Weekly VAT News

We are delighted to invite you to join us on Tuesday, 19 May, 13.30-17.30 (with optional networking and drinks afterwards) for an exclusive event bringing together industry peers to explore the evolving landscape of global tax mandates and the importance of ensuring accurate data in your core SAP platform from the outset.

In this session, we will discuss the following key topics:

• The importance of tax being involved in the SAP S/4HANA project
• The significance of data in the indirect tax transformation journey
• SAP updates on the latest technologies including Business Technology Platform (BTP), Business Data Cloud (BDC) and Artificial Intelligence
• The Jaguar Land Rover SAP S/4HANA tax determination story

This event is aimed at:

• Indirect Tax leaders
• Tax Technology and Transformation leaders
• Projects leads for Tax Technology or SAP S/4HANA projects

Secure your spot now to gain expert insights, practical strategies and actionable steps to stay compliant.

For further information on how to register please contact Ruby Buckland.

Sustainability taxes are increasingly embedded in the mechanics of trade and supply chains, with direct consequences for cost structures and cross-border exposure. For many organisations, sustainability-related charges now shape sourcing choices, pricing decisions and aspects of legal entity design. Yet accountability for interpreting these impacts often emerges late, once costs crystallize or regulatory scrutiny intensifies. The growing complexity of sustainability regimes, combined with uneven implementation across jurisdictions, makes exposure difficult to monitor through traditional compliance processes alone.

Leading tax functions are responding to this challenge by getting involved earlier in sustainability-related decisions. They are strengthening visibility into transactions that determine accountability and how sustainability costs are allocated across the enterprise rather than waiting to engage once reporting obligations arise.

By strengthening the data that underpins sustainability tax obligations and connecting it to operating model and financial insight, tax functions are beginning to use that data not only to meet reporting requirements, but to inform sourcing, pricing and structural decisions. This shift in how data is used, from validation to foresight, is becoming increasingly important in a data-dependent environment. Additionally, the shift has material implications for how tax functions engage with sustainability policy.

Understanding the implications of this shift for tax is now central to navigating the evolving sustainability tax agenda.

Please read this new article on ey.com – Why sustainability taxes are becoming a core tax issue.

Welcome to Issue 1, 2026 of TradeWatch, the EY’s global trade magazine.

In this issue we explore how recent EU trade agreements are reshaping market access, while the expansion of sanctions and increasing automation are transforming how businesses manage risk and execution across global trade operations.

Wednesday 13 May

Judgment – C-603/24 Stellantis Portugal

Topics – Valuation and minimum profit margin

A Portuguese referral which asks whether Article 2 of the Sixth VAT Directive, as worded in the version in force at the time of the facts, should be interpreted as meaning that the concept of the supply of services effected for consideration contained in that provision includes an adjustment of the sale price of vehicles which is duly provided for and determined in a contract concluded between the parties, in order to achieve a minimum profit margin, and which is documented by means of a credit or debit note issued to the applicant/appellant by the European manufacturers of the General Motors Group?

Opinion – T-366/25 Szytelbiecka

Topics – Supply of goods – asset transfer to non-taxable individuals

A Polish referral which asks whether Article 19 of the VAT Directive must be interpreted as meaning that a transfer of a totality of assets within the meaning of that provision also occurs when there is a transfer without consideration by a taxable person of a half share each of a totality of assets to two individuals who are not taxable persons and who intend to contribute those shares immediately as a contribution in kind to a business partnership of which they are partners.

Wednesday 3 June

Judgment – T-198/25 – G Kft. (Régularisation de la TVA après un contrôle fiscal)

Topics – Correction and refunding of VAT improperly invoiced – closed period

A Hungarian referral which asks whether Articles 167, 168, 179, 180, 183, 250 and 252 of the VAT Directive, together with the principles of tax neutrality, effectiveness and proportionality, must be interpreted as permitting domestic legislation to the effect that, in relation to a period closed by means of an inspection, the correction and refunding of VAT improperly invoiced is only possible if there are new facts and circumstances that demonstrate that the taxable person did not previously have, nor could in good faith have had at its disposal, or of which the taxable person was not, nor could in good faith have been aware, even if there was no risk of any loss of tax revenue.

Wednesday 10 June

Judgment – T-444/25 – Cavert

Topics – VAT grouping eligibility – exempt medical care

A Dutch referral concerning a VAT group comprised of five entities, including two foundations and three private limited companies, providing various care services for individuals with intellectual disabilities. Only one foundation is officially recognised as a care institution, exempting its services from VAT. The referral asks whether Article 11 of the VAT Directive, read in conjunction with Article 132(1)(b) and (g), must be interpreted as meaning that the exemptions referred to therein apply only in so far as the supplies of the VAT group referred to in those provisions are made to third parties for consideration by a legally independent member of the VAT group which, considered individually, meets all the conditions for the application of those exemptions. If answered in the negative, is it sufficient for the applicability of Article 132(1)(b) and (g) and Article 133 in respect of all supplies referred to in those provisions made by the VAT group to third parties for consideration that only one legally independent member of the VAT group satisfies all the conditions for the application of those exemption provisions.

Thursday 11 June

Opinion – C-308/25 – Isolanti Group

Topics – Simplified resolution mechanism – exclusion of disputes involving VAT on imports but not the resolution for intra-Community VAT disputes

An Italian referral which asks whether Article 4(3) of the Treaty on European Union and Articles 250 and 273 of the VAT Directive preclude national legislation which provides for a simplified resolution mechanism, which excludes disputes involving VAT on imports but allows resolution for intra-Community VAT disputes. The referring court questions whether the simplified resolution mechanism violates EU obligations to ensure full VAT collection and equal treatment of taxpayers.

A report issued by the National Audit Office (NAO) on 27 February 2026 (Taxing large businesses) examined HMRC’s approach to large business tax compliance. It found that the approach offers taxpayers good value for money, that large businesses rate their experience of dealing with HMRC highly, relative to other customer groups, and the size of the large-business tax gap, relative to revenue, is low. However, the report noted that large businesses also feel HMRC often asks for large volumes of data without making it clear how it plans to use the information.

Subsequently, the Public Accounts Committee (PAC) opened an inquiry (Large business tax compliance) in the course of which it has taken evidence from senior HMRC officials as it scrutinises the processes surrounding large business tax compliance. The evidence session is scheduled for 18 May 2026.

The PAC also invited wider views on the subject, which drew responses from a mix of ‘trade bodies’ and NGOs. Some of the points made in the responses are interesting, though it remains to be seen whether any will be taken up in the sessions with HMRC.

Chartered Institute of Taxation (CIOT) response

The CIOT notes that the customer compliance manager (CCM) model generally works well although there are some concerns about CCMs being unable to resolve issues. It adds that CCMs are most effective when they understand the sector and stay in place long enough to understand the company. It would support extension of the cooperative compliance model and CCMs, noting that businesses which are large but not large enough to have a CCM currently have additional burdens without additional support.

It raises concerns about HMRC requesting considerable, and often seemingly excessive, amounts of information, at times “overstepping their statutory powers and with little thought to the cost to business”. It suggests that HMRC needs to be clear on the purpose of each data request and what they intend to do with the information and communicate this clearly to businesses.

Finally, it suggests that if a business has a cooperative relationship with HMRC and has achieved a low-risk rating this should be taken into account when considering compliance interventions.

Association of British Insurers (ABI) response

The ABI notes that the majority of insurers are classed as large businesses by HMRC and have a CCM. It recommends that HMRC extends the CCM model to all groups containing regulated insurers to reflect the particular complexity of the industry. However, it notes a recent trend for CCMs to become more reliant on technical specialists and recommends facilitating taxpayer access to these specialists to make enquiry processes more efficient as well as providing clear timescales for resolution of disputes which the HMRC specialist teams are required to adhere to.

The ABI also notes that HMRC does not always appear to consider wider government policy when applying tax law. It also highlights occasions where HMRC’s interpretation of legislative requirements conflicts with industry’s and seeks a clearer resolution process.

It notes well-run, highly regulated insurers often spend significant time and resources maintaining as low a risk rating under HMRC categorisations as possible. However, it points out that the benefits of being low risk are diminished when a one-size-fits all approach is applied, such as when one-to-many letters are sent to all taxpayers in scope without reflecting the risk profile known to the CCM.

Finally, it argues that the process of agreeing VAT partial exemption special methods, which need to be updated as businesses change, is cumbersome. This often takes many years (six years being not uncommon) with HMRC’s approach often including a revisiting of issues previously thought to be settled.

UK Finance response

UK Finance notes that its members report a clear shift in HMRC’s operating approach, resulting in greater friction, reduced certainty and increased administrative burden. It suggests that its members are reporting a noticeable reduction in HMRC’s willingness to exercise pragmatic judgement, with interactions becoming increasingly process-driven. This is turn means that CCMs often lack discretion to resolve issues, with decisions escalated to internal specialists who have no knowledge of the taxpayer’s business or compliance record. There is also reduced willingness to apply materiality thresholds or close issues proportionately. Enquiries can be open for years with continuous, extensive and, at times, disproportionate information requests.

It also notes that clearance processes have become slower and significantly less predictable. It suggests it may be appropriate to update HMRC’s Departmental Strategic Objectives, as set out in its Annual Report to explicitly reference growth, competitiveness and efficient administration. It also calls for the low-risk profile of regulated financial institutions, especially Code of Practice banks, to be recognised and compliance approaches tailored accordingly.

Finally, it calls for “systemic failures” in HMRC digital systems, especially the VAT Business Tax Account, to be addressed with urgency.

Fair Tax Foundation response

The Foundation calls for the PAC to champion the need for the UK to take an international lead on public country-by-country reporting by the world’s largest multinationals. It suggests that the focus would be those multinationals that are already required to capture country-by-country data and share it with tax authorities privately (i.e., those with an annual consolidated turnover of at least €750m).

It calls for the UK Government to align but improve upon the baseline EU pCbCR disclosure requirements so that the UK could consider:

• Augmenting the EU’s list of ‘tax havens’ with the UK’s list of Overseas Territories and Crown Dependencies
• Requiring public country-by-country reporting (pCbCR) filings to be published both at Companies House and on the parent company’s website
• Not offering a “safeguard clause”, whereby businesses defer disclosure for up to five years on the basis of ‘commercial sensitivity’
• Implementing substantial fines for non-compliance, of up to c.£500,000

Tax Justice response

The Tax Justice submission also calls for corporate reporting of profits to be made more transparent with the introduction of pCbCR and support for the principles of the United Nations Tax Convention. In a similar vein to the Fair Tax Foundation, it argues that the PAC should look at the role of the British Overseas Territories and Crown Dependencies in fuelling the offshore tax gap for large companies.

Finally, it calls on the PAC to look at the wider tax architecture as part of its investigation or a future inquiry, in particular the excessive length of the tax code and assessment of reliefs.

Tax Watch response

The Tax Watch submission is heavily focused on the role that MAP plays in international tax issues. It calls for HMRC to set out revenue guardrails in the Litigation and Settlement Strategy for HMRC’s approach to Mutual Agreement Procedures (MAP), as it does for domestic tax settlements. It also asks for HMRC to disclose how many Mutual Agreement Procedures in the last five years have been decided by arbitration, what was the amount of tax at stake, and in how many was HMRC’s position selected by the arbitrators.

It makes the point that HMRC has previously insisted that the Diverted Profits Tax (DPT) is out of scope of these treaty-mandated processes. However, it argues that legislative changes in Finance Act 2026 are intended to ensure that in future taxpayers can insist on such processes in DPT cases too.

The submission also includes a ‘case study’ focusing on what it describes as a “a £1.5 billion large business tax dispute”, which is covered in more detail in a separate Tax Watch report.

This Helpsheet is aimed at charities and other qualifying bodies that raise money through fundraising events. It has been updated with a connection between VAT exemption and direct taxes and to reflect the Upper Tribunal decision in Yorkshire Agricultural Society.

Brazil

Regulations regarding the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS) have been published. These detail the operational rules of Brazil's new consumption tax system and represent a key milestone in the implementation of Brazil's indirect tax reform, as they provide detailed operational rules and practical guidance for the application of IBS and CBS, marking the transition from a legislative to an operational phase of the new tax system.

Although IBS and CBS are legally distinct taxes, they are designed as ‘mirror taxes’, sharing a common conceptual and regulatory framework. This design choice reinforces the importance of a coordinated and holistic approach by taxpayers when assessing its impact and preparing for compliance (please also refer to EY Global Tax Alert, Brazil enacts indirect tax reform establishing new consumption taxes).

The publication of the IBS and CBS regulations formally initiates the operational phase of Brazil's indirect tax reform and triggers a compressed adjustment period for taxpayers. Once the transitional period expires, failure to comply with the new requirements may result in fines and penalties, increasing tax exposure and operational risk.

Taxpayers should promptly:

• Perform a detailed review of the IBS and CBS regulations
• Assess impacts on pricing, supply chains and contractual arrangements
• Adapt systems, processes and fiscal documentation
• Implement governance and controls to mitigate compliance and enforcement risks

Early and coordinated action will be critical to ensure readiness and minimise disruption under Brazil's new consumption tax regime.

Saudi Arabia

Draft regulations of the Special Economic Zones (SEZs) were opened for public consultation between 24 April to 8 May 2026

The draft regulations aim to establish a formal customs-supervised framework for storage, manufacturing, processing and re-export activities within King Abdullah Economic City (KAEC), Jazan SEZ and Ras Al Khair (RAK) SEZ.

The framework of the draft regulations introduces two distinct bonded zone models – Central Bonded Zones (CBZs) and Dedicated Bonded Zones (DBZs). The CBZs and DBZs offers investors a choice between shared, lower-complexity facilities and exclusive investor-controlled zones with greater operational flexibility.

Customs duty suspension is available subject to strict inventory control, record-keeping, and ongoing post-clearance audit exposure.

The bonded zones within Saudi Arabia's SEZs offer a powerful platform for supply chain optimisation, regional distribution and manufacturing strategies. However, the choice between a central and a dedicated model has material customs compliance and regulatory governance implications. Investors should align the chosen structure with their operational scale, risk appetite and compliance maturity.

Norway

The Government has proposed mandatory e-invoicing, effective from 1 January 2027. One of the objectives of the proposal is to align Norwegian requirements with EU developments, in particular with the VAT in the Digital Age (ViDA) initiative. The proposed rules will apply to all businesses with bookkeeping obligations in Norway, irrespective of where the business is established.

The Norwegian authorities have decided to accelerate the implementation timeline. A statutory requirement to use e-invoicing and digital bookkeeping in the business sector was proposed in 2025 and circulated for public consultation. Following this process, the Ministry of Finance announced that it is aiming to introduce a mandatory requirement to issue and exchange e-invoices (in a structured electronic format) for business-to-business (B2B) transactions from 1 January 2027. Furthermore, the Ministry has requested that draft regulations are submitted well in advance of the planned entry into force.

Businesses should prepare by assessing whether their invoicing and accounting systems can meet the forthcoming regulatory requirements. The Government has instructed the Norwegian Tax Administration to develop detailed rules on invoice formats, technical standards for electronic accounting systems and potential regulation of accounting software providers. For multinational groups, this may require adapting centralised invoicing and Enterprise Resource Planning systems, as well as monitoring further regulatory developments in this area.

Qatar

The Council of Ministers has approved a draft law on electronic invoicing together with its implementing regulations, prepared by the Ministry of Finance in coordination with the General Tax Authority. The draft law establishes the legal framework to issue electronic invoices and credit notes, in addition to supporting Qatar's digital transformation agenda.

In anticipation of the approval of the draft law and implementing regulations, businesses operating in Qatar should begin assessing the potential impact of electronic invoicing on their operations. This includes reviewing enterprise resource planning and invoicing systems, identifying transactions in scope, evaluating data quality and considering changes required to their finance, tax and operational processes.

The European Council has reported that it has provisionally agreed new rules to strengthen the fight against VAT fraud in the EU by improving cooperation between member states, the European public prosecutor’s office (EPPO) and the European anti-fraud office (OLAF).

The new framework aims to give EPPO and OLAF more direct access to key VAT data on cross-border business transactions in the EU, including information held by Eurofisc – the EU’s anti-VAT fraud network.

The new rules take the form of a regulation amending Council regulation 904/2010 on administrative cooperation and combating VAT fraud. The measure follows the agreement in March last year to make VAT reporting obligations for companies who sell goods and services to businesses in another EU member state fully digital by 2030, which should further support the fight against VAT fraud.

Once the European Parliament has adopted its opinion on the file – currently expected in July 2026 – the Council will proceed to formally adopt the new rules. The regulation will enter into force twenty days after its publication in the Official Journal of the EU.

Please also refer to:

• Council regulation on EPPO and OLAF access to VAT information at EU level (compromise text)
• Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax
• Combatting tax avoidance in the EU

The European Commission has reported that a recent online workshop attracted strong participation from 75 EU businesses subject to excise duty rules. Participants had the opportunity to discuss challenges related to the implementation of rules and procedures when operating with excise goods, and share their practical feedback on the functioning of the EU excise rules.

The exchanges revealed that while the EU excise framework functions effectively in principle, businesses face significant hurdles due to divergent approaches across Member States, fragmented compliance obligations generating high costs, limited coordination between customs, excise, and VAT procedures, as well as barriers for distance sales of alcoholic beverages within the EU.

Participants emphasised the need for uniform rules at EU level, clearer guidance and training to align enforcement practices across Member States and streamlined procedures (for instance for authorisation, reporting, and guarantee processes). They also called for a centralised contact point for support for economic operators.

The feedback aims to inform the ongoing study on simplifying excise procedures in intra-EU operations. Further analysis will explore potential legislative and administrative improvements to reduce red tape and boost competitiveness, particularly for SMEs.

For further information regarding excise duty please contact Craig Clark.