Global VAT Revolution in E-commerce and Digital Services Tax – October 2024 Update!

Recent developments in global VAT taxation of e-commerce activities and digital services tax in October 2024

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Highlights

Chile: New Reporting and VAT Obligations for Digital Platforms and Remote Sellers
- New VAT Obligations: Digital platforms and remote sellers must now register as VAT taxpayers in Chile.
- Comprehensive Tax Compliance Bill: Act 21.713 introduces various tax reforms, including enhanced VAT rules for the digital economy.
- Reporting Requirements: Digital platform operators must report details of registered entities and transactions to the tax authority.
- VAT on Low-Value Imports: VAT is now applicable to low-value goods imported through digital platforms.
- Effective Dates: Most changes will take effect from November 1, 2024, with some provisions becoming effective later.
Egypt B2B Sales Tax ID and UIN Validation Implementation Postponed to December 1
- Postponed Implementation: Egypt’s B2B Sales Tax ID and UIN Validation is postponed to December 1, 2024.
- VAT Compliance: The Egyptian Tax Authority (ETA) has identified 800 potential VAT payers on digital services.
- VAT Obligations: New VAT obligations for foreign digital services have been implemented.
- Regulation Navigation: Businesses must navigate new tax regulations for digital services.
- ETA Portal Integration: Selected foreign businesses will integrate with the ETA portal for real-time validations.
Mexico: New VAT withholding requirement for platforms facilitating the sales of goods for nonresidents
- Digital Platforms VAT Withholding: The Mexican Tax Authority (SAT) requires digital platforms to withhold 100% of VAT on sales of goods by non-resident merchants.
- E-commerce Goods: This new regulation applies to digital platforms facilitating sales of e-commerce goods by foreign merchants.
- Crowdfunding Platforms: New tax regulations mandate crowdfunding platforms to withhold income tax and VAT on interest income earned by investors.
- Digital Intermediation Services: SAT has broadened the definition of ‘Digital Intermediation Services’ in the 2024 tax law update.
- Article 18-B Clarification: The tax authority provided clarification on ‘Digital Intermediation Services’ under Article 18-B of the VAT Law.
Philippines passes VAT on Digital Services Law affecting nonresident providers
- VAT on Digital Services: Philippines enacts Republic Act No. 12023, imposing a 12% VAT on digital services provided by both resident and non-resident providers.
- Scope of Digital Services: Includes online search engines, marketplaces, cloud services, online media, and digital goods.
- Registration Requirements: Non-resident digital service providers must register for VAT if their gross sales exceed PHP 3 million or if there are reasonable grounds to believe they will exceed this threshold in the next 12 months.
- Compliance: Non-resident providers must issue VAT invoices and remit VAT on services consumed in the Philippines.
- Effective Date: The law took effect on October 18, 2024.
Vietnam to Scrap VAT Exemption on Low-Value Imports via E-Commerce Platforms
- Elimination of VAT Exemption: Vietnam will remove the VAT exemption for products valued below VND1 million (US$39.3) imported via e-commerce platforms, as announced by Deputy Prime Minister Ho Duc Phoc during the National Assembly session.
- International Context: The exemption policy was based on the Tokyo Convention and Decision 78 from 2010. However, other member countries, such as EU nations, Singapore, and Thailand, have already imposed VAT on low-value imports.
- Policy Abuse and Revenue Loss: The e-commerce platform Temu exploited the VAT exemption to sell low-cost products, leading to significant tax revenue losses. Approximately four to five million low-value orders from China to Vietnam resulted in an estimated daily loss of $45-63 million in VAT and import taxes.
- Government Proposal and Implementation: The government proposes mandatory regulations for e-commerce platforms to declare and pay taxes on behalf of traders, including foreign suppliers, regardless of their physical presence in Vietnam. Relevant ministries will develop databases of e-commerce traders, and financial institutions will share transaction data.
- Impact on Local Economy: The VAT exemption on low-value goods has negatively impacted local producers and retailers, as it encouraged splitting shipments to avoid taxes, resulting in substantial tax revenue loss and unfair competition in the domestic market.