Weekly VAT News

Our Technology, Media, and Telecommunications (TMT) indirect tax team will be hosting our next webcast covering:

• US trade tariffs and the impact for the TMT sector
• An update on recent developments for Digital Services Taxes (DST)
• Recent updates on Electronically Supplied Services (ESS) rules in key territories (including South Africa)

This will be the next instalment in a series of short lunch-time webcasts addressing topics relevant to indirect tax practitioners working in the TMT sector.

Please join us on Wednesday, 9 April 2025 1:00 – 1:30 pm. You can register by clicking here – you will then receive an email with login details and the option to add this event to your calendar. We hope you can join us for this webcast.

Please look out for further webcast dates in the coming months.

Speakers:
Liam Smith | EY Director | TMT Indirect Tax
Maggie Taucher | EY Manager | Trade Policy & Strategy
Gareth Latter | EY Manager | TMT Indirect Tax

For further information, please contact Shabina Ali or Gareth Latter.

On 26 March 2025, the Office for Budget Responsibility (OBR) will publish revised medium-term forecasts for the economy and public finances.

The Chancellor will respond to the forecast in her Spring Statement in the House of Commons, and this is expected to be at around 12.30pm on 26 March. It appears that the Chancellor is likely to limit her announcements to spending cuts, as the Government has now repeatedly said there will be no tax rises.

We understand that the UK digital services tax is under review in light of the negotiations with the Trump administration over US tariffs. Announcements on DST are not (currently) expected to be included in the Spring Statement.

We could however see some consultation outcomes or new consultations launched across the taxes. We may also see some announcements regarding tax administration and avoidance, for example, late filing penalties have been rumoured in the press to be significantly increased.

For further information, please contact Sarah Delaney or Liam Smith (DST).

Trade Talking Points is our fortnightly newsletter on the latest insights from EY's Trade Strategy team.

In this edition we provide updates on US tariff developments, the implications of UK and EU retaliatory divergence for Northern Ireland, the UK’s bilateral trade and foreign policy discussions, and UK, EU and US trade remedies.

For further information please contact Marc Bunch, Maggie Taucher, Ross Freeman or Will Main.

Thursday 3 April

Opinion – C-726/23 Arcomet Towercranes

Topics – Transfer Pricing settlement invoices – supply of services?

A Romanian referral asking whether Article 2(1)(c) of the VAT Directive is to be interpreted as meaning that the amount invoiced by a company (the principal company) to an associated company (the operating company), equal to the amount necessary to align the operating company’s profit with the activities carried out and the risks assumed in accordance with the margin method of the OECD Transfer Pricing Guidelines, constitutes a payment for a service which therefore falls within the scope of VAT? If the answer to the first question is in the affirmative, with regard to the interpretation of Articles 168 and 178, are the tax authorities entitled to require, in addition to the invoice, documents (for example, activity reports, works progress reports) justifying the use of the services purchased for the purposes of the taxable person’s taxable transactions?

Judgment – C-164/24 Cityland

Topics – Automatic removal of taxpayers from VAT register

A Bulgarian referral concerning automatic VAT deregistration of a taxpayer following successive non-payment of declared VAT. The referral asks whether domestic legislation is contrary to Article 213(1) of the VAT Directive? If answered in the affirmative, does Article 213(1) have direct effect. Alternatively, do Articles 213(1) and 273, as well as the principles of legal certainty and proportionality, permit exclusion from the VAT system in the event of formal infringements of the law, without account being taken of the time of commission of the offence, the type of offence, the other conduct of the person and the existence of other subjective circumstances, such as commercial litigation for failure to pay the tax due on time? If the first question is answered in the negative, do Articles 213(1) and 273, and the principle of proportionality, permit exclusion from the VAT system at the same time as the imposition of interest for failure to pay declared tax on time, without the revenue authority being required to analyse the type and nature of the company’s activity, its conduct as a taxable person and the severity of each of the proposed measures?

Judgment – C-213/24 Grzera

Topics – Sale of immovable property with no prior business use – economic activity?

A Polish referral asking whether Articles 2(1) and 9(1) of the VAT Directive must be interpreted as meaning that a person who sells an immovable property, which was not previously used for an economic activity, and commissions the preparation for sale of that property to a professional trader who subsequently, as that person’s agent, undertakes a series of organised activities with the aim of dividing the property and selling it for a higher price, independently carries out an economic activity?

Opinion – C-232/24 Kosmiro

Topics – Factoring company, acquisition from a client invoiced debts not yet due

A Finnish referral asking where a factoring company acquires from a client invoiced debts not yet due so that the default risk relating to those debts is transferred from that client to that company (factoring taking the form of a sale of debts, ‘trade factoring’): (a) is the factoring commission which is charged by that company consisting of a percentage of each invoiced debt covered by the agreement, to be regarded as an adjustment to the purchase price of the acquisition of the debts or as another item outside the scope of the VAT Directive, or (b) are Articles 2(1)(c) and 9 of the VAT Directive to be interpreted as meaning that that same company provides its client, in return for the factoring commission, with a supply of services for reward falling within the scope of the VAT Directive?

Is the fixed arrangement fee which is charged to the client for setting up and activating the factoring arrangement in the context of trade factoring to be regarded as a consideration for the supply to the client of a service falling within the scope of the VAT Directive?

Where the fees referred to in questions 1 and 2 above which are charged in the context of trade factoring are to be regarded as a consideration for a supply of services falling within the scope of the VAT Directive: (a) is Article 135(1)(b), relating to the granting of credit, or Article 135(1)(d), relating to transactions concerning payments or debts, to be interpreted as meaning that the factoring commission or the arrangement fee charged to the client are to be regarded as consideration for the supply of a tax-exempt service, or (b) is Article 135(1)(d) to be interpreted as meaning that it is the consideration for debt collection, which is to be regarded as a taxable supply of services, or, as the consideration for another taxable service?

Where a factoring company finances its client by granting it credit so that that client’s invoiced debts are used as collateral for the finance provided by that company (factoring taking the form of financing guaranteed by invoices, ‘invoice factoring’): (a) is Article 135(1)(b), relating to the granting of credit, or Article 135(1)(d), relating to transactions concerning payments or debts, to be interpreted as meaning that the factoring commission charged to the client, consisting of a percentage of each invoiced debt covered by the agreement, and the fixed arrangement fee for setting up and activating the factoring agreement must be regarded, at least in part, as a consideration for the supply of a tax-exempt service, or (b) is Article 135(1)(d) to be interpreted as meaning that it is the consideration for debt collection, which is to be regarded as a taxable supply of services, or the consideration for another taxable service?

If the factoring commission or arrangement fee charged in the context of trade factoring or invoice factoring is to be wholly regarded, on the basis of the answer to question 3 or 4 above, as the consideration for a taxable service, is the taxation of that service in application of the VAT Directive so clear and unconditional such that, where the taxable person so requests, that taxation be recognised as having direct effect even though the exemption from VAT provided for by the national VAT law covers, besides the granting of credit, other financing arrangements?

Thursday 10 April

Opinion – C-101/24 XYRALITY

Topics – Digital platforms and electronic-services pre-1 January 2015

A German referral asking, where a German taxable person (developer) supplied, before 1 January 2015, a service by electronic means to non-taxable persons established within the EU, via a marketplace for applications operated by an Irish taxable person, is Article 28 of the VAT Directive to be applied, with the result that the Irish taxable person is treated as if it had received those services from the developer and supplied them to the end customers, because the marketplace for applications did not name the developer as the supplier of the service and show German VAT until it did so in the order confirmations issued to the end customers? If the first question referred is answered in the affirmative: Is the place of supply of the fictitious service supplied by the developer to the marketplace for applications under Article 28, by virtue of Article 44 or in the Federal Republic of Germany, by virtue of Article 45? If, by virtue of the answers to the first and second questions referred, the developer has not supplied any services in the Federal Republic of Germany: is the developer subject to a tax liability for German VAT under Article 203 on the ground that the marketplace for applications, acting in accordance with an agreement, named the developer as the supplier of the service and showed German VAT in the order confirmations it sent by email to the end customers, even though the end customers are not entitled to deduct input VAT?

Topics – Zero-rating – food items – confectionery

HMRC v Innovative Bites Limited

The Court of Appeal (Court) has released its judgment in this case concerning the VAT treatment of a food product called ‘Mega Marshmallows’.

Supplies of food of a kind used for human consumption are zero-rated for VAT, pursuant to Group 1, Schedule 8, VATA94. However, zero-rating does not apply to certain ‘excepted items’. Excepted Item 2 refers to confectionery. Note (5) provides that for the purposes of item 2 ‘confectionery’ includes “chocolates, sweets and biscuits; drained, glacé or crystallized fruits; and any item of sweetened prepared food which is normally eaten with the fingers”.

Innovative Bites Limited (IBL) is a wholesaler of American sweets and treats and sells, inter alia, an oversized marshmallow which was originally imported from the United States. It is now produced and imported from Belgium. The marshmallows are broadly cylindrical in shape, approximately 5cm in height with a diameter of 3.5 – 4.5 cm. In comparison, regular marshmallows are also cylindrical, 2cm in height with a diameter of 2.5cm. The size of the marshmallows means that they are more easily and more effectively roasted on a skewer over an open fire or flame.

The marshmallow’s packaging includes the words “made to a delicious American recipe” and “perfect for roasting”. The packaging also provides instructions for roasting the marshmallows.

IBL sells the marshmallows to UK retailers including Asda, Morrisons, Iceland and The Range. IBL also sells a large number of other mallow products which are held out for snacking, and which are standard-rated.

At the First-tier Tribunal (FTT), IBL asserted that the Mega Marshmallows are intended to be roasted over a campfire or barbecue and then eaten or used as an ingredient in what is called a ‘s’more’ – a traditional American night-time campfire treat, consisting of a roasted marshmallow and a layer of chocolate between two digestive biscuits. IBL considered that the product would not usually be consumed as a snack without being roasted; its intended use is such that it does not fall within the term ‘confectionery’ and should properly be considered a supply of food and zero-rated.

The FTT allowed IBL’s appeal, finding that as Mega Marshmallows are food of a kind used for human consumption but not confectionery, they are therefore zero-rated. The conclusion was based on the findings that Mega Marshmallows are sold and purchased as a product specifically for roasting. The FTT considered, inter alia, the marketing, the packaging, the size of the product, the positioning in supermarkets and the seasonal fluctuation in sales when reaching its findings.

On appeal, the Upper Tribunal (UT) also found that the product, which is intended to be roasted over a fire before consumption, is not ‘confectionery’ and qualifies as zero-rated. It found no material error of law in the FTT's analysis of the evidence and the weight attributed to it.

HMRC appealed on the grounds that the UT erred in its interpretation of Note (5) and in concluding that the FTT’s approach to Note (5) was not a material error of law. HMRC’s case is that the UT was mistaken in viewing Note (5) as “akin to a rebuttable presumption” and in considering that “even where a product might fall within a description in Note 5 other factors might lead to a conclusion that the product is not confectionery”.

HMRC contend that the matter should be remitted to a differently constituted FTT for it to decide whether Mega Marshmallows fall within Note (5) as “sweetened prepared food which is normally eaten with the fingers”.

The Court considered it clear that it is irrelevant whether Note (5) is interpreted as a ‘deeming provision’ or an ‘inclusive definition’. What matters is what Parliament has said about the significance of Note (5) and in this regard the Court held it to be unambiguous that products of the type detailed in Note (5) are ‘confectionery’ for the purposes of Item 2, absent absurdity or the like.

Before the FTT, HMRC argued that Mega Marshmallows were “confectionery” for the purposes of Item 2, because they were “sweetened prepared food which is normally eaten with the fingers” per Note (5). The Court recalled that the UT stated in its decision that “the burden is on the taxpayer to demonstrate that the product is not normally eaten with the fingers”. In this regard the Court considered that had the FTT decided that IBL had not discharged that burden, it should have dismissed the appeal. This is not a case in which it could be said to be absurd for the product at issue to be regarded as ‘confectionery’ or that it is obvious that Item 2 and Note (5) were not intended to apply to the product. Failure to persuade the FTT that Mega Marshmallows were not “sweetened prepared food which is normally eaten with the fingers” should thus have been determinative.

The Court also noted that the UT had said that the FTT “seemed unable to conclude what method was more usually or more often used to eat the product”. In disagreement, the Court considered that the FTT had explained that it “did not give particular weight to the means of eating”. It did not say that it could not reach a conclusion on how Mega Marshmallows are usually eaten or whether they are “normally eaten with the fingers”.

The Court considered that in the circumstances, the right course must be to remit to a differently constituted FTT the question whether Mega Marshmallows are “sweetened prepared food which is normally eaten with the fingers” within the meaning of Note (5). The hearing should be conducted on the basis of the existing written evidence but with the potential for cross-examination and re-examination of any witness who has given evidence relating to the way in which Mega Marshmallows are normally eaten.

In conclusion, the Court unanimously agreed to allow HMRC’s appeal and remit the case back to the FTT.

Comments: This judgment will be disappointing to manufacturers and retailers, who sell similar products, and have appeals stood behind this case. We await to see the outcome of the next stage in litigation.

For further information please contact Andy Jones.

The Upper Tribunal (UT) has granted Queenscourt Limited permission to appeal. In a decision released on 7 August 2024, the First-tier Tribunal (FTT) had granted permission to appeal on various grounds but refused permission on one further ground. The UT has now heard further submissions that the FTT erroneously confined its analysis to weighing up the financial detriment suffered by the Applicant and failed to take into account another relevant factor, namely, that permitting HMRC to resile from its previous decision to repay the VAT was not conducive to good administration.

The UT is satisfied that the additional ground of appeal is realistically arguable and has therefore granted permission to appeal on that ground.

This case concerns the supply of a dip pot as part of a KFC takeaway meal deal and whether it is a separate zero-rated supply or whether it is part of a single, standard-rated supply of hot food.

Queenscourt Limited had treated the dips as part of a single standard-rated supply until 2019, when it sought to reclaim VAT for the period between October 2015 and September 2018, considering that the dips should be zero-rated. HMRC initially agreed to repay but later refused a subsequent claim for October 2018 to September 2019, considering the dips part of a single standard-rated supply of hot food, and issued recovery assessments for the previous accepted claims. Queenscourt appealed, arguing the dips were a separate zero-rated supply and that HMRC's previous repayment created a legitimate expectation or estoppel by convention. Dismissing the appeal, the FTT found that the dips were not a separate supply but an enhancement to the hot meal, thus standard-rated. It also ruled that HMRC's recovery assessments were valid and Queenscourt's arguments on legitimate expectation and estoppel failed.

The FTT decision is available here.

For further information please contact Andy Jones.

Topics –Tour Operators’ Margin Scheme – mobile ride hailing services – whether services of a kind commonly provided by tour operators or travel agents, material alteration

Bolt Services UK Limited

Background

Bolt had requested a non-statutory ruling that the Tour Operators Margin Scheme (TOMS) would apply to its services. However, HMRC asserted that TOMS did not apply as Bolt was neither a tour operator nor a travel agent. The First-tier Tribunal (FTT) determined that Bolt's supplies would fall within TOMS, with VAT calculated on the margin, as it offers services commonly provided by tour operators and travel agents, without substantial alteration. HMRC appealed against the decision of the FTT.

The Bolt group offers a global mobility platform (Platform) which provides a range of services, including transport by private hire vehicle (PHV). The Platform enables Bolt’s customers to request a PHV to take them from point A to point B by using an app on their smart phone. Customers are able to select from a wide range of PHV options before completing their request. Bolt accepts requests for rides from the customers via the Platform and provides each customer with an estimated fare and arrival time. Once a request for a ride has been received, Bolt allocates the journey to a PHV driver who is willing to transport the customer. All bookings and acceptances of PHV journeys are carried out via the Platform and in accordance with Bolt’s terms and conditions for drivers and passengers. With effect from 1 August 2022, Bolt has acted as principal in the re-supply of passenger transport by PHV, which it buys from self-employed PHV drivers and re-supplies to its customers. Bolt contracts separately with both drivers and passengers and is responsible for all invoicing and remittance of payments. There is no contractual relationship between the drivers and the customers.

The PHV drivers are independent contractors. They are free to provide PHV transport independently of the Platform, including to Bolt’s competitors. To provide transport services to Bolt, a PHV driver must first register with Bolt and be granted access to the Bolt platform. The PHV drivers are able to set their own operating parameters when logged into the Platform.

Bolt provides transport to a diverse group of customers who choose to travel via Bolt for a variety of different reasons. The customers include overseas tourists travelling in the UK and UK residents travelling for personal and business reasons. Bolt supplies journeys of different lengths both within and between cities or towns.

Bolt offers its customers help and assistance via the Bolt app and its website, as well as by email and 24/7 phone lines. Bolt employees are dedicated to customer service in-house and Bolt has also outsourced some of the support work. Customers can receive assistance at any point in the process, and Bolt maintains an up-to-date blog on its website offering travel advice to customers who are tourists or visiting places.

The First-tier Tribunal decision

The FTT recalled that in order for Bolt’s supplies to fall within the scope of the TOMS, it must:

1. Provide services of a kind commonly provided by tour operators or travel agents; and
2. Supply the services of the drivers to the passengers without material alteration or further processing, i.e. they have not been changed so as to become in-house supplies

In determining whether what Bolt provides is a service of the kind commonly provided by tour operators or travel agents, the FTT noted that the answer depends on how Bolt’s services are viewed for the purposes of comparing them with the services provided by tour operators and travel agents. At a high level, Bolt supplies passenger transport and it is clear from prior case law that transport is a travel service. That corresponds, at a high level, with the kind of supplies made by tour operators or travel agents when they supply transport by planes, trains and coaches. More particularly, Bolt supplies on-demand ride hailing services for passenger transport from point A to point B, mostly within urban areas. The FTT considered that while some of the evidence suggested that tour operators and travel agents supplied point to point transport, e.g. airport pickups and transfers, it was not satisfied that they commonly provided on-demand rides from point A to point B which were the same as or similar to those provided by Bolt. In any event, it considered that the correct approach was to take a high level or general view when considering whether services are of a kind commonly provided by tour operators or travel agents.

The FTT considered that taking a general or non-specific view of the activities that are to be compared, passenger transport services are the kind of services commonly provided by tour operators or travel agents in that such services are generally associated with the type of activity carried on by tour operators and travel agents. Referring to the AG Opinion in Madgett and Baldwin, the FTT recalled that the AG opined that where a hotel arranges for a taxi to take one of its guests to a station or airport, the ride with the hotel’s other services would not fall within TOMS. However, the AG did not take that view because arranging a taxi ride to a station or airport was not the kind of service commonly provided by tour operators or travel agents but because the taxi service was ancillary to the provision of hotel accommodation. The obvious inference was that if the transport by taxi had not been ancillary then it would have fallen within the scope of TOMS. The FTT held that there seemed to be no reason why a taxi ride, and thus a PHV journey, cannot be regarded as a service of a kind commonly provided by tour operators or travel agents. The details of the journey re points A and B or its purpose should make no difference.

Allowing the appeal, the FTT concluded by considering that the supply of mobile ride-hailing services, without any additional elements, to a traveller is a provision of travel facilities within TOMS in the same way as a supply of accommodation only.

If it was wrong and the provision of travel facilities required there to be other elements in addition to the transport, the FTT considered that this would not be fatal to Bolt’s appeal. The CJEU in Star Coaches held that the addition of other services such as information and advice relating to holidays and the reservation of the journey would be enough to bring transport, which is a travel service, within the EU special scheme. In this case, Bolt provides such other services, namely: the ability to arrange a journey with various options by using the Bolt mobile app; help and assistance available 24/7 via the app or Bolt’s website as well as by email and telephone; and information and advice on certain places served by Bolt which can be found in articles on Bolt’s website and in its blog. If required, such additional services are sufficient to bring the supply of mobile ride-hailing services within TOMS.

Upper Tribunal decision

In a lengthy judgment, there are two key points of interest.

• The UT reviewed leading case law in the area and agreed with the FTT that what Bolt is doing is comparable with other travel and tour operators. The UT further agreed that the high-level approach taken by the FTT to reach that decision is the correct approach.
• In relation to whether there is a material alteration, the UT undertook the exercise specified by the Upper Tribunal in Sonder to determine whether the supplies bought-in by Bolt are provided for the direct benefit of the traveller. Having done so, the UT agreed with the FTT that the supplies made by the drivers are for the direct benefit of the traveller. The UT also agreed with the FTT that the services of the drivers are not subsumed within a wider “in-house supply” made by Bolt. The services of the drivers in conveying the passenger from A to B in properly maintained, insured and taxed vehicles remain the same. The UT concluded that the services are not materially altered.

Comments: Given the recent loss for the taxpayer in the UT decision in Sonder, it will be welcome news that Bolt has won HMRC’s appeal before the UT. Private-hire taxi hailing apps may wish to consider the implications of the latest decision, particularly if they haven’t accounted for VAT using the TOMS.

For further information please contact Ethan Ding.

As reported by the CIOT, HMRC has recently commenced a One to Many letter campaign directed at individuals and businesses suspected by HMRC of using Electronic Sales Suppression (ESS) (till fraud) to under-declare their income. The letter states that this is the recipient’s final opportunity to make a complete, accurate and honest disclosure before HMRC calculate what tax they think they owe and charge penalties.

Two letters are being used. A copy of each of the letters is provided below. There is one difference between the two letters – that is, the figures for tax and penalties used in the example in the boxed section on page 1 are higher in one letter than the other. HMRC has advised that two letter variants have been issued to test the impact different framing of the scale of possible penalty amounts has on the engagement of recipients.

• HMRC Letter 1 – ESS
• HMRC Letter 2 – ESS

The letters direct the recipients to tell HMRC about their undeclared sales by making a disclosure within 30 days from the date of the letter using HMRC’s online ESS disclosure service on GOV.UK: Make a disclosure about misusing your till system.

If they believe they have declared all their sales, they are asked to make a nil disclosure.

If they make a false or incomplete disclosure HMRC may charge penalties of up to 100% in addition to any tax that is owed and late payment interest. HMRC reserve the right to open a civil or criminal investigation should they disagree with the information that is disclosed. HMRC will also register the person for VAT, income tax self-assessment and corporation tax as necessary.

The CIOT has published further information on its website, including guidance for members.

This Guidance provides details regarding carrying out checks on your overseas customers and what records you will need to keep if you are approved for the Fulfilment House Due Diligence Scheme (FHDDS). The 'keep records' section has been updated with information on what may happen if you do not keep records for a 6-year period.

For further information please contact Alex Hale.

HMRC has published its latest Update for agents which includes:

• Freeport and Investment Zone special tax sites – On 26 February 2025, the remaining Investment Zone special tax sites in England were designated. The East Midlands Investment Zone special tax sites were designated following a Statutory Instrument which was laid on 5 February
• Celebrating 20 years of HMRC with the Institute of Chartered accountants for England and Wales and Chartered Institute of Taxation – On 11 March, the Exchequer Secretary to the Treasury and Chair of HMRC’s Board, James Murray MP, set out his vision for the department as a modern and effective tax authority at a conference hosted by the ICAEW and the CIOT.

This Guidance explains how to move goods, in parcels or large letters, between Great Britain and Northern Ireland. Guidance for the implementation of the Windsor Framework has been updated.

Please also refer to:

• Sending parcels between Great Britain and Northern Ireland under the Windsor Framework
• Sending parcels from Great Britain to Northern Ireland between private individuals
• How to send parcels from a business in Great Britain to a private individual or a business in Northern Ireland
• How to move parcels from Great Britain to Northern Ireland for parcel carriers
• Data requirements for parcel carriers who move consumer parcels from Great Britain to Northern Ireland
• Internal Market Movements from Great Britain to Northern Ireland

This Guidance provides details regarding the VAT Import One Stop Shop (IOSS) Scheme and registering to report and pay VAT due on imports of low value goods to consumers in the EU, Northern Ireland or both. Information on what you need to do with your IOSS VAT identification number when importing low value goods has been added.

Please also refer to Register for the VAT Import One Stop Shop Scheme.

For further information regarding Northern Ireland please contact Michael McNeil.

This Guidance explains how to apply for compliance scheme approval, register, take on packaging producer responsibilities and comply. A link has been added to new guidance about how regulators will assess fit and proper person status as part of applications to be a compliance scheme (see here).

For further information please contact Danny Vu.

South Africa

The National Treasury has issued amendments to 2019 regulations for the purposes of defining ‘electronic services’ under section 1 of the VAT Act. These amendments to the electronic services regulation are crucial in determining whether foreign suppliers of electronic services must register for and levy VAT. The amendments become effective on 1 April 2025, and encompass the following changes:

• Revise the definition of "electronic services" to exclude supplies made by foreign non-residents who supply exclusively to VAT registered vendors
• Amend the intermediary rules to allow non-residents to utilise an intermediary as principal for electronic services purposes, irrespective of their VAT-registration status or liability
• Introduce a more restrictive exclusion for intragroup supplies where services consumed by the local group entity must also be devised, developed, created or produced specifically for consumption by the local resident entity

These amendments aim to reduce administrative burdens, align with OECD recommendations and simplify VAT processes for non-resident suppliers.

Canada

The New Brunswick Minister of Finance and Treasury Board René Legacy has presented the fiscal 2025-26 budget, which includes confirmation that the Government of New Brunswick is working with the federal government to rebate the 10% provincial portion of the Harmonized Sales Tax for eligible purpose-built rental housing, applicable to construction that begins between 15 November 2024 and 31 December 2027 and is substantially completed by 31 December 2029.

EU

Commission Implementing Regulation (EU) 2025/486, which lays out the rules for applying for the status of authorised Carbon Border Adjustment Mechanism (CBAM) declarant, has been published in the Official Journal of the European Union.

The regulation entered into force on 19 March 2025, and applies from 28 March 2025.

The regulation provides clarity for EU operators subject to the CBAM Regulation. Businesses can now start preparations to file applications for the authorised CBAM declarant authorisation. Given the theoretical processing time by the competent CBAM authorities, businesses should consider filing the applications in the first half of 2025 with a substantive application package that addresses all the application requirements to reduce the possibility of the application being withdrawn.

Not having the authorised CBAM declarant authorisation in place means, if the Commission's proposals are adopted, being unable to import CBAM goods at a volume beyond 50 tons of goods in a year by the customs declarant and exclusion from business for indirect representatives.

For further information, please register for the 9 April 2025 EY webcast: EU Omnibus: Charting the path forward for CBAM.

United Arab Emirates

The Ministry of Finance (MoF) has released Ministerial Decision No. 64 of 2025, confirming the accreditation process and criteria published in the MoF website, for Accredited Service Providers (ASPs) to become accredited by the MoF, a crucial component of the UAE's electronic-invoicing (eInvoicing) initiative. ASPs will act as mandatory access points to the Peppol network (i.e., an electronic-invoicing framework), responsible for validating and transmitting eInvoicing data between suppliers and buyers, as well as reporting to the Federal Tax Authority (FTA).

Though the primary impact of the ASP accreditation process falls on eInvoicing-solution vendors, businesses must prepare to engage an ASP to facilitate compliance with MoF requirements.

The European Commission has published a notice seeking information and views in relation to the US tariffs imposed on certain steel and aluminium products and derivatives, and possible EU commercial policy measures concerning specific products imported from the US in response.

The period of consultation closes on 26 March 2025.

For further information please contact Marc Bunch, Ross Freeman or Maggie Taucher.

The VAT Committee was set up under Article 398 of the VAT Directive to promote the uniform application of the provisions of the Directive.

Following its latest meeting, it has released the following Working Papers (WP):

• Agenda
• WP 1102 – E-Invoicing and Digital Reporting – On 11 March 2025, the Council reached an agreement on the VAT in the Digital Age (ViDA) package. This package entails a significant change of the VAT rules in the three areas covered by this package: i) Electronic invoicing and digital reporting requirements ii) Platform economy and iii) Single VAT Registration. Each part of the ViDA package has different dates of application. For the part on electronic invoicing and digital reporting requirements, this date is 1 July 2030. However, upon entry into force, the ViDA Directive provides for the immediate application of amendments to Articles 218 and 232 of the VAT Directive, related to electronic invoicing. These amendments will be in force and apply from the twentieth day following the publication in the Official Journal of the European Union of the ViDA Directive up until 1 July 2030, where they will be replaced. The Commission services believe that, with a view to ensuring the uniform application of those new rules, it is necessary to come to a common understanding on what are the possibilities given to Member States through them. Delegations are asked to express their opinion on the issues raised.
• WP 1103 – ViDA IOSS – Each part of the ViDA package has different dates of application. For the main elements of the Single VAT Registration, this date is 1 July 2028. Upon entry into force, the ViDA package provides for the immediate application of measures to improve the Import One-Stop Shop (IOSS). These amendments will be in force and apply from the twentieth day following the publication in the Official Journal of the European Union of the ViDA Directive. These key measures concern a mandate for the Commission to adopt an Implementing Act to introduce special measures aimed at strengthening the security of the IOSS; and improvements to IOSS controls by ensuring that the IOSS monthly reports will now include a breakdown of data per Member State of consumption. This paper focuses on the latter improvement, which forms part of broader efforts to improve VAT compliance and facilitate better audit controls for Member States. Delegations are asked to express any views they may have regarding the changes.

The European Commission has welcomed the European Court of Auditors' (ECA) Special report 08/2025: Value Added Tax fraud on imports, which highlights the need for improved protection of the EU's financial interests. The report emphasises the importance of addressing VAT fraud, particularly in the context of simplified import customs procedures.

The Commission acknowledges the significance of the issue and outlines the measures it has taken to combat VAT fraud including amendments to the legislative framework and the introduction of new tools and instruments such as the Import One Stop Shop (IOSS) scheme, and further highlights its proposal on VAT in the Digital Age (ViDA), which includes improvements to the IOSS system, such as empowering the Commission to introduce special measures to prevent tax evasion or avoidance.

Further details are available here.