VAT Purposes Research Articles

Digital tax reform in Indonesia: Perspective on tax policy development

In Indonesia tax reform has undergone multiple revisions in recent years, all within a brief timeframe. Digital tax reform in Indonesia began with significant milestones in recent years to adapt to the digital economy’s challenges. The specific start date for digital tax reform in Indonesia can be traced back to the passing of the Tax Regulations Harmonization Law on 7th October 2021, which officially became Law No 7/2021 on 29th October 2021. This law marked a crucial step in Indonesia’s journey towards modernizing its tax system to address the implications of the digital economy. The provisions of this law have varying effective dates, such as for income tax purposes from the 2022 fiscal year and for VAT purposes from 1st April 2022. These changes under the Tax Regulations Harmonization Law are extensive and wide-reaching, signifying a pivotal moment in Indonesia’s digital tax reform efforts. This shows that the Indonesian government intends to radically overhaul the tax system, yet there are inconsistent approaches to deciding on the long-term course of tax policy. It is critical to investigate the concept of tax legislation in Indonesia in order to provide legal clarity on digital tax reform. Normative juridical research methodology is employed, together with a qualitative research strategy and descriptive-analytical research specifications. The findings suggest that the Indonesian government’s efforts to establish strict policies governing taxes on digital activity are inadequate and uneven. In order to apply to digital platform enterprises, the definition of permanent establishment as outlined in a number of national regulations must incorporate a substantial economic presence criterion. Legislative progress toward the establishment of a framework for digital tax collection is necessary to mitigate the possible income loss of states in this area, which could result from the rapid advancement of information technology. The OECD consensus is still in the process of drafting an international tax reform that will require adjustments from national tax reform. Therefore, it is imperative that the Indonesian government establish a thorough framework for tax regulation that can ensure robustness, economic efficiency, fairness, against motivation compatibility, administrative ease, and avoidance.

2B or Not 2B?

In this article, the author explains that suppliers must collect essential information to distinguish if a supply of goods is a B2B or B2C transaction to treat it correctly for VAT purposes. When the supplier depends on information (not) provided by the customer, it is sometimes difficult to make the distinction between a B2B or B2C supply. In fact, other information, such as the nature of the goods or volumes sold, can help in making this distinction.

VAT and Directors’ Fees: Can Directors Who Are Individuals Be Considered Taxable Persons?

In the aftermath of the ECJ’s decision in the TP (C-288/22) case, the author of this article argues that directors who are private persons can be taxable persons for VAT purposes. The author argues that this idea is a solution in line with the broadness inherent in the concept of taxable person and that directors can fulfil the requirements of “any person”, “economic activity” and of acting “independently”. In addition, the author stresses that depriving an individual of such a status may equate to hindering legal neutrality (or at least the principle of equal treatment), as well as affecting system neutrality. Furthermore, this article reveals the alignment of this position with economic reality. Lastly, it will signal some of the undesirable consequences of negating the taxable person status: from non-taxation and creation of opportunities for tax avoidance, to tax non-neutrality.

Déjà Vu Drama: The Controversy of Subsidiaries as Fixed Establishments as Illustrated by the Adient Case

On 13 June 2024, the ECJ issued its decision in the Adient case, concerning whether a controlled company or a group company can be considered a fixed establishment for VAT purposes of the parent company or another group company. This decision reiterates that mere group affiliation or contractual agreements do not constitute a fixed establishment per se. In this article the author delves into all these questions and considers why tax authorities continue to assess companies for fixed establishment matters despite the clear guidelines provided by the ECJ.

The VAT Treatment of Cryptocurrencies

Since their creation in 2009, crypto-assets have evolved from niche products into assets held and used much more widely. These assets pose challenges for policymakers and tax administrations, because, as pointed out by the OECD, they can be transferred and held without the participation of traditional financial intermediaries and without central administrators being aware of the transactions carried out or the location of crypto-assets holdings.
 On the indirect taxation side, the VAT Committee discussed the issues relating to the VAT treatment of crypto-assets and, in particular, of cryptocurrencies, on several occasions. The discussion on the most recent of the working papers on this subject, No. 1037 on the VAT treatment of crypto-assets, resulted in the adoption of the Guidelines which aim at harmonising tax administrations’ practice regarding the VAT implications of the different transactions linked to crypto-assets.
 The article highlights the main challenges posed by cryptocurrencies in terms of VAT while focusing on the main supplies with the use of cryptocurrencies and their qualification for the VAT purposes. Those transactions range from the creation, verification, validation, and supply of cryptocurrencies through their modification, storage, transfer, to exchange. The article explains in this context the position of the VAT Committee reflected in the Guidelines.

VAT and the Concept of Fixed Establishment: The Cabot Plastics Belgium Case

In this article, the authors analyse an important ECJ decision in the Cabot case concerning the interpretation of the concept of fixed establishment for VAT purposes, and explain the practical consequences that this case has for taxable persons carrying out cross-border activities.

VAT Consequences of Rewarding Staff with Vouchers

In this Column, the author analyses the ECJ’s judgment in GE Aircraft Engine Services, in which the court decided on whether or not the issuance of vouchers under an employee recognition programme constitutes a deemed supply of services for VAT purposes.

The Evolution of the State Tax Policy in the Context of the Development of Client-Centricity of Tax Authorities (on the example of VAT)

The relevance of the study is due to the requirements imposed on the process of digitalization and ensuring comfort for paying taxes and fees. The subject of the study is the tax policy of the state in the process of its evolution to a complex of relations with VAT—paying companies. The purpose of the work is to establish the key characteristics of the current stage of the state's tax policy in relation to VAT payment management. As a result of the analysis of the academic literature, two fundamentally different aspects of VAT are summarized — its legal content as a tax on the producer and its economic content as an indirect tax on the final consumer. In terms of value creation, the consequences of taxation for the manufacturing company as a paying agent of the final real payer, who is forced to accept the costs and risks of paying VAT as a formal taxpayer, are given, which allowed us to consider ways to bring together the interests of the state and business in the process of the evolution of taxation management; substantiate the need to comply with tax ethics as a fundamental component of tax partnership. Based on the achieved level of digitalization of tax document flow and VAT administration, a conclusion is made about non-declaration administration as a reasonable direction for managing the fulfillment of tax obligations; measures for its implementation for VAT purposes are proposed, requiring, in addition to the technical information basis, the elimination of ambiguous provisions in the methodology and practice of VAT taxation.

The Effects of Perceived Ease of Use, Perceived Usefulness, and Computer Self-Efficacy on e-Nofa Application User Satisfaction

This research aims to find out the effect of Perceived Ease of Use, the effect of Perceived Usefulness, and the Effect of Self-Efficacy on taxable entrepreneur for VAT purposes satisfaction in using e-Nofa. The Technology Acceptance Model (TAM) is a tool that can be used to forecast satisfaction. This research is used to determine the satisfaction of users of information systems in (Mandatory Environment). The number of samples is 100 respondents. This research method uses a questionnaire as data collection, and multiple linear regression analysis is used as an analytical technique. Then the results of this study are variables of Perceived Ease of Use, Perceived Usefulness, Computer Self-Efficacy significantly affect the satisfaction of Taxable Entrepreneur for VAT Purposes in the Jakarta area in using e-Nofa.

Challenges related to determining for VAT purposes the status of the goods and services provider using the platform economy

Background: The aim of the study was to analyse EU legislation and case law on the VAT status of the provider of goods and services for the platform economy. This issue is becoming increasingly important in the context of a rapidly developing platform economy, using the latest technological developments. The study conducted a comprehensive legal analysis of the issue, at the same time drawing attention to the doubts that exist particularly due to the lack of CJEU judgments on the concept of a taxable person in the platform economy.
 Research purpose: The aim of the study was not only to assess the relevant legislation or its interpretation, but above all to draw attention to the need to fill the legislative gap in the area studied, which has led, and may continue to lead, to non-uniform application of VAT rules in the EU Member States.
 Methods: The study was carried out predominantly using the empirical-dogmatic method, backed by a historical method and comparative method.
 Conclusions: Our analysis demonstrated that the provisions of the VAT Directive do not simply and clearly regulate whether a platform provider is a taxable person. There is also a lack of CJEU jurisprudence addressing this issue; judgments on the ‘traditional’ economy do not seem to ‘fit’ the specifics of the platform economy. In our opinion, legislative changes are needed, especially the VAT Directive, which would take into account the specifics of transactions in the platform economy. We present preliminary proposals that can be taken into account in the legislative work on the European Commission’s recently proposed provisions in this area.

The Interplay between the VAT “Open Market Value Principle” and the Transfer Pricing “Arm’s Length Principle”

In this article, the authors look at the relationship between the “arm’s length principle” used for transfer pricing purposes and the “open market value” applied in determining the VAT tax base. In particular, the authors examine an issue that has not been adequately addressed in the tax literature, namely the relationship between the transfer pricing rules and the VAT provisions in situations in which, for VAT purposes, it is necessary to derogate from the general principle that the agreed consideration should apply.

The Role and Prospects of Development of the Mechanism for Determining the Place of Sale of Goods, Work and Services within the Framework of VAT Taxation

The problem of collecting value added tax in the framework of international trade allowed us to determine the purpose of scientific work: analysis of the current mechanism for determining the place of sale in relation to various categories of goods, works and services and the development of proposals for its improvement. To achieve this goal, a set of tasks was solved, aimed at forming an objective position on the issue under study from both the theoretical and practical sides. The object of the study is the economic relations that develop in the process of taxation of economic agents with VAT. The subject of the study is the tools for the practical implementation of the procedure for establishing the place of sale in order to collect VAT. The work uses general scientific research methods: analysis and synthesis, deduction and induction, generalization, description. In addition, the following private scientific methods were used: analysis of dynamic data series, graphical and tabular method of presenting the data under study, comparison method. The novelty of the study consists in identifying problematic aspects of the functioning of the mechanism for determining the place of sale for VAT purposes, as well as the proposed practical solutions to them. The relevance of the topic is beyond doubt due to the fact that VAT is an integral component of cross-border trade in goods, works and services. Within the framework of writing the work, considerable attention is paid to statistical and economic research and analysis of the regulatory framework. Based on the results obtained, reasonable proposals and hypotheses aimed at improving the mechanism for determining the place of implementation are put forward. The scientific work may be of interest to a wide range of users, as it contains material that allows for a comprehensive understanding of the functioning of the mechanism for determining the place of implementation in the Russian Federation.

Can There Ever Be a Fixed Establishment without Human Resources? – ECJ’s Titanium Case

In the Titanium decision of 3 June 2021, the ECJ considers that there is no fixed establishment for VAT purposes when a foreign company leases real estate in an EU Member State, regardless of subcontracting the operational management of the business to a third party, as such outsourcing does not fulfil the requirement of having human resources in that jurisdiction. In this article, the author discusses this ECJ case.

The taxable amount for VAT purposes – CJUE case law: refresh and update

The taxable amount for VAT purposes – CJUE case law: refresh and update

Allocation of Supplies between Establishments under EU VAT

In 2021, the Italian tax authorities issued two ruling replies providing guidance on how to allocate a supply to an establishment for VAT purposes in the context of a global contract under which several supplies are provided to a multilocation entity (MLE). In this article, the authors discuss the official guidance provided by the Italian tax authorities in light of the rules for allocating supplies to establishments located in different jurisdictions as enshrined in the EU legislature.

VAT on Webinars

The ongoing corona pandemic and the resulting ban on human gatherings have brought about a boom for webinars and other kinds of online events. As there is no physical location, the question of the place of supply for VAT purposes arises in the case of paid services. The result of such an analysis based on current VAT rules may surprise some, as it opens up scope for tax optimization. An explicit regulation that accords with the consumption tax concept of VAT would be necessary to avoid risks, as well as untaxed revenues and double taxation. However, this may require a change in the EU VAT Directive with the coordination of all Member States.

Case Law Note: Bad Debts Relief (Almost) Always Available? A Glance at Case Law of the CJEU

The Court of Justice of the European Union (CJEU or the Court) recently ruled in the Polish E. Case1 that not being registered for VAT purposes or being subject to insolvency proceedings cannot be an obstacle for a reduction of a taxable base in the event of a lack of payment (bad debts adjustment). The resolution reached in this judgment was to be expected taking into consideration the court’s approach in its numerous decisions that have been rendered during a couple of previous years. The case seems to affirm a relatively coherent approach in case law leading up to the establishment of certain rules concerning bad debts adjustment in the field of VAT. This case note discusses those cases and summarizes the rules that were settled. The topic gains significance in times of restrictions connected with Coronavirus disease 2019 (COVID-19) in which many businesses have become insolvent and thus may not be able to pay their debts. Court of Justice of the European Union, VAT, taxable base, bad debts.

The Consequences for the Romanian State Budget Generated Through the Inappropriate Interpretation/ Evading of the Civil and Tax Legislation in Relation to the Sale of Second-Hand Vehicles

Vehicles that are deemed as second-hand can benefit from a special VAT regime that allows the tax to be applied only to the profit margin in the case of resale of second-hand goods. As a consequence, VAT does not apply to the acquisition value. One of these situations is when an individual sells a second-hand vehicle to a firm registered for VAT purposes at the price excluding VAT, and the firm subsequently sells it as commodity to another firm or individual, applying VAT only to its gross profit. At the same time, the special system also applies when the intermediary reselling firm acquired the vehicle through a margin-based procedure from a company, including from within the Community.Since this is a regime that allows the reduction of the VAT tax base, “the financial engineers”, focused on identifying new methods of “fiscal optimization”, are tempted to force the legal boundary of optimization and find solutions that are way outside the law. The judicial practice proved that for most of the vehicles acquired from EU the delivery was standard, namely intra-Community delivery with reverse charge, the consequence being that when the car is sold in Romania the VAT is collected for the entire value and it must be transferred to the state budget, and yet, through certain fraudulent acts and the falsification of documents, the special VAT regime applies, namely the margin-based VAT and the intermediary company pays VAT only for the difference between the selling and the buying price, not for the entire value of the vehicle.

Statement 311

This article presents a series of aspects related to the statement 311, regarding the collected value added tax owed by those tax payers whose registration number for VAT purposes has been cancelled in accordance with art. 316 para. (11) (a)-(e), (g) or (h) from Law No. 227/2015 regarding the Fiscal Code, as subsequently amended and supplemented.

VAT Treatment of the Sharing Economy

The sharing economy is experiencing a huge growth, which is putting the world’s tax systems to the test. The implications of the sharing economy in the field of VAT can become extremely complex, especially when it comes to international transactions. In this article, the author provides his view about the qualification for VAT purposes of the underlying suppliers acting in the sharing economy as well as the role of the platforms facilitating the supplies of goods and services.