Lovat Newsletter – February 2023

The most interesting this month: Lovat was ranked second in “10 Best E-commerce Sales Tax Software For 2023” by Finn Bartram, Editor-in-Chief of The Ecomm Manager. And in Germany, meanwhile, on July 1, 2022, changes that relate to EPR compliance, registration, and reporting requirements come into force.

🆕 News digest:

👉 The Kenya Revenue Authority has issued for consultation the draft Value Added Tax Regulations, 2023, which would introduce a value-added tax on electronically supplied services to Kenyan consumers.

The draft regulations specify that electronically supplied services include digital content such as software, music, and video, as well as services such as online advertising and cloud computing. These services will be subject to a standard VAT rate of 16%, which is the same rate applied to most goods and services in Kenya. The draft regulations state that electronic services will be subject to VAT, regardless of whether the supplier of the service is located in Kenya or abroad.

The move to introduce VAT on electronically supplied services is part of the Kenyan government’s efforts to modernize its tax system and increase revenue collection. The growth of the digital economy in recent years has led to a growing gap between the amount of VAT collected on traditional goods and services and the value of electronically supplied services. The new regulations are intended to close this gap and ensure that the VAT system is fair and equitable for all taxpayers.

The draft regulations also provide for the registration of non-resident suppliers of electronically supplied services to Kenyan consumers, who will be required to appoint a tax representative in Kenya and submit returns to the KRA.

The KRA has invited the public to provide feedback on the draft regulations, which will be considered before the final regulations are published. The deadline for submissions is set for March 10, 2023.

👉 Beijing announced about reduction and exemption of VAT for taxpayers with monthly sales of  ≥100,000 yuan.

The announcement is part of the government’s efforts to provide tax relief for small and medium-sized enterprises (SMEs) and support the country’s economic recovery. They can waive the VAT exemption and instead issue special VAT invoices for a specific sale.

Throughout the year, small value-added tax (VAT) payers are subject to a reduced VAT rate of 3% on their taxable sales, with a collection rate of 1%. For prepaid VAT items, the prepaid VAT is calculated at a reduced rate of 1% prior to taxation. The policy is expected to provide a significant tax cut for eligible taxpayers and provide much-needed support for SMEs in the country.

The value-added tax deduction policy will be implemented in accordance with the following provisions:

1. Taxpayers in the production services sector are allowed to set off the payable tax in addition to 5% of the input tax deductible for the current period.
2. Taxpayers in the field of everyday services are allowed to set off the tax payable in addition to 10% of the deductible amount of input tax for the current period.
3. For other matters related to the application of the super-credit policy by taxpayers, please follow the “Announcement of the Ministry of Finance, the State Tax Administration, and the General Administration of Customs on the relevant policies to deepen the value-added tax reform” and other relevant regulations.

Subject to the provisions of this announcement, value-added tax subject to reduction or exemption, if collected prior to the issuance of this announcement, may be credited against the tax payable by the taxpayer in the next tax period or refunded.

This move is part of the government’s wider plan to support SMEs, which are an integral part of the country’s economy and play a crucial role in creating jobs and driving growth. SMEs have been particularly affected by the COVID-19 pandemic, and the reduction and exemption of VAT is expected to provide much-needed relief for these businesses.

👉 France launched a single center for processing business formalities to replace six networks of Business Clearance Centers (CFEs).

The new center, known as the Centre de Formalités des Entreprises (CFE), is designed to simplify the process of starting and running a business in France and improve the business environment.

The CFE includes six networks of Business Clearance Centers (CFEs) previously run by Chambers of Commerce, Chambers of Commerce, Chambers of Agriculture, Clerks, URSSAF, and Tax Services for Business.

Upon registering on the site, companies are seamlessly integrated into a centralized database – the National Register of Companies (RNU). This registry serves as a unified platform, replacing the National Trade and Companies Registry (RNCS), the Commerce Registry (RM), and the Agricultural Assets Registry (RAA). The status of artisan or agricultural workers for the heads of enterprises or agricultural holdings will also be reflected in the RNU.

This portal provides companies with a convenient and efficient platform to carry out various business formalities, such as the creation of legal entities, updating information about existing entities, and their liquidation. Additionally, it facilitates procedures related to industrial property and trademark registration.

The integration of all business-related procedures into a single register streamlines the process and reduces the administrative burden on companies. This centralized platform provides businesses with a user-friendly experience, saving time and reducing the risk of errors.

✍️ Blog: EPR Packaging Germany | Lovat Compliance

This article is about EPR Packaging in Germany and the changes enter into force on 1 July 2022 for the German market. From the material, you will learn what changes await the market, who falls under them, what this means, and many other things.

Please see more about EPR Packaging in Germany here: Lovat Compliance

🥳 Lovat Named to 10 Best Ecommerce Sales Tax Software For 2023.

And it occupies the second line of the rating, which was compiled by the editor-in-chief of The Ecomm Manager Finn Bartram.

10 Best Ecommerce Sales Tax Software For 2023 – The Ecomm Manager

🥰 In addition, in this newsletter, we congratulate our customers on the most romantic holiday of the year – Valentine’s Day. We’ve compiled some interesting and unusual tax facts about gifts for Valentine’s Day and other holidays:

1. Gift Tax: In some countries, there may be gift taxes applied on gifts given on Valentine’s Day or any other occasion. The tax rate and the threshold for taxability may vary depending on the country.
2. Luxury Tax: In some countries, there may be a luxury tax applied on high-value gifts, such as jewelry, watches, and expensive gadgets. This tax may be applied in addition to regular sales tax.
3. Gift Exchange Programs: Some countries have gift exchange programs that allow individuals to exchange gifts without triggering a taxable event. For example, in the United States, there is an annual gift tax exclusion of $15,000 per person, per year, which means that an individual can gift up to $15,000 to another person without incurring gift tax.
4. Charitable Donations: If you choose to make a charitable donation in the name of your loved one on Valentine’s Day, you may be eligible for a tax deduction, depending on the country and your tax status.
5. Gift Cards: If you give a gift card as a gift on Valentine’s Day, it may be subject to sales tax, depending on the country and the type of gift card. Additionally, some countries have laws that regulate the expiration date and fees associated with gift cards.
6. Virtual Gifts: If you choose to give a virtual gift, such as an online gift certificate or a digital item, it may be subject to taxes, depending on the country and the type of gift.
7. Employee Gifts: If you are an employer and you choose to give gifts to your employees on Valentine’s Day, the value of the gifts may be considered taxable income for the employees.

These are just a few examples of unusual tax implications related to gifts and holidays. It’s always a good idea to consult with a tax professional for specific advice, as tax laws and regulations can be complex and may change over time.

❤️ And we also love our clients very much, so keep a Valentine with love from Lovat: