Real-time VAT calculations, reporting and split payments direct to Belastingdienst
The Dutch tax authorities are to review the introduction of live VAT determination and split payments to tackle VAT fraud particularly in the B2C sector. The tax authorities are expected to do more consultations with various retailers, e-commerce players and payment companies.
The UK split payments proposal is still in pilot after several years and reboots. The main challenge in the technology and messaging systems of the payment providers which are not set for the level of data required for accurate VAT determination. Plus, how to bring non-resident sellers / providers into the regulations to avoid fraudsters switching to unregulated channels.
Split payments involves the vendor making immediate payments of the VAT element of any supply immediately to the tax authorities. This would replace the current monthly/quarterly VAT returns and payment routine. This could be facilitated by payment service providers (e.g. credit cards; online payment services and e-wallets) which could identify the VAT charge, and redirect the VAT element directly to the VAT authorities
Split payments emerge as key tool to combat fraud
Split payments are already used on a small scale such as Polish split payments which requires businesses in fraud-prone sectors (e.g. construction) to hold VAT amounts in limited-use bank accounts. Italy VAT split payments requires vendors to name public controlled companies to pay any VAT directly to It is used extensively in South America, especially for e-commerce payments to foreign providers.
