Tax news - March 2016
Amendments to the VAT law that were made at the end of last year introduce the requirement to apply VAT reverse charge to supplies of mobile phones, tablets and laptops. The new provision of the law becomes effective from 1 April 2016, therefore suppliers, traders, as well as purchasers (providing that they are registered VAT payers) of these products should be aware of their responsibilities regarding the application of this tax.The SRS website contains methodological material on application of VAT to electronics, which includes the SRS’s understanding as regards the practical application of this provision (available under Taxes / Value Added Tax / Legislation).
Which transactions are subject to reverse charge
According to the VAT law, the special procedure applies to supplies of mobile phones, tablets, laptops, as well as integrated circuit devices, including microprocessors and central processing units. The SRS's methodological material includes a list of products with Combined Nomenclature codes that are subject to the special procedure. According to this list and explanations provided by the SRS the following conditions should be taken into account when applying the reverse charge procedure:
- The reverse charge applies to the products referred to in the second part of Article 143.1, as well as to their accessories (chargers, batteries, mouse, keyboards etc.), if the accessories are sold in a single set with the mobile phone, tablet or laptop;
- The reverse charge applies to integrated circuit devices only if they are sold separately and are not integrated in other devices (e.g. in desktop computers, servers, copiers, printers, monitors etc.);
However, the reverse charge does not apply to:
- Phone or computer accessories that are sold separately from mobile phones, laptops or tablets;
- Mobile phone, laptop or tablet components, spare parts etc., that are sold separately from computers or phones;
- Desktop computers, monitors, network routers, radio etc.;
- Services related to the maintenance, repair and programming of electronic devices, including mobile phones, laptops and tablets.
Application of the reverse charge in retail
Specific conditions will have to be taken into account when selling mobile phones, laptops or tablets in retail stores, so that the seller, as well as the purchaser of these products could avoid the risks related to the application of VAT.
It is required for the seller to provide the following conditions:
- Identification of the buyer - making sure that it represents a registered VAT payer;
- Issue of a VAT invoice excluding VAT, but with a reference ”VAT reverse charge”;
- Payment is made by the means of a non-cash payment procedure;
- In case the payment is made by means of a payment card issued by a credit institution - making sure that this card belongs to the registered VAT payer.
Most important of all is that the seller must ensure that the reverse charge is actually applied in respect of the buyer – to make sure that a person who actually represents a VAT payer, does not use the data of a legal person in order to purchase, for example, a mobile phone for private needs without paying VAT.
If the seller is not able to ensure the above conditions, it is necessary to apply the general tax payment procedure, where the buyer covers the price of the products and VAT. However, in such a case the buyer is exposed to a risk, as until now the SRS has not confirmed whether the buyer will retain the right of deduction of input tax, if he has bought any of the products concerned without the application of the reverse charge, i.e. contrary to the provisions of the law.If VAT payers would like to buy mobile phones, laptops or tablets in retail stores, an advance invoice with all the necessary details (excluding tax) should be issued, the invoice paid by a bank transfer and only then the product can be obtained by the buyer. Of course it would significantly complicate the process, but it would protect the seller from misapplication of tax and provide the possibility for a buyer to calculate VAT, without losing the right of deduction of input tax.
On the minimum object of social contributions
Amendments to the law On state social insurance were made at the end of last year, and they are formally becoming effective next year. Nevertheless, it is necessary to prepare for their implementation.
Minimum object of social contributions
Amendments to the law provide for establishing the minimum salary on which social contributions will be paid, which in future will not be lower than the minimum monthly salary in the given year. Regardless of whether the employee is working part-time and receives a time-based salary for performing certain work, social contributions must be calculated from at least the minimum salary. The employer will be obliged to cover both the employee's and employer's part if social contributions are calculated for salary, but are not actually paid to the employee.
This provision is planned to be introduced gradually. In 2017, social contributions will be payable from at least ¾ of the minimum monthly salary. However, from 2018 social contributions must be calculated and paid from at least the amount of minimum monthly salary.
Derogations from the requirement are permissible if the employee is on child care leave, he is granted leave from work on account of childbirth (for a father), the employee is on a temporary incapacity or maternity leave (in the case of sick-leave certificate "B") or he is on unpaid leave due to child-care for a child under the age of 3 or due to acquiring higher education on a full-time basis. In all these cases the minimum social contributions shall not be applied.
In case the employee is employed by several employers
If the employee is employed by several employers, the obligation to pay social contributions from at least the minimum monthly salary is for the employer who holds the employee's salary tax book. Other employers will be permitted to pay social contributions from the actual salary calculated. If the salary tax book is not submitted to any employer, the SRS will inform via the Electronic Declaration System which employer is responsible for the payment of social contributions from at least the minimum monthly salary. For this purpose, the SRS will select the employer who was first to provide information on the employment of the individual.
The Cabinet of Ministers will introduce procedures on the refund of overpaid social contributions for the reporting month, in case there are any.
Requirements for micro-enterprise taxpayers
The law provides for stricter requirements for employees of micro-enterprise taxpayers. If an employee works in a such micro-enterprise, the salary tax book must be submitted to this micro-enterprise. Moreover, if the employee is employed by several micro-enterprises, the social contributions from at least the minimum salary must be paid by all micro-enterprises, regardless of whether the salary tax book is submitted to this micro-enterprise or not and regardless of the amount of salary.
Although these requirements regarding the payment of social contributions will partially become effective only next year, employers are advised to estimate the potential additional costs that may be incurred if the employees are working part-time or receive a wage, which does not exceed the minimum monthly salary.
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