VAT treatment of virtual currencies and transactions – GERMANY

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On 27th February 2018, the Germany‘s Federal Ministry of Finance (MOF) issued guidance clarifying the VAT treatment of bitcoins and other “virtual currencies.”

 

It determined that although transactions to exchange a traditional currency for a virtual currency and vice versa were deemed to be a “taxable supply” these transaction are considered to be VAT exempt.

 

The guidance confirms that Germany will not impose a VAT charge in circumstances where the virtual currency is a substitute for a traditional currency and is used merely as a form of payment.

 

This guidance is in line with the ruling of the Court of Justice of the European Union (CJEU)— Hedqvist (C-264/14, 22nd October 2015).

Revenue Investigations for Airbnb Hosts

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  1. Are you letting a property through Airbnb?
  2. Have you recently received a Letter from Revenue advising you that your tax affairs are “under investigation”?
  3. Do you believe that you may be at risk of a Revenue Investigation?

 

The Irish Revenue is cracking down on anyone who has a listing on the accommodation website Airbnb.

It appears that Revenue is focusing on the tax years 2014, 2015 and 2016 but please be aware, Revenue have the legislative powers to extend the scope of their investigation to include previous years.

 

So, what does that potentially mean for a Tax Payer?

Once the Tax Payer receives a Notice of Investigation the option to make a voluntary disclosure no longer exists.

Previously unreported income from the letting of property via an accommodation website such as Airbnb will be liable to interest and penalties with potential publication of the Tax Payer’s name on the defaulters list.

 

What should the Tax Payer do?

If you haven’t received a Notice of Investigation, then you should file the relevant Income Tax Returns NOW.  If you have already filed tax returns for 2014, 2015 and 2016, you should make the necessary amendments to those forms as soon as possible.

If you file your Tax Returns immediately you are reducing the risk of being selected for a Revenue Investigation.

 

What should the Tax Payer include in his/her Return?

Your Rental Profit is liable to Income Tax, PRSI and Universal Social Charge.

The profit is arrived at by reducing your “Rents Receivable” figure by expenses which are wholly and exclusively incurred for the purpose of your business which include:

• Repairs and Maintenance including decorating, laundry and cleaning.

• Airbnb fees/commission

• Insurance

• Legal fees

• Accountancy / Taxation Fees

• Advertising Costs

• Utilities

 

 

Non-allowable expenses include:

• Food

• Commuting/Travel

 

 

Recent Revenue eBrief

Revenue eBrief No. 59/18 was published on 17th April 2018 in relation to the Tax treatment of income arising from the provision of short-term accommodation:

 

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-01-20.pdf

 

This comprehensive and detailed guidance material differentiated between frequent hosting and occasional hosting:

 

Frequent Hosting – Schedule D Case I

If the property is expected to be available for rent on a frequent and/or regular basis as opposed to a once-off or occasional basis then any profits arising from the provision of the accommodation will be liable to Income Tax under Case I Schedule D.

 

Allowable Case I Expenses:

  • Capital allowances – The annual wear & tear allowance of 12½% for plant and machinery used for the purposes of a trade e.g. furniture and fixtures.
  • Pre-trading expenses – expenses incurred up to three years prior to the date of commencement of a trade are completely tax deductible where the expenditure would be deductible had it been incurred after the trade commenced. Examples include the cost of painting or wall papering a room or purchasing towels and bed linen in advance of the guest accommodation being put into use for the first time.
  • Expenses wholly and exclusively expended carrying on a trade

 

Occasional Hosting – Schedule D Case IV

If the property is let only on an occasional or infrequent basis then the profits generated will be taxed under Schedule D Case IV.

Allowable Case IV Expenses:

  • No Capital Allowances
  • No Pre-trading expenses
  • Annual costs with a property will not be permitted such as the Television licence, Insurance, etc.

 

 

Additional Tax Issues to Watch Out for

VAT @ 9% could arise if your turnover figure is greater than €37,500.  Please be aware that the VAT registration is based on Turnover (i.e. what you received in rental income) and not Profit (i.e. the difference between your rental income and the allowable expenditure).

 

In the event of a subsequent sale of this property, since it won’t have qualified as your home for the entire period of ownership, you may not be entitled to the full CGT exemption afforded by Principal Private Residence Relief.

 

 

What to do Next

If any of this post has affected you and you’re worried about a potential tax liability or Revenue Investigation, please don’t hesitate to contact us to see what we can do for You.

 

 

 

Zero-rated GST implemented in Malaysia

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According to Malaysia’s Ministry of Finance, the supply of goods and services made in Malaysia will now be subject to the zero rated Goods and Services Tax (GST) effective from 1st June 2018.  The “Goods and Service Tax (Rate of Tax) (Amendment) Order 2018” amends the rate of tax on the supply of goods or services as well as on the importation of goods from 6% to 0%.

 

Please be aware that the zero rating will not apply to the supply of goods and services listed under the Goods and Services Tax (Exempt Supply) Order 2014.  These goods and services will remain exempt from GST.

 

All persons registered for GST (Goods & Services Tax) must comply with the new legislation in relation to zero rating but will continue to be governed by the current regulations with regard to invoicing, filing and claiming input tax credits.

 

GST registered persons must continue to ensure that the pricing of goods and services provided adheres to the Price control and Anti-Profiteering Act 2011.