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VAT News Minnesota Nexus of Internet vendors See California. New Jersey Small businesses New Jersey has expanded the eligibility of small-businesses for exemption under the urban enterprise zone sales tax rebate programme to include businesses with annual gross receipts up to USD 10 million. New Jersey Assembly, 2720 of 27 October 2008. North Carolina Nexus of Internet vendors See California. From our correspondent Robert van Brederode New York University, School of Law, New York, NY Vietnam Non-resident contractors On 1 December 2008, the Ministry of Finance issued Circular No. 1 4/2008/TT-BTC (“Circular 1 4”), which contains detailed provisions on the tax treatment of non-resident contractors and subcontractors, which apply from 1 January 2009. Circular 1 4 supersedes Circular No. 0 on Foreign Contractor Tax (FCT) and Circular No. 1 /1999/TT-BTC on freight tax. Circular 1 4 applies to virtually all non-resident organizations, regardless of whether or not they have a permanent establishment (PE) in Vietnam, and individuals that carry on a business in Vietnam or receive business income sourced in Vietnam, either directly, on the basis of contracts with Vietnamese organizations or individuals, or indirectly, as subcontractors. The FCT is not imposed on the mere supply of goods to Vietnam’s overseas ports or border gates, provided that the supply is not accompanied by any services performed in Vietnam. Circular 1 4 explicitly excludes non-resident organizations and individuals who: – provide services outside Vietnam; or – provide, outside Vietnam, the following services to Vietnamese organizations or individuals: – repair of means of transport, machinery, equipment, including replacement of parts of those goods; – advertising and marketing services; – investment and trade promotion services; – brokerage services relating to sales of goods; – training services; – freight sharing services performed outside Vietnam; and – provision of transmission lines and satellite bands from abroad. For the purposes of the FCT, a distinction must be made between corporate and individual non-resident contractors. As regards: – non-resident organizations, the FCT contains an element of VAT and an element of corporate income tax; and – non-resident individuals, the FCT contains an element of VAT and an element of personal income tax. The non-resident organization or individual must account for VAT under the “credit method” if: – it has a PE in Vietnam or is a tax resident of Vietnam; – its business operations in Vietnam have run for at least 18 days from the date the contract entered into – effect; and it has adopted the Vietnamese accounting system. The non-resident party must file its tax returns and pay the tax directly to the tax authorities. The Vietnamese contracting partner must notify the local tax office within 20 days of the signing of the contract. This method enables the non-resident party to charge VAT to its customers in Vietnam and deduct input VAT, if any. Where the non-resident party does not meet the criteria set out above, the VAT must be paid under the “directcalculation” method. Within 20 days of the signing of the contract, the Vietnamese contracting partner must report, to the local tax office, its obligation to pay FCT on behalf of the non-resident party. VAT payable = VAT rate x “added value” of the goods or services The current standard VAT rate is 10%, although specific goods and services are subject to VAT at the rate of %. The “added value” is a fixed percentage, which, depending on the type of business, is either 0% or 0% of the taxable turnover, i.e. total turnover, including taxes and costs paid by the Vietnamese party. It should be noted that, in Circular 1 4, the leasing of machinery and equipment is reclassified as a service (and thus subject to % VAT), whereas it was previously classified as a commercial right (exempt from VAT). Where a package of services is provided, the contract must separately identify the value of each element, and VAT must be paid accordingly. In the absence of such a specification, the taxable turnover is the entire value of the contract at the deemed value added rate of 0%. Tax concessions On 21 January 2009, the Prime Minister issued Decision No. 1 /2009/QD-TTg, which contained tax concessions aimed at mitigating the consequences of the international economic crisis. The concessions include a reduction by 0% of the VAT rate on specific goods and services, such as coal, chemicals, automobiles and automobile components, transport (with the exception of international transport), tourism and hotel accommodation, etc. 1 4 INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 © IBFD
Zambia On 0 January 2009, the Minister of Finance and National Planning presented the Budget for 2009/10 to the National Assembly. As regards VAT, the details of the Budget are summarized below. All measures apply from 1 January 2009. Zero rate The following machinery and equipment are zero rated for VAT purposes: – windmills and maize dehullers; – two-wheeled tractors and accessories; – tractors of up to 0 horse power; – ploughs, harrows, disc harrows, planters, seeders, rippers/subsoilers, and cultivators; – pump sets; and – “backpack” sprayers (agricultural sprayers). The field of application of the zero rate to tour activities for tourists has been extended to include services subcontracted between tour operators. Deferment scheme Copper and cobalt concentrates qualify for the VAT deferment scheme. Australia First sale of immovable property The recent decision of the Federal Court in South Steyne Hotel establishes important precedents for the interpretation of the GST rules applicable to sales of immovable property. The Australian GST generally treats the sale and letting of commercial property as ordinary taxable supplies to avoid any risk of compounding tax where the customer is a registered business. By contrast, the sale and letting of residential premises are normally treated as exempt supplies (called “input-taxed supplies” in Australian GST terminology). However, the first sale of residential premises is subject to GST. The sale and letting of a subset of residential premises called “commercial residential premises”, for example an entire hotel, are also treated as taxable supplies. The facts in South Steyne Hotel concerned an enterprise that had purchased an operating hotel that was subsequently divided into separate titles for each apartment in the hotel. The enterprise sold the management rights and associated immovable property (reception area, offices, parking lot) to a hotel management company and leased several apartments to a company associated with the hotel operator. The enterprise and the hotel operator argued that the lease of apartments to the hotel operator VAT Case Notes © IBFD INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 VAT News Seasonal crops Persons who are exclusively or predominantly engaged in the production of seasonal crops can file their VAT returns on a quarterly basis, instead of monthly. Storage of records Suppliers of goods and services are required to maintain business records in the English language and preserve them for a period of six years (previously, five years). Refunds The VAT refund period for exploration companies has been increased to seven years. Multi-facility economic zones Supplies made to developers of multi-facility economic zones and industrial parks are zero rated and, if they are made by non-resident suppliers, the supplies are excluded from the reverse charge mechanism. was a taxable supply, which would enable the hotel operator to claim input GST in respect of the lease payments it made. The Commissioner of Taxation argued that the supply was an exempt supply of residential premises that were not commercial residential premises. Subsequently, the enterprise sold several of its apartments (subject to the leases to the hotel operator) to private investors. For the Commissioner’s argument on the leases to the hotel operator to succeed, he had to show that a commercial residential premises means an entire building – that is the entire hotel and not simply an apartment in a hotel lease – so the lease to the hotel operator of a single apartment in the hotel complex was not a lease of commercial residential premises. This argument was successful and the Federal Court found the lease of the apartment to the hotel operator was an exempt supply of residential premises that were not commercial residential premises. At the same time, the Court held that the supply of a hotel room to a guest was an ordinary taxable supply, as it falls into an exception to the definition of a supply of residential premises which states that an exempt supply of residential premises does not include “a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises”. 1
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Page 3 and 4: Correcting invoices Where VAT is no
Page 5 and 6: able persons) moved from Kanterstee
Page 7 and 8: Central African Republic Petroleum
Page 9 and 10: Consumption tax rates The budget fo
Page 11 and 12: under conditions determined by each
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Page 15 and 16: against VAT fraud in the European U
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Page 19 and 20: Madagascar Refunds of VAT The Budge
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Page 23: supplies. Claims that are still ope

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