Administering the Value-Added Tax on Imported Digital Services and Low-Value Imported Goods by John Brondolo and Mark Konza published by IMF indicated by Alvaro Manoel (3/2021).
“Cross-border sales of goods and services have become a growing challenge to tax administration. Two particular challenges involve administering the value-added tax (VAT) on: (1) imported digital services and (2) low-value imported goods. In both cases, the rapid increase in cross-border transactions, brought about by digitalization and the rise of digital platform companies, combined with weaknesses in collecting VAT on those transactions have raised concerns that growing amounts of tax revenue may be foregone and domestic businesses may be at a competitive disadvantage vis-à-vis non-resident businesses. Concerns have also been raised that the current practices create risks of offshoring by domestic businesses to avail themselves of the more favorable VAT treatment.
In response to those challenges, an increasing number of countries are adopting new approaches to administering the VAT on imported digital services and low-value imported goods. This note describes the vendor collection model under which non-resident suppliers are required to register for VAT in those foreign jurisdictions where they make supplies to final consumers, 3 charge and collect VAT on those supplies, and remit the revenue to the foreign jurisdiction. This approach has been implemented by more than 60 countries for imported digital services and, more recently, by a growing number of countries for low-value imported goods. The note also describes the application of the reverse charge mechanism to collecting VAT on digital (and nondigital) services imported by businesses…”
