC has outlined the importance of transfer pricing in VAT compliance, especially for multinational businesses operating across borders.
The new VAT compliance guidelines from HMRC provide much-needed clarity for businesses dealing with the complexities of VAT.
They are particularly useful for companies involved in international trade, as they explain how transfer pricing can impact VAT obligations.
Following these guidelines will help businesses avoid costly penalties and ensure they are fully compliant with UK tax laws.
If you have any queries about this article on VAT compliance, or tax matters in the UK, then please get in touch.
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China’s VAT rebate program is to be expanded to support its export sector.
This is a major policy shift aimed at helping businesses that export goods, especially in light of global economic challenges and reduced demand in some markets.
In this article, we’ll explore what VAT rebates are, why China is expanding this program, and how this could benefit businesses both inside and outside of China.
In many countries, VAT is charged on goods and services as a way to collect tax from consumers. However, when goods are exported, they are often exempt from VAT.
To make sure that exporters aren’t unfairly taxed, governments often offer VAT rebates.
These rebates refund the VAT that was paid when the goods were produced, allowing businesses to recover the tax paid on inputs (like raw materials and manufacturing costs).
For exporters, VAT rebates can significantly reduce costs and increase profits, making their goods more competitive in international markets.
China’s economy has faced several challenges in recent years, including trade tensions, the COVID-19 pandemic, and global inflation.
These factors have put pressure on Chinese exporters, who are struggling with rising production costs and slowing demand from key trading partners.
By expanding its VAT rebate program, China aims to boost its export sector by making it cheaper for companies to produce goods for export.
This policy will give businesses more cash flow by refunding the VAT they paid during production, which could be reinvested into their operations or used to lower prices, making Chinese goods more competitive globally.
While the exact amount of VAT rebates varies depending on the type of goods being exported, the Chinese government has hinted that the rebate program will be expanded to cover a wider range of goods.
This means more industries will benefit from VAT rebates, especially those in manufacturing, electronics, and textiles.
The rebates are likely to be increased to 13%, which is the standard VAT rate in China. This will allow exporters to recover nearly all the VAT they paid when producing goods for international markets.
For Chinese businesses, this expanded VAT rebate program is a lifeline. It will help them reduce costs and make their goods more competitive in global markets, particularly in sectors where price is a key factor in attracting buyers.
The rebates will also boost profitability and give companies more financial flexibility in a challenging economic environment.
For foreign businesses that import goods from China, this could mean lower prices on Chinese-made products, as exporters may pass on some of the savings from the VAT rebates to their customers.
This is especially important for industries like retail and electronics, which rely heavily on Chinese imports.
China’s decision to expand its VAT rebate program is a significant step towards supporting its export-driven economy.
By giving businesses more financial relief, China hopes to keep its goods competitive in the global marketplace, especially in industries that have been hit hard by rising costs and weakening demand.
For exporters, this policy could provide much-needed support as they navigate a complex global economy.
If you have any queries about this article on China’s VAT rebate program, or tax matters in China, then please get in touch.
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India has introduced new Goods and Services Tax (GST) regulations targeting e-commerce platforms.
The updates include stricter rules around GST collection at source (TCS) and increased penalties for non-compliance.
This is part of India’s broader effort to improve tax compliance and ensure that digital businesses operating in the country are meeting their tax obligations.
GST (Goods and Services Tax) is a comprehensive tax applied to the sale of goods and services in India. TCS (Tax Collected at Source) is a system where the e-commerce platform collects GST on behalf of sellers and then remits it to the government. This ensures that tax is collected at the point of sale, reducing the risk of evasion.
India’s latest GST updates include:
India’s digital economy has been growing rapidly, and the government is keen to ensure that all businesses, including those operating online, pay their fair share of taxes.
The new GST rules are designed to close loopholes that some e-commerce platforms have used to reduce their tax liabilities.
Platforms like Amazon India, Flipkart, and other digital services will need to review their tax compliance procedures.
The increased reporting requirements may result in higher administrative costs for these companies, but they are also likely to reduce the risk of tax audits and penalties.
India’s new GST regulations for e-commerce platforms represent a significant step towards improving tax compliance in the digital economy.
These changes will ensure that online businesses contribute fairly to the tax system while making it harder for companies to evade their obligations.
If you have any queries about this article on India’s GST update, or tax matters in India, then please get in touch.
Alternatively, if you are a tax adviser in India and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
Australia is updating its Goods and Services Tax (GST) rules, with a focus on cross-border digital services.
These changes require foreign companies that provide digital services to Australian consumers—such as streaming platforms, software providers, and online content services—to register for GST and collect the tax from their customers.
Under the new rules, any company that provides digital services to Australian consumers must:
This new regulation expands the scope of GST to cover not only goods but also digital services, meaning companies like Netflix, Spotify, and Amazon Web Services will all be subject to the tax.
Australia’s digital economy has grown rapidly in recent years, with many Australians using streaming services, software subscriptions, and other online platforms.
However, foreign companies that provide these services have been able to avoid paying Australian taxes because they do not have a physical presence in the country.
These new rules are designed to close this loophole and ensure that all businesses operating in Australia’s digital market contribute to the country’s tax base.
For foreign companies, these new rules will increase administrative costs as they will need to set up systems to collect and remit GST.
Companies that do not comply with the new regulations may face penalties or fines from the ATO.
On the other hand, this move will help level the playing field for domestic digital service providers, who already have to pay GST on their services.
Australia’s decision to extend GST to cross-border digital services is part of a broader trend towards taxing the digital economy.
These changes will ensure that foreign companies contribute fairly to the Australian tax system, while also boosting the government’s revenue from the rapidly growing digital sector.
If you have any queries about this article on Australia’s GST rules for digital services, or tax matters in Australia, then please get in touch.
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There is more information on membership here.
Value Added Tax (VAT) is a type of tax that’s added to most goods and services that are sold.
In many countries, businesses collect VAT from their customers and then pay it to the government.
Recently, Switzerland decided to require online platforms to collect VAT on behalf of sellers, similar to rules in the European Union.
Switzerland is following the lead of the EU in making sure that online platforms like Amazon and eBay collect VAT on the goods sold by independent sellers.
Before this rule, it was up to the sellers themselves to collect and pay the VAT. However, not all sellers complied, and this led to lost tax revenue.
By shifting the responsibility to platforms, Switzerland aims to make sure that VAT is properly collected and paid. This helps ensure a fairer tax system and increases government revenue.
Under the new rule, if an online platform facilitates a sale between a Swiss buyer and an independent seller, the platform must collect VAT on behalf of the seller and pay it to the Swiss government.
This applies to both Swiss-based sellers and sellers from other countries selling to Swiss customers.
This change is important because it makes it harder for sellers to avoid paying VAT. It also levels the playing field for Swiss businesses, which have always had to collect and pay VAT on their sales.
For sellers, this rule means they no longer have to worry about collecting VAT themselves. However, it also means they may have to adjust their prices to include the VAT collected by the platform.
For online platforms, this rule adds extra work, as they need to update their systems to comply with the new VAT requirements.
However, platforms are used to these types of rules, especially in the EU, so most should be able to adjust without too much difficulty.
Switzerland’s new VAT rule for online platforms is a step towards stronger tax compliance.
By requiring platforms to collect VAT, Switzerland ensures that sellers pay their fair share of taxes while making the system simpler for both businesses and the government.
Final thoughts
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In a significant ruling that could have widespread implications for taxpayers across the UAE, the Abu Dhabi Cassation Court has delivered a judgment that clarifies the rights of taxpayers in recovering Value Added Tax (VAT) from non-compliant suppliers.
The ruling, issued on 8 August 2024, in Case No. 648/2024, addresses a common issue where the UAE Federal Tax Authority (FTA) has historically rejected VAT refund requests due to suppliers failing to provide compliant tax invoices.
This decision now opens the door for taxpayers to seek financial recourse from suppliers, potentially reclaiming substantial amounts of VAT.
The case involved a construction company that issued a cheque to a supplier as a guarantee for VAT related to a construction project.
The dispute arose when the FTA rejected the company’s VAT refund request, citing a lack of proper documentation—specifically, the necessary VAT invoices from the supplier.
Under UAE VAT Law (Federal Decree-Law No. 8 of 2017), businesses are entitled to recover input tax (VAT paid on goods and services) provided they possess a valid tax invoice.
However, strict compliance with the invoicing requirements, as detailed in Article 59 of the Executive Regulations, is crucial.
Non-compliance has frequently led to the FTA rejecting VAT refund requests, leaving businesses with significant unrecovered VAT liabilities.
In this particular case, the construction company was unable to submit compliant invoices within the required timeframe, leading to the FTA’s rejection of their refund claim. Consequently, the company initiated legal action to recover the VAT from the supplier who had failed to provide the necessary documentation.
The Abu Dhabi Cassation Court’s decision is a pivotal moment in UAE tax law, establishing that taxpayers have a clear legal path to recover VAT amounts from suppliers when refund claims are denied due to non-compliance.
The court upheld the principle that if a supplier issues a non-compliant tax invoice and this results in the FTA rejecting the taxpayer’s VAT refund claim, the taxpayer is entitled to reclaim the corresponding amount from the supplier.
The court’s reasoning was based on the supplier’s obligations under UAE VAT Law.
It emphasized that issuing a compliant tax invoice is a statutory requirement, and failing to do so can have serious financial consequences for the purchaser.
In this case, the court found that the supplier’s failure to provide the necessary VAT invoices within the stipulated period directly led to the FTA’s decision to deny the refund.
As a result, the court ruled that the taxpayer could recover the lost VAT from the supplier.
Moreover, the court underscored the principle of equity, asserting that the financial burden resulting from non-compliance should not fall on the taxpayer.
Instead, the supplier, who failed to meet their legal obligations, should bear the responsibility.
This ruling has significant implications for both taxpayers and suppliers in the UAE:
This decision offers a vital remedy in situations where VAT refunds are denied due to the supplier’s non-compliance with invoicing requirements.
Taxpayers now have a clear legal avenue to seek compensation directly from suppliers, ensuring they are not financially penalised for issues beyond their control.
The ruling serves as a strong warning to suppliers about the importance of adhering to VAT invoicing standards.
Suppliers must ensure that their tax invoices meet the FTA’s requirements, as failure to do so could lead to substantial financial liabilities, including the need to reimburse clients for denied VAT refunds.
The Abu Dhabi Cassation Court’s ruling in Case No. 648/2024 marks a landmark moment in the UAE’s tax landscape.
It reinforces the critical importance of compliance with VAT regulations and provides a robust legal mechanism for taxpayers to recover amounts denied by the FTA due to non-compliant supplier invoices.
Both taxpayers and suppliers should pay close attention to this ruling and its potential impact on their financial and operational practices.
If you have any queries about this article, UAE Court Allows VAT Recovery, then please do get in touch.
On March 28, 2024, the Diet passed the bill implementing the 2024 tax reform proposals, ushering in changes that broaden the scope of foreign business operators subject to Japanese consumption tax (JCT).
The 2024 Tax Reform introduces significant amendments to the Japanese consumption tax regime:
Previously, a business operator became taxable if their taxable transactions exceeded JPY 10 million in the base period. Under the reform, foreign business operators established for more than two years are deemed taxable if their share capital is at least JPY 10 million (or equivalent) upon commencing operations in Japan.
While offshore developers of digital content were already required to collect JCT from Japanese users, the reform imposes new collection rules. Digital platforms with transaction volumes of JPY 5 billion or more between offshore developers and Japanese users are now responsible for collecting and remitting JCT on behalf of these developers.
The 2024 Tax Reform expands the JCT obligations for foreign business operators, including those not previously subject to such taxation.
Foreign companies planning to enter the Japanese market and digital platforms serving Japanese users must evaluate how these changes will affect their operations.
These reforms reflect Japan’s efforts to adapt its tax framework to the evolving digital economy and ensure fair taxation across borders.
Businesses should proactively assess their compliance obligations to mitigate potential risks and ensure continued success in the Japanese market.
If you have any queries about this article on JCT Reform Proposals, or other Japanese tax matters, then please get in touch.