Cross-border commerce – How to deal with indirect taxes? · 5/23/2017 Cross-border commerce –...
Transcript of Cross-border commerce – How to deal with indirect taxes? · 5/23/2017 Cross-border commerce –...
5/23/2017
Cross-border commerce –How to deal with indirect taxes?
www.pwc.ch
23 May 2017
Michaela Merz
PwC
Electronic commerce (e-commerce)
• Transaction of buying and selling online;
• Using World Wide Web, mobile phones, tablets, computers with access to the Internet.
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Functionality of indirect tax
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Supplier
• Indirect tax is based on trade flows and transactions and not on profits or income;
• Indirect tax taxes the consumption of goods / services;
• Multiple rules exist to define place of taxation for indirect tax purposes.
Supplier sale
payment
delivery
sale
payment
delivery
Cross-border supplies of e-services
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E-services
Download of music Download of games E-learning
Webhosting
Download of software
Download of Apps
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PwC
Current place of taxation rules for cross-border e-commerceServices supplied and delivered online to the EU
EU VAT
Swiss supplier
Place of taxation from a Swiss perspective
Place of taxation from an EU perspective:
Consumers in the EU
EU VAT
E-services
Consequences:
• Liability for VAT in multiple additional countries
• Lower product margin
• Adaptation of systems and billing
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Current place of taxation rules for cross-border e-commerceMini One Stop Shop for e-services supplied to EU recipients
EU or Non-EU supplier
local EU VAT authorities
19% German VAT17% Lux VAT20% UK VAT
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PwC
MOSS - number of registrations within the EU
0
500
1000
1500
2000
2500
3000
3500
DE GB NL AT FR PL ES CZ IT SE BE DK CY FI SK BG HU RO EE MT LU SI LV PT LT HR EL
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Current place of taxation rules for cross-border e-commerceServices supplied and delivered online to Swiss consumers
EU VAT
EU supplier
Place of taxation from an EU perspective
Place of taxation from a Swiss perspective:
Consumers in SwitzerlandE-services
Consequences:
• Supplier liable for Swiss VAT if sales > CHF 100’000
• Competitive advantage compared to local suppliers (if below CHF 100’000)
CH VAT if sales beyond CHF 100’000
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Cross-border supplies of goods andservices
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Current place of taxation rules for cross-border commerceServices supplied to the EU / rest of the world
Financial adviceLegal advice
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PwC
Current place of taxation rules for cross-border commerceServices sold online to Swiss consumers
EU VAT
EU supplier
Place of taxation from an EU perspective
Place of taxation from a Swiss perspective:
Consumers in SwitzerlandServices
Consequences:
• Supplier is not liable for VAT
• Higher product margin CH VAT from CHF 10’000 if any
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Current place of taxation rules for cross-border e-commerceServices sold online to the EU / rest of the world
EU VATCH VAT
Swiss supplier
Place of taxation from a Swiss perspective
Place of taxation from an EU perspective:
Consumers in the EUServices
Consequences:
• Double non-taxation
• Higher product margin
• Competitive advantage compared to local suppliers
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PwC
Current place of taxation rules for cross-border e-commerceGoods sold online to the EU / rest of the world
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Current place of taxation rules for cross-border e-commerceGoods sold online to the EU / rest of the world
EU VATCH VAT
Swiss supplier
Place of taxation from a Swiss perspective
Place of taxation from an EU perspective:
Consumers in the EU
Consequences:
Who imports the goods?
• Consumer: no VAT registration for the supplier;
• Supplier: VAT registration in the EU.
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Recent VAT developments
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Taxation of e-commerce at destination
Countries which tax the electronically supplied services in country of the service recipient and/or are about to introduce the taxation in recipient’s location
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Revision of Swiss VAT Act Liability of foreign supplier for VAT if worldwide turnover > CHF 100’000
Foreignsupplier • Foreign suppliers of goods / services
to Swiss consumers will be liable for Swiss VAT as from 2018 – if their worldwide turnover exceeds CHF 100’000;
• Equality with local suppliers;
• 30’000 additional taxpayers expected in Switzerland.
Goods / services
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OECD international VAT guidelines Taxation of all B2C services at destination - recommendation
Supplier+19% MWST
• Negative impact on the margin between 1% -27%;
• Higher compliance costs;
• Higher resource demand;
• Adaptation of booking and billing systems;
• Different VAT regimes;
• Personal liability of the directors;
• Transparency;
• Data availability.
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Potential solutions
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Taxation of e-commerce at destinationInternational One-Stop-Shop
Mini One Stop Shop in the EU
Light Maximum
OECD
One StopShop
Central VAT registration at one VAT Authority(in the country of the establishment of the supplier)
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PwC
Thank you for your attention!
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Cross-border commerce - how to deal with indirect taxes?
Swisscom Ltd.
GBS-TAX
Giesen Romana
23.05.2017
C1 - Public
> OECD / EU – where the recipient is resident/established
> In general right approach as final use/consumption shall be taxed
> EU implemented MOSS to enable tax payer to file one return and to lower administrative burdens
> Outside EU no alignment in terms of filing
> OECD recommends to align filing and install technology that reduces administrative burden and costs for all parties
> But outside EU no efforts evident
24Electronic supplies– B2C – quo vadis
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> What is an electronic supply?
– No exact definition available
– Every country has it’s own definition-> double taxation possible
> Where is the final place of consumption?
– Invoice address vs. country code of the debit card vs. IP screened at order etc.
> Invoicing
– Adjustment of IT systems to the requirements of every country?
> Registration
– Language issues, tax audits abroad
– MOSS – could be a solution, but no registration for MOSS possible if the company has a VAT registration in an EU Country even if it is for another business part
– Administrative cost of the registration and administration
– Intern: IT, extra headcount etc. plus extern: IT, tax advisor, fiscal representative
25Issues and questions with regards electronic supplies
> Mila Ltd
– Start up, very limited headcount, financed with so called risk capital with clear goals
– Platform at which so called "Friends" can offer manual/technical support, e.g. assemble a closet, configure a router etc.
– Contract is settled on the platform but between the “Friend” and the customer, but in a lot of cases the “Friend” is not seen as a (tax)business but a private customer too, therefore the medium via the platform is a B2C supply
– Limited clients, every country needs to be tested to its needs and how it works out
> VAT results on E-commerce and B2C
– VAT is due in every country in which the platform is operating (even with only one client and turnover of CHF 1)
> Consequences for the Start up
– High administrative burden with regards tracking of clients, correct invoicing etc.
– High cost on registration, tax advice, IT etc.
26Expectations vs. reality
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Either the Start up acts compliant with regards taxes and becomes unprofitable und illiquid
Or
The Start up doesn’t act compliant with regards to taxes and might have a chance to grow or it will be caught in the act and again high administrative cost plus penalties will result and finally a
shut down due to unprofitability / illiquidity like in the first option
The issue itself is not the VAT which is due at the place of the final consumption but the administrative burden and the cost for being compliant.
The “tax set up” by now is hostile to innovation, as small start ups / F&E’s that try to be present on a global market are disadvantaged. The current set up helps the big global players.
27And now?
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BLACKSOCKS SA - Seefeldstrasse 301a - CH-8008 Zürich - www.blacksocks.com
AMCHAM
May 23, 2017
BLACKSOCKS.COM: Cross Boarder Commerce since 1999.
BLACKSOCKS SA - Seefeldstrasse 301a - CH-8008 Zürich - www.blacksocks.com
BLACKSOCKS SA - Seefeldstrasse 301a - CH-8008 Zürich - www.blacksocks.com
Our product idea: The Sockscription™
Shipping rhythm:• 4 shipments of 3 pairs• 6 shipments of 3 pairs• 1 shipments of 10 pairs
5/23/2017
BLACKSOCKS SA - Seefeldstrasse 301a - CH-8008 Zürich - www.blacksocks.com
The More Button: Re-Order with one click
BLACKSOCKS SA - Seefeldstrasse 301a - CH-8008 Zürich - www.blacksocks.com
- Customer from 127 countries.
- 20% growth in Export
- 35% of Sales Export
- Costs for export administration is
increasing every year.
5/23/2017
Federal Tax Administration FTA
Partial Revision of the VAT ActEffect on foreign businesses
Raffaello Pietropaolo
Head of Swiss VAT Administration
Zürich, 23 May 2017
Swiss-American Chamber of Commerce
34Federal Tax Administration FTA
Partial Revision of the VAT ActTax liability: threshold based on worldwide turnover
Exemption from tax liability if worldwide turnover from taxable supplies is less than CHF 100'000
(Art. 10 para. 2 lit. a and c revVAT-Act)
Exemption from tax liability if worldwide turnover from taxable supplies is less than CHF 100'000
(Art. 10 para. 2 lit. a and c revVAT-Act)
≥ CHF 100'000 ≥ CHF 100'000
≥ CHF 100'000 ≥ CHF 100'000
Subsidiary Acquisition tax on supplies of immovable property
(Art. 45 para. 1 lit. c revVAT-Act)
Subsidiary Acquisition tax on supplies of immovable property
(Art. 45 para. 1 lit. c revVAT-Act)
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35Federal Tax Administration FTA
Partial Revision of the VAT Act Low-value consignments – tax liability of businesses abroad (I)
LVCR: VAT ≤ CHF 5LVCR: VAT ≤ CHF 5
Turnover from LVCR < CHF 100’000Place of supply: abroadno liability to VAT in CH
Turnover from LVCR < CHF 100’000Place of supply: abroadno liability to VAT in CH
Turnover from LVCR ≥ CHF 100’000
Place of supply: CH*
Liability to VAT: CH
Importer: business abroad
Turnover from LVCR ≥ CHF 100’000
Place of supply: CH*
Liability to VAT: CH
Importer: business abroad
* Art. 7 para. 3 lit. b revVAT-Act
36Federal Tax Administration FTA
Partial Revision of the VAT Act Low-value consignments – tax liability of businesses abroad (II)
If the place of supply has shifted to Switzerland:
• all cross-border supplies concerned
• customs declaration by the sender
• import VAT deducted as input tax
If the place of supply has shifted to Switzerland:
• all cross-border supplies concerned
• customs declaration by the sender
• import VAT deducted as input tax
If annual turnover from LVCR is < CHF 100’000 tax liability ends with deregistration by the business.
If annual turnover from LVCR is < CHF 100’000 tax liability ends with deregistration by the business.
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37Federal Tax Administration FTA
Required data for the VAT registration
Turnover worldwide
Turnover in Switzerland
including exempt turnover
VAT reporting method / mode
38Federal Tax Administration FTA
Online registration in 5 easy steps
Legal Form Company Information Activity Declaration
Modalities Submit
Available in German, French and Italian
www.estv.admin.ch
- Legal form- Branch
- Address- Tax representative
- Business activites- Start in Switzerland- Turnover worldwide- Turnover Switzerland
- Reporting method- Reporting mode
- Optional comments- Contact details- Submit
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39Federal Tax Administration FTA
Additional steps for foreign companies
Tax Representative
Place of business in Switzerland
Security Deposit
Amount defined by the Federal Tax Administration (FTA)
Certificate of registration including VAT-Number
40Federal Tax Administration FTA
VAT rates as from 1 January 2018