BDO Indirect Tax News - Issue 2/2023

ESG issues continue to drive both government and private sector activity. In the EU, the Carbon Border Adjustment Mechanism (CBAM) is designed to discourage the use of carbon-intensive processes and encourage manufacturers to operate more sustainably. CBAM will have substantial implications for importers into the EU, whether or not they are EU-established—our article looks at the key features of CBAM and how it will operate in practice. Other climate-related developments that have taken place in Europe include: 

• A zero-rate VAT for the supply and installation of solar panels in Germany and Ireland;

• Rulings issued by Spain’s tax authorities to clarify the scope of the tax on non-reusable plastic packaging; and

• A UK consultation on a potential CBAM and other measures to mitigate the risk of future carbon leakage.

Shifting to another aspect of ESG, Mexico has stepped up its efforts to tackle the issue of forced labour by introducing a prohibition on the import of goods made using forced labour. 

In other EU news, the Court of Justice of the European Union has ruled that an online platform operator is required to collect VAT from customers and that the applicable implementing regulation, under which electronically supplied services made via online platforms are deemed to be supplied by the platform rather than the service provider, is compliant with EU law. 

A proposed broadening of the definition of “online information and database access retrieval (OIDAR) services” in India would have the effect that any services provided online, regardless of whether human intervention is involved, would be treated as OIDAR services, bringing many new services within the scope of the OIDAR rules. A nonresident provider of OIDAR services would have to register for GST purposes and comply with filing and payment obligations. 

New reporting rules in the UAE will require certain businesses making e-commerce taxable supplies to determine in which emirate their services are received and report their sales on an emirate-by-emirate basis. 

Germany’s Federal Finance Court has clarified the VAT grouping financial integration requirement following decisions issued by the CJEU. 

Canada’s underused housing tax (UHT) imposes tax filing requirements on nonresident owners of vacant or underused residential property in Canada, with severe penalties for noncompliance. The Canadian tax authorities have extended the original 1 May filing deadline for the 2022 calendar year to 1 November—no penalties or interest will be imposed for UHT returns and payments received by the authorities before that date.

We also include an article outlining potential issues in the context of U.S. sales tax exemption rules, which vary by state, but are generally becoming stricter.

Content adapted from BDO Global.