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Indirect Tax Insights is our summary of developments in relation to VAT, customs, excise and other indirect taxes. We hope you find this and future editions useful to keep up to date with the frequent and often rapid developments in indirect taxes – such as VAT rate changes, relevant court judgments, and new VAT reporting obligations for digital service providers.

In this edition, we cover the following:

  • Irish developments, including: 
    • A temporary VAT rate reduction from 23% to 21% will apply for 6 months commencing on 1 September 2020. What should businesses do next to prepare? Read our checklist of issues you should consider and listen to a playback of our Webinar from 30 July,
    • A round-up of Ireland’s other COVID-19 VAT support measures,
    • Other news including a judgment by the Tax Appeals Commission on the VAT exemption for medical services and Revenue’s e-brief on the VAT treatment of gambling and gaming activities
  • Brexit: As the clock ticks down to the end of the Brexit transitional period, we ask what VAT and customs steps should a business take now to be prepared for 1 January 2021? Access our preparation checklist and a playback of our recent webinars held on 7 and 21 July 2020.
  • EU developments, including
    • 2021 e-commerce VAT changes: the EU Council has formally approved a 6-month postponement of the implementation of the new VAT regime for e-commerce providers to 1 July 2021. Notwithstanding the deferral, it is timely for businesses to consider the impact – read our summary of the key implications.
    • A summary of recent EU Court of Justice judgments considering issues such as the VAT treatment of services relating to both specified and non-specified investment funds, the meaning of a “fixed establishment” for VAT purposes, and how termination payments should be treated for VAT purposes.
  • Global indirect tax developments, including a round-up of recently announced VAT rate changes in the UK, Germany, Austria, Saudi Arabia and elsewhere, and details of new regimes for taxing remote suppliers of digital services in Mexico, Chile, Costa Rica, Indonesia and others. We also include links to some helpful resources for keeping up to date on indirect tax developments as they happen.
  • Webinar: Thursday 20th August at 12pm. Join members of our Indirect Tax and Tax Technology teams for the latest in our Lunch & Learn webinar series on “Managing your end to end VAT process”. We will consider best practice for managing the processes impacting your VAT position, from the initial recording of purchases and sales in your system, through to VAT compliance reporting as well as the latest developments in indirect tax compliance reporting at home and abroad. Click here to register.

Irish Indirect Tax Developments

VAT rate reduction

The Government’s July Stimulus Package confirmed the standard rate of Irish VAT will be temporarily reduced from 23% to 21% for a six month period from 1 September 2020 to 28 February 2021. The standard VAT rate applies to supplies of goods and services in Ireland which do not qualify for a reduced VAT rate or VAT exemption. The rate cut will therefore have impact for businesses across virtually all industries and sectors both in terms of their sales and/or purchases. There was no change to any of the other Irish VAT rates that currently apply. 

While the reduction in the VAT rate will be welcomed in the main by businesses and consumers, there are a number of issues that businesses will need to consider in order to be ready for the change coming into effect on 1 September 2020 – read our alert.

COVID-19 – Round-up of Irish VAT reliefs

As has been well publicised, several measures were introduced in recent months to assist businesses in dealing with the impact of COVID-19. 

In May, the Minister for Finance announced a scheme allowing businesses that have availed of VAT and PAYE deferrals to defer or “warehouse” the payment of those outstanding liabilities. The July Jobs Stimulus package confirms that the Government will enact legislation to confirm this previously announced warehousing of tax liabilities and draft legislation was issued on 24 July. Based on current available information and the draft legislation the scheme will allow VAT and PAYE liabilities to be deferred for a period up to two additional months after the business resumes trading. Once trading is resumed, the outstanding VAT and PAYE liabilities can be warehoused without interest for 12 months. At the end of the 12-month period (or by 31 December 2022 if earlier), a lower than normal interest rate (3% per annum instead of 10% per annum) will apply until such time that the warehoused tax debt is fully repaid. There are a number of conditions attaching to the application of this relief.   

Revenue also announced by way of an eBrief that the deadline for submission of claims under the VAT Compensation Scheme for Charities has been extended from 30 June 2020 to 31 August 2020. This applies to claims submitted by qualifying charities in respect of VAT incurred by them during 2019.

Reliefs allowing zero-rate VAT and customs for imports, and zero-rate VAT for domestic and intra-EU acquisitions of certain personal protection equipment (“PPE”) and other specified equipment to the HSE, hospitals and other health care settings, that were originally in place up to 31 July 2020 have now been extended for a further three month period, and apply until 31 October, subject to further review. Further information is available on the Revenue website.

Case-law update: VAT treatment of services provided by a locum doctor’s company

On 12 June 2020, the Tax Appeals Commission (“TAC”) published a determination in a case (126TACD2020) involving a GP who operated through an incorporated company (the “Appellant”). The case considered the VAT treatment of the Appellant’s services and whether such services qualify as VAT exempt medical services when provided to patients through an association that arranged for an out of hours doctors service. The Appeal Commissioner agreed with the Appellant that such services fall within the scope of VAT exemption, overriding Revenue’s arguments that the services were a taxable supply. Of importance in reaching this decision was the fact that the doctor was not directed by the association in the manner in which medical services were performed. The Appeal Commissioner noted that it was clear from the evidence that while the association employed a medical director, this individual was engaged at a macro level and did not control or supervise the activities of the doctor in the provision of medical care to patients. It was also significant that the doctor held professional indemnity insurance which would not have been necessary if his company was merely providing staff to the association rather than providing medical services.

We understand that Revenue is appealing the determination to the High Court and indeed, Revenue issued an eBrief on 17 June maintaining their view that where a locum doctor provides services to a medical practice, such services should be regarded as a supply of staff to that practice, subject to VAT at the standard rate, rather than the supply of a VAT exempt medical service.

VAT treatment of betting and gaming

Revenue issued an eBrief on 17 June with new guidance on the VAT treatment of betting and gaming activities (including lotteries, bingos and e-gaming). While the guidance does not appear to reflect any material changes to existing Revenue practice, it is a useful summary of the position for both traditional and on-line suppliers of such activities.

EU Indirect Tax Developments

E-Commerce VAT Deferral

Significant changes to the EU VAT rules for e-commerce transactions were due to come into effect on 1 January 2021. However, due to the challenges for governments and businesses arising from COVID-19, in May the European Commission proposed a 6 month deferral to 1 July 2021. That postponement was formally confirmed by the Council of the EU on 22 July.

In adopting the deferral, some Member States (Netherlands and Germany) have asked the European Commission to consider a further extension, whereas a number of other countries have indicated that no further extensions should be considered. We will continue to monitor developments, but businesses should operate on the basis that 1 July 2021 will be the go-live date. Further information on the impact of the changes and what businesses should do to prepare is available here.

Overview of recent ECJ VAT case-law

The Court of Justice of the EU (“ECJ”) has issued a number of judgments in recent months.  These considered some familiar topics from a VAT perspective, including the VAT treatment of investment management services, the meaning of a “fixed establishment” for VAT purposes, and the VAT treatment of termination payments.

On 2 July 2020, the ECJ issued its judgment in the BlackRock Investment Management case (C-231/19) stating that a single package of services bought in by an asset manager which is used partly for managing specified investment funds (SIFs) and partly for managing non-specified investment funds (non-SIFs) does not qualify for VAT exemption. This judgment may be relevant to fund administrators/managers and other businesses (e.g. insurers) which buy in a single package of services which is used for both VAT taxable and VAT exempt activities. Read our analysis of this case here.

In Dong Yang Electronics (C-547/18), the ECJ found that the mere existence of a local subsidiary does not constitute a fixed establishment of its overseas parent company, but circumstances can arise where this is the case. However, a supplier of services to the parent company is not required to analyse the contractual relationship between the parent and subsidiary to determine if the subsidiary constitutes a fixed establishment of the parent or not. The supplier should instead follow the guidelines in EU VAT Implementing Regulation. This judgment may be relevant where a business is having to consider if it has a fixed establishment (i.e. human and technical resources) necessary to supply or receive goods or services in another country. The question of whether there is a fixed establishment can determine where VAT is payable and who is responsible to pay that VAT.

In Vodafone Portugal (C-43/19), the ECJ held that charges imposed by a telecoms operator for early termination of a contract by a customer, where the contract was subject to a minimum ‘tie-in period’, are subject to VAT rather than non-VATable compensation. The judgment highlights that charges, which may be referred to as termination fees or compensation payments, may nonetheless attract VAT. The Court also held that the VAT analysis is not changed by the fact that the termination fees charged by Vodafone were not the same as the amounts that would have been charged had the contract run its course. This follows a similar decision in the earlier ECJ case of MEO (C-295/17), and is in line with a recent Irish TAC determination (16TACD2020) on termination fees charged by an Irish mobile phone operator.

A brief round-up of Advocate General Opinions (which are non-binding opinions issued prior to the ECJ final judgment) are included in the table below. The judgments in these cases are expected within the coming months.






Name & case reference



Key points


Advocate General’s Opinion



A holding company is entitled to recover VAT incurred on consultancy costs relating to a planned share acquisition where it intended to provide management services to the acquired company, even though the share acquisition did not subsequently proceed.  However, it is not entitled to recover VAT on costs of raising funds for the intended share acquisition, where those funds are subsequently used to grant a VAT exempt loan.


Advocate General’s Opinion United Biscuits (Pension Trustee) Ltd (C-235/19)

Investment management of a defined benefit pension scheme does not constitute a VAT exempt insurance transaction.


Advocate General's Opinion

Wellcome Trust


Where a taxable person carrying on a non-economic activity consisting of the purchase and sale of shares and other securities in the course of the management of the assets of a charitable trust acquires a supply of investment management services from a person outside the EU exclusively for the purposes of such activity, it is to be regarded as a ‘taxable person acting as such’ for the purposes of that provision and therefore has an obligation to self-account for VAT.

Global Indirect Tax Updates

VAT rate changes

We have already seen a number of significant VAT rate changes and we expect to see more as part of government’s economic stimulus measures in response to COVID-19. As outlined above in the case of the Irish VAT rate reduction, VAT rate changes raise issues for businesses such as implementing systems changes, commercial pricing decisions, and determining the appropriate rate applying to particular supplies. A brief round-up of more significant changes announced to date are summarised below.

  • Germany has introduced temporary VAT rate reductions for the six-month period from 1 July 2020 to 31 December 2020. The standard rate of VAT has been reduced from 19% to 16% and the reduced rate of VAT decreased from 7% to 5%.  
  • The UK introduced a targeted 5% rate of VAT for the hospitality and tourism sector which came into effect on 15 July 2020 and will continue until 12 January 2021. 
  • Austria, Bulgaria and Cyprus amongst others have also introduced temporary VAT rate reductions mainly targeted at tourism sectors such as hospitality and hotel accommodation.
  • Saudi Arabia meanwhile has broken the trend of rate reductions, by increasing its standard VAT rate from 5% to 15% with effect from 1 July 2020.  

VAT on digital and similar services

We are seeing a continuing trend across the globe of countries applying local VAT/GST to supplies of digital services and other services to local customers by non-established service providers. The VAT/GST rules can vary significantly from country to country, in terms of scope (B2B v B2C or both) and compliance obligations. A short round-up of recent developments in this space is set out below. 

  • Mexico: New measures have been introduced in Mexico regarding VAT on digital services and are effective from 1 June 2020.  
  • Chile: New rules were also introduced in Chile with effect from 1 June 2020, which require non-resident suppliers of digital services, including the supply of digital content and software, to consumers (i.e. B2C supplies) in Chile to register for and collect VAT on such services.  
  • Indonesia: In Indonesia, sales of digital goods and services from abroad to domestic consumers will be subject to VAT at 10%. The VAT collection obligation for foreign suppliers came into effect on 1 August 2020. Affected businesses must contact the Ministry for Finance who after review will appoint it as a "VAT collector" on such supplies.
  • Costa Rica: New rules are due to be introduced in Costa Rica with effect from 1 October 2020 which will impose VAT on digital services and intangibles acquired from abroad for consumption in Costa Rica and will require non-resident digital services providers or intermediaries to register and apply VAT on such supplies in Costa Rica.
  • Other countries that have or will introduce VAT/GST rules for non-established providers of digital services include Vietnam, Thailand, Philippines and Mauritius.

Keeping up to date

Digital Economy Tax Tracker

You can keep up to date with digital economy tax changes by downloading the KPMG Digital Economy Tax Tracker which is available through the App or Play store. 

KPMG TaxNewsFlash

Daily summaries of the latest tax developments being reported by KPMG firms from around the globe are available here. You can also subscribe for any TaxNewsFlash publication using this subscription form and receive alerts direct to your inbox.

If you would like further information on these developments, please let us know and we will be happy to provide input in conjunction with colleagues in the local KPMG member firm.  

Contact us

If there are any aspects of this newsletter that you would like to discuss further, please do not hesitate to contact Glenn Reynolds or David Duffy.

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