Tax officials from 104 jurisdictions attending the November 5-6 meeting of the OECD’s Global Forum on VAT endorsed new OECD VAT/GST guidelines on the treatment of cross-border trade in services and intangibles and suggested that the OECD next consider taking on several new VAT projects.
In a statement of outcomes, signed by the tax officials, the group said it welcomed the new guidelines, which are designed to serve as a reference point for countries as they design and implement domestic VAT legislation. It is hoped that the uniform standards will reduce the likelihood of VAT double taxation and double nontaxation in cross-border trade.
Included are new rules that address the VAT treatment of supplies of services to private consumers, such as Internet downloads of digital goods.
These rules recommend that foreign sellers register and remit tax on sales of e-books, apps, music, videos, and other digital goods in the jurisdiction where the final consumer is located. The guidelines also suggest a mechanism to ensure the effective collection of VAT by tax authorities from foreign sellers, to help governments protect VAT revenues and level the playing field between domestic and foreign suppliers.
“The effective and consistent implementation of the recommended approaches for collecting the VAT on these digital sales will help jurisdictions to protect their VAT revenues and level the playing field between domestic and foreign suppliers,” said OECD’s Deputy Secretary-General Rintaro Tamaki.
“It is very encouraging to see that a number of jurisdictions have already implemented the rules and the mechanism recommended by these guidelines, or have expressed their intention to do so,” Tamaki added.
This part of the package has already been endorsed by the G20 finance ministers as it was included in the OECD/G20 base erosion profit shifting (BEPS) work on the digital economy approved October 8. It will also be presented as a part of the BEPS package to be delivered to G20 leaders on November 15-16 at their summit in Antalya, Turkey.
Next steps
In its statement of outcomes, the tax officials urged the OECD to develop an implementation package to support the guidelines.
The group also said that the OECD should next consider researching and analyzing approaches to improve the neutrality and overall performance of VAT systems, such as through the design and implementation of efficient VAT refund mechanisms and risk assessment processes.
“This work could also include the development of a possible framework for the exchange of information and enhanced administrative cooperation in the area of VAT,” the group said.
The tax officials also suggested the OECD consider drafting guidance on the application of VAT to cross-border trade in goods, including the collection of VAT on low value imports, and on good practices to address compliance issues.
Further, the group suggested more work be considered on “the interaction between VAT and the international direct tax framework, notably in the area of transfer pricing.”
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