VAT & Indirect Tax Intelligence
VAT news digest
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The Bailiwick Express reader letter argues that Guernsey’s proposed 3% GST will not deliver the projected £55m revenue, instead yielding a net income of only about £12.3m after costs. It highlights one‑off implementation costs of £40.9m, ongoing annual costs of £30.7m, and a £30m increase in the States Superannuation Fund liability, concluding that the claimed £50m funding gap is negligible.
Today's VAT news highlights key developments in Europe, Africa, and the Middle East, including updated regulations on VAT for food supplements and VAT group members in the EU. Additionally, changes to VAT refunds and e-invoicing systems are being implemented in various regions, such as the UAE and France. These developments have significant implications for businesses and individuals, with potential impacts on costs and compliance requirements.
Today's VAT news is dominated by significant developments in Europe, including a key court ruling on fixed establishments and updates on mandatory online registration for tax advisors. Additionally, various countries are introducing VAT reforms, such as temporary reduced rates for certain goods and services, and broader tax system overhauls. These changes are also being examined in the context of the latest research findings, including the Billentis 2026 Key Report.
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Italy’s mandatory B2B e‑invoicing via the SDI platform has exposed high first‑pass rejection rates driven by master‑data errors, highlighting the need for a tax engine to ensure real‑time compliance. The article quantifies savings of €37 per invoice and a drop in rejection rates to about 5% when a tax engine is used. It underscores that even mature markets like Italy still face significant data quality challenges that a tax engine can address.
The article explains how contract and toll manufacturing arrangements are treated under EU VAT law, highlighting the importance of economic reality in determining whether the supply is of goods or services. It outlines the reverse charge mechanism for toll manufacturing, the French four-part test, and the risk of creating a Fixed Establishment that triggers local VAT registration and reporting obligations.
The article explains how VAT on food supplements varies across EU member states, highlighting Germany’s split between solid (7%) and liquid (19%) rates and Sweden’s temporary 6% rate until 2027. It stresses the importance of correct Combined Nomenclature classification to apply the right rate and warns that misclassification can trigger back payments and fines.
An EU court has ruled that grouped companies, even when treated as a single entity for VAT payments, must be considered separately when determining eligibility for certain VAT exemptions. The decision clarifies that VAT group members cannot rely on a collective status to claim exemptions, affecting how VAT groups assess exemption eligibility across the EU.
Kenya’s Finance Bill 2026 proposes a VAT exemption for certain mobile phones, cutting the effective tax burden on imported devices from about 55% to 50%. The exemption would give imported phones a price advantage while local assemblers would lose the ability to recover VAT on inputs, raising their production costs and potentially making Kenyan‑assembled phones more expensive.
The Federal Tax Authority (FTA) has announced a new initiative that broadens the range of construction costs eligible for VAT refunds for UAE nationals building new homes. Effective 1 January 2026, citizens can claim refunds on a variety of items—including staff quarters, home gyms, smart security systems, and complete reconstruction projects—provided they meet all conditions and documentation requirements. The digital VAT refund platform has been updated to reflect these new categories.
France has launched a 2026 e‑invoicing pilot that runs from February to August, allowing businesses to test real invoice exchanges on the French Public Invoicing Portal. The pilot precedes the mandatory e‑invoicing regime that will take effect on 1 September 2026. Storecove will enable clients to join the pilot from mid‑June via its French API and the national Annuaire directory.
Slovakia is advancing its mandatory e‑invoicing rollout, with the new system set to take effect on 1 January 2027. A draft amendment to the VAT Act introduces transitional relief, exempting domestic buyers from digital reporting of received invoices until 1 July 2030. The government also opened voluntary participation to entrepreneurs and is developing a certified digital postman framework.
The article provides a detailed checklist for UK VAT‑registered businesses to comply with the Making Tax Digital (MTD) programme, outlining digital record‑keeping, API submission, exemption criteria, and the penalty regime. It also highlights upcoming MTD requirements for Income Tax and offers guidance on software selection and consolidation.
The article outlines e‑invoice archiving requirements across the EU, highlighting minimum retention periods, technical format standards, and country‑specific rules. It details upcoming deadlines for Germany’s B2B e‑invoicing mandate and Poland’s KSeF platform, and explains how to maintain compliance with PDF/A, XML, and hybrid formats such as Factur‑X.
Portugal's Social Democratic Party has proposed a legislative change that would retroactively apply a 6% VAT rate to urban rehabilitation works in designated Urban Rehabilitation Areas, regardless of whether an approved Urban Rehabilitation Operation exists. The measure would override the current tax authority interpretation that requires an approved operation, potentially allowing construction companies to challenge past assessments and recover overpaid VAT. If passed, the 6% rate would apply to projects carried out since 2008.
The UAE Federal Tax Authority has broadened the range of construction costs eligible for VAT refunds for citizens building new homes, effective 1 January 2026. The initiative covers items such as staff quarters, home gyms, smart home systems, swimming pools, and full reconstruction projects, and is expected to generate over AED 1 billion in approved refunds in 2026.
A London tribunal ruled that Barclays' British branch was skeletal and did not constitute a fixed establishment for VAT grouping purposes, resulting in the loss of Barclays' appeal. The decision clarifies the application of UK fixed establishment rules for foreign entities.
