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E-Commerce VAT and GST Changes

by Jon Davies
May 10, 2017

Taiwan and Australia have been added to growing ranks of countries that require Value Added Tax (VAT) and Goods and Services Tax (GST) on e-commerce/internet transactions

As companies around the world continue to expand their global reach through the online sales of goods and services, authorities are focusing more attention on the taxation of these transactions. The rapid global growth of internet commerce or e-commerce over the last several years has led many countries to implement rules that deal with the various aspects of these transactions. Some of the countries that have already implemented rules include all Member States of the European Union, as well as the countries noted in the table below, with many others to follow.

Due to the onslaught of new requirements, it is getting increasingly more difficult for e-commerce businesses to avoid international VAT and GST obligations. It is critical for companies participating in international e-commerce, on either side of the transaction, to evaluate and address the implications that current and potential rules and laws will have on the business.

The definition of ecommerce or electronic service varies by country, but is broadly defined (using Russia as an example) as the supply or delivery of:

  • transferring software and database rights, including access to online games on the Internet, including through remote access
  • installing (downloading) games on PCs and mobile phones, banner-ad blocking programs, accounting and antivirus software, web filters
  • enabling the placement of goods (works, services, property rights) offers on the Internet
  • furnishing information via the Internet, including making available e-books and other e-publications, graphic images, pieces of music, both with and without text and audio-visual works through the Internet, including by providing remote access for viewing or listening to them through the Internet
  • making search engines and other portals available
  • providing web-hosting services
  • providing cloud services and cloud-based e-platforms
  • providing website visitor statistics
  • broadcasting TV and radio channels using the Internet and other services. 
  • providing advertising services on the Internet, including by using computer software and databases functioning on the Internet as well as providing advertising space on the Internet
  • providing online calculating capacity for placing information in information systems
  • providing search services and/or providing information regarding potential buyers to service recipients.

These countries typically take a destination-based approach to VAT/GST requirements, effectively defining internet-based activity as being supplied at the “destination” or location of the consumer receiving such services. This triggers the VAT/GST filing requirement.

While most business-to-business transactions are exempted from this reporting, some countries require registration for business transactions, as well.

When the relevant sales threshold has been met, most countries require VAT/GST registration and regular tax filings. Some countries require in-country representatives, while others allow for remote registration and remittances.

The table below provides a high-level summary of various countries and their VAT/GST positions:

Country Effective Date VAT/GST Tax Rate Threshold of Sales (annual) Comments
European Union Various Various Mini one stop shop (MOSS) regime facilitates filing in EU.
Iceland 01-Nov-2011 24% ISK 1,000,000
Norway 01-Jul-2011 25% NOK 50,000
South Africa 01-Jul-2014 14% ZAR 50,000
Albania 01-Jan-2015 20% N/A No specific threshold has been set.
Switzerland 01-Jan-2015 8% CHF 100,000 Sales threshold based on worldwide revenue.
South Korea 01-Jul-2015 10% N/A No specific threshold has been set.
Japan 01-Oct-2015 8% JPY 10,000,000
New Zealand 10-Jan-2016 15% NSD 60,000
Russia 01-Jan-2016 18% N/A No specific threshold has been set.
Taiwan 01-May-2017 5% NTD 480,000
Australia 01-Jul-2017 10% AUD 75,000 Will be effective July 1, 2017
Canada* N/A 5-15% N/A See note below.
Israel* N/A 17% N/A See note below.
* Country does not currently have specific e-commerce rules regarding VAT/GST and is currently considering implementation of rules.

If you would like more information on how your company may be impacted by the e-commerce VAT/GST rules, what you can do to address current filing requirements and how you can prepare for upcoming changes, please reach out to one of Armanino’s international tax experts.

May 10, 2017

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Jon Davies - Partner, Tax - San Jose CA | Armanino
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