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VAT in IcelandGap analysis

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The Scope (Title I)

• Intra-Community acquisition of goods within the territory of a Member State– Intra-Community acquisition is not a part of

the VAT system in Iceland – The term intra-Community acquisation needs

to be defined in the Icelandic VAT Act No. 50/1988

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Territorial Scope (Title II)

• Definition is needed to define:• The territory of the Community• Third territories• Third countries

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Taxable persons and taxable transactions (Titles III and IV)

• The substance of the terms taxable persons and taxable transactions is the same

• The term taxable persons in the VAT Act differs slightly from the definition in the VAT Directive 2006/112/EC

555

Place of taxable transactions (Title V)

• Differentiation– The place of supply of goods– The place of supply of services– The place of importation from 3rd

countries

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Chargeable event and chargeability of VAT (Title VI)

• The chargeable event and chargeability of VAT is to a large extent similar in the VAT Act

• More comprehensive definition is needed in the VAT Act

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Taxable amount (Title VII)

• The taxable amount in the VAT Directive is to a large extent similar with the VAT Act

• More comprehensive definition is needed to align the rules in the VAT Act with the VAT Directive

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Rates (Title VIII)

• The VAT Act meets both the conditions of minimum standard rate of 15% and reduced rate not less than 5% pursuant to the VAT Directive

• Certain items in the VAT Act goes beyond those mentioned in Annex III in the VAT Directive, c.f.:– Sales of hot water, electricity and oil for space heating

and swimming pool water– Admission tolls to land transportation projects– CD disks, records, magnetic tapes and other similar

means of music recordings, other than visual records.

8

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Exemptions (Title IX)

• The VAT Act has specific VAT exemptions that go beyond those included in the VAT Directive– Sports– Passenger transport– Authors– Composers– Burials– Travel agents

9

10

Exemptions (Title IX)

• Iceland has no exemptions laid down for certain items, c.f.– The supply of human organs, blood and milk– Services supplied by independent groups of

persons rendering services to their members– The importation of gold by central banks– Warehouses other than customs warehouses

and similar arrangements, VAT warehouses, c.f. Annex V of the VAT Directive

1111

Deductions (Title X)

• The rules of deduction in the VAT Directive is to a large extent similar to the VAT Act

• The following needs further definition according to the VAT Directive– Rules governing exercise of the right of

deduction, c.f.– Rules governing the adjustment of

deductions

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Obligation of taxable persons and certain non-taxable persons (Title XI)

• Those items are to a large extend similar, c.f.– The rules of invoicing and issue of invoices– The rules of Accounting and specific obligations

relating to the storage of all invoices– The rules regarding VAT returns

• To be better defined– Obligation to pay VAT– Identification

13

Special schemes (Title XII)

• Special scheme for small enterprises– The rules in the VAT Directive are similar as the rules in the VAT

Act but with different threshold amount• Other special schemes need to be defined in the VAT Act, c.f.:

– Common flat-rate scheme for farmers– Special scheme for travel agents– Special arrangements for second-hand goods, works of art,

collectors’ items and antiques– Special arrangements for taxable dealers– Special scheme for investment gold– Special scheme for non-established taxable persons supplying

electronic services to non-taxable persons

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VAT Refund (Directive 2008/9EC)

• Directive 2008/9EC of 12 February 2008 for taxable persons established in another Member State– No such scheme in the VAT Act– The scheme need to be defined in the VAT

Act to lay down detailed rules for the refund of VAT, c.f. (Article 170), to taxable persons not established in the Member State of refund

15

VAT Refund (13 VAT Directive 86/560/EEC)

• The tax refund procedure of reimbursment of VAT to foreign companies in Iceland is mostly in line with the 13 VAT Directive

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Administrative cooperation and combating fraud in the field of indirect taxation

• Information agreements are in force entailing the provision of information of VAT

• Implementation is needed– The Council Regulation (EC) 1798/2003 which will be

replaced by by Council Regulation (EC) 904/2010 mainly as from 1 January 2012 with the VAT Act

– The Commission Regulation (EC) 1925/2004 laying down implementing measures of Council Regulation (EC) 1798/2003

17

Summary

• The basic principles are in line with the VAT Directive

• Some items need to be discussed further

• Need for assistance –TAIEX and other possible

assistance

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Thank you for your attention