Indirect Tax News, March 2014

CONTENTS ▶ ISRAEL Israeli VAT: is it necessarily an additional cost for foreign entities? 1

▶ EDITOR’S LETTER 2

▶ BELGIUM Relaxation of Belgian self-billing rules 3

▶ EAST AFRICA VAT relief for the tourism industry in East Africa 4

▶ FRANCE France’s new reverse charge mechanism on construction works 5

▶ IRELAND Member-owned golf clubs – possible claims for VAT overpaid on green fees 6

▶ LATVIA Further improvement of Latvia’s VAT legislation 6

▶ ROMANIA CJEU judgment C-424/12 – SC Fatorie SRL vs. General Directorate of Public Finance Bihor 7

▶ SINGAPORE Major Exporter Scheme 8

▶ SLOVAKIA Slovakia’s recent legislative changes 9

▶ SPAIN Spanish VAT exemption on deliveries of goods to another EU Member Country 9

EAST AFRICAVAT relief for the tourism industry

READ MORE 4

FRANCENew reverse charge mechanism on construction works

READ MORE 5

BELGIUMRelaxation of self-billing rules

READ MORE 3

MARCH 2014 ISSUE 1 WWW.BDOINTERNATIONAL.COM

INDIRECT TAX NEWS

ISRAELISRAELI VAT: IS IT NECESSARILY AN ADDITIONAL COST FOR FOREIGN ENTITIES?

Israeli VAT law does not have a mechanism similar to the 13th Council Directive 86/560/EEC of the European

Union under which EU Member States refund local VAT paid by non-EU entrepreneurs on the purchase of goods or services in the territory of a member state. This means Israeli VAT can sometimes be an additional cost for non-Israeli entrepreneurs.

Nevertheless, there are some ways foreign entities can mitigate Israeli VAT costs.

VAT in Israel

Israel’s VAT law has been in effect since 1 July 1976. The VAT rate in Israel is currently 18% and there is no reduced VAT rate, though there is a zero rate and exemptions in certain situations. Israel imposes VAT liability, in general, on the following transactions:

• The sale of “assets”, both tangible and intangible.

• The provision of services.

• The importation of goods.

Israel’s application of VAT on consumption in Israel is extended also to “imported” intangibles or services provided to Israeli entrepreneurs by foreign suppliers. It may be collected in one of two ways: from the Israeli purchaser (provided that the purchaser is not an individual) or by requiring the foreign vendor to register in Israel and file VAT returns. In principle, a foreign entity that has a substantial presence in Israel should register for VAT and file VAT returns. Nevertheless, the border line between a liability of the foreign resident to register in Israel and alternatively the liability of the Israeli recipient of the service to issue a self-tax invoice for the services (similar to the “reverse charge mechanism” in the EU) may be blurred. It should be noted, additionally, that in certain situations there is some room for argument that the service is out of the scope of Israeli VAT law and so neither the foreign services provider nor the recipient would be liable to report to the Israeli VAT authorities.

2 INDIRECT TAX NEWS 1

Israeli VAT is also imposed on certain kinds of benefits, supports, and subsidies received by taxable persons.

How to mitigate Israeli VAT costs

Although no Israeli VAT refunds are available for foreign entities that purchase goods or services in Israel or from Israeli suppliers, there may be ways for a foreign entity to minimise its Israeli VAT costs.

1. Register for VAT

One possible course of action, provided that it can be justified under the Israeli VAT law (meaning that local taxable transactions are conducted or are expected to be conducted), is for the foreign entity to register in Israel for VAT purposes. Foreign entities that register and fulfil all the requirements can deduct input VAT or have it refunded. It should be noted that registration for VAT does not automatically create a permanent establishment for Israeli income tax proposes.

This course of action is often recommended if a foreign entity’s Israeli customers are indifferent to the VAT charged by the foreign entity registered for Israeli VAT.

2. Inputs prior to VAT registration

In principle, deduction of input VAT in Israel is allowed only following registration for VAT in Israel. Nevertheless, in certain situations, foreign entities can ask the Israeli VAT authorities for special approval to claim VAT refunds for invoices they received from Israeli suppliers with full rate VAT before they have registered for VAT in Israel.

It should be noted that this approach may result in a VAT refund being paid with respect to VAT invoices issued to an entity other than the one that has been registered as a VAT entrepreneur and regardless of whether the invoices were issued more than six months before registration. (Normally input VAT must be claimed within six months of the date the invoice is issued.)

3. Zero rated VAT

Foreign entities purchasing goods or services in Israel, or from Israeli suppliers, should also consider whether a zero rate of VAT may apply on the purchase. In Israel, to qualify for a zero rate of VAT a number of conditions set out in the VAT law and regulations must be met and the Israeli VAT authorities interpret them very strictly. For example, one of the conditions for a zero rate of VAT to apply on services received by a foreign entity from an Israeli supplier is that the services must not have been provided to the foreign entity in addition to an Israeli entity in Israel.

It should be noted that the authorities’ interpretation in this respect may include third party Israeli entities that don’t pay for the service and that are not at all a party to the agreement with the services provider. For example, an Israeli supplier that is engaged with a foreign company in supplying intermediary services and introduction of potential Israeli clients to the foreign company will usually be subject to full rate VAT on those services.

Another example of a situation where a zero rate of VAT may not apply is the provision of service related to an asset (tangible or intangible) that is located in Israel.

Issues related to zero rated VAT are often the subject of litigation and dispute by Israeli tax authorities. Nevertheless, foreign entities should consider whether a zero rate might apply, as it is a viable solution in some cases.

4. Alternative structure of planning for the transaction

On a case-by-case basis there may be other ways of structuring and invoicing particular transactions in a way that can help foreign entities achieve VAT optimisation.

We recommend that before agreements for purchases of goods or services are concluded, taxpayers seek Israeli tax advice regarding the VAT implications.

AYELET YITZHAKI Israel – Tel Aviv [email protected]

Dear Readers,

Welcome to the First Edition of Indirect Tax News for 2014.

Hopefully this year will see a continuation in the improvement in economic conditions across the globe and that the recent developments in the Ukraine won’t have too much of an adverse effect on business activity.

As always, this edition of Indirect Tax News is focussed on providing our BDO clients and colleagues with a useful snapshot of evolving indirect tax related developments in the different countries in which our contributors are based.

If you feel any of the issues addressed are of specific interest to you and you require additional detail, please feel free to reach out either directly to the writer of the article or please contact your local BDO indirect tax advisor.

As always, if you have any thoughts on making this publication more user friendly or would like an article about any specific matter, please feel free to email me at [email protected]

Kind regards from Dublin.

IVOR FEERICKChair – BDO International VAT Centre of Excellence Committee Ireland – Dublin [email protected]

EDITOR’S LETTER

3INDIRECT TAX NEWS 1

The system of self-billing has been part of the Belgian VAT legislation for years but until recently, strict rules have

restrained Belgian businesses from issuing self-bills. On 1 January 2013, however, the VAT legislation was amended to relax the conditions for self-billing and the Belgian VAT authorities have now issued a VAT circular to explain the practical impact of the new rules.

The old rules

Previously, in order to use the self-billing system, a VAT payer had to conclude mutual agreements with its suppliers and inform the VAT authorities of each of these agreements. Each document that referred to a self-billing agreement was also subject to an individual acceptance procedure which had to include a signature for acceptance and a number that referred to the supplier’s sales ledger.

More flexible acceptance procedure

Over the years some minor simplifications were introduced, but as of 1 January 2013, contracting parties can now freely determine the nature of the acceptance procedure. This means, for example, that contracting parties can apply self-billing under a merely tacit agreement.

Naturally, parties must still reach a preliminary agreement for self-billing. However, they are free to choose the format and content of that agreement. There is no longer an obligation for a written agreement, though we would still recommend one.

Cross-border transactions

The EU VAT directive contains rules to determine which EU member state is entitled to set the invoicing rules in cross-border situations. The member state where the operation is located is generally authorised to determine the applicable rules. For example, if a Belgian customer issues a self-bill for an intra-Community supply of goods from Hungary, the Hungarian invoicing/self-billing rules will apply.

Supplier remains responsible

Despite the relaxation of the self-billing rules, the supplier of goods and services remains responsible for timely invoicing, even when its customer issues self-bills. This means that the VAT risk (VAT claim, administrative fines, and so on) remains with the supplier.

With the new, more flexible rules, self-billing has become more feasible for Belgian businesses. We suggest that VAT payers that already issue self-bills verify whether the procedures they apply for self-billing are still in line with the new regulations and whether further simplification (for example, automation) is possible.

CINDY DE BOCK ERWIN BOUMANSBelgium – Brussels [email protected] [email protected]

BELGIUMRELAXATION OF BELGIAN SELF-BILLING RULES


EAST AFRICAVAT RELIEF FOR THE TOURISM INDUSTRY IN EAST AFRICA

The diversity and abundance of wildlife found in the East African (EA) region has made the region a magnet for tourists.

Not surprisingly, EA governments are eager to harness this potential engine of economic development and all the EA member states have identified tourism as a critical economic sector that deserves priority treatment.

Even taking into account the differences in governing styles and philosophies of each of the member states, the variation found in the tourism industry – and the tax treatment of these industries by each EA country – is quite significant. All EA countries have a Value Added Tax (VAT) regime. However, what exactly is taxable, and the amount of tax payable, differs significantly from one country to another.

This article highlights the recent changes in the VAT regimes of Uganda, Kenya, Tanzania, and Rwanda as they apply to the tourism industry. It also highlights the need for harmonisation of the VAT laws affecting critical sectors of the economies of the member countries ahead of the full integration of the East African Community (EAC). Such harmonisation will help all member states realise the full synergistic benefits of the EAC.

One of the key themes of Uganda’s 2013/14 Budget speech was the need for the government to prioritise the continued development of the tourism sector. In her speech, Uganda’s Finance Minister Maria Kiwanuka identified the key constraints to tourism in Uganda. She then pledged to continue to support tourism platforms as vehicles for promoting domestic cultural and other product development. However, in the same breath, the government reinstated the VAT on the supply of accommodation in tourist lodges and hotels outside the Kampala district. The Finance Minister explained that this measure would raise a significant amount of revenue and also improve tax administration.

After presentation of the budget, the influential tourism industry lobbied the government, seeking to reverse the tax. The industry argued that imposition of VAT would make Uganda less competitive within the EA tourism industry because most tourists are not VAT registered in Uganda, which means the tourists would bear the full impact of the tax. Tourism operators also noted that they had already sent out itineraries to their clients and it was too late to revise the prices quoted.

The exemption, when it was introduced in 2002, initially applied to the supply of accommodation in hotel and tourist lodges everywhere in Uganda. In 2003 the exemption was restricted to the supply of accommodation in tourist lodges and hotels outside Kampala and Entebbe. And in 2008 the exemption was amended so that it only applied to the supply of accommodation in tourist lodges and hotels outside the Kampala district.

The intensive lobbying by the Ministry of Tourism, Uganda’s Tourism Board, and the Parliamentary Committee on Tourism succeeded and the government agreed to continue exempting from VAT supplies of accommodation in tourist lodges and hotels outside of the Kampala district. By reversing course on the proposed tax, Uganda has followed the lead of the other EAC member states that try to use favourable VAT laws to compete for tourist dollars.

In its 2013/14 budget speech, Tanzania’s government pledged to continue to promote delivery of tourism services and improve the tourism environment. But, in the same budget the government proposed abolition of the VAT exemption on tourist services, such as guiding tourists, game driving, water safaris, animal and bird watching, park fees, tourist charter services, and ground transport. As in Uganda, tourism stakeholders argued that the VAT imposition would make Tanzania a more expensive, and therefore a less competitive, tourist destination. After consultation with the Tourism Confederation of Tanzania (TCT), the Tanzanian government decided not to levy VAT on tourist services.

Kenya, in its VAT Act of 2013, eliminated several tax exemptions that the tourism industry previously enjoyed. Specifically, the supply of tour operation and travel agency services including travel, hotel, holiday and other supplies made to travellers (excluding in-house supplies and services provided for commission, other than commission earned on air ticketing) are no longer exempt from VAT. In addition, the supply of services by hotels to foreign travel and tourism promoters, tours within Kenya that follow a predetermined written itinerary and that are recommended by the Director of Tourism and are conducted in conjunction with local tour associations, are no longer zero rated supplies. Furthermore, the supply of materials and equipment for use in the construction of tourist hotels financed using external funding is also no longer zero rated in Kenya.

Rwanda’s LAW NO N° 37/2012 of 09/11/2012, on the other hand, still exempts from VAT: the supply of tourist vehicles; special tourist airplanes; equipment for the tourism and hotel industry; and “relaxation places” approved (and listed) by the Minister of Finance.

Clearly, there is a lack of harmony in the VAT regimes currently being pursued by the individual EA member states. There are wide differences regarding which goods and services are impacted by VAT. While Kenya, for example, has effectively shifted from legislative incentives, Uganda and Tanzania’s efforts to follow suit have been thwarted by powerful tourism industry stakeholders. Rwanda, however, has continued its tourism industry VAT incentives. And, while Uganda’s VAT exemption targets tourist accommodation, Tanzania’s exemption is more extensive, covering tourist services in general. Meanwhile, Rwanda exempts from VAT the supply of tourist vehicles but Uganda taxes their supply (taxpayers who are engaged in a continuous and regular business of hiring of tour and travel passenger vehicles can claim input VAT incurred for the supply). Unlike its neighbours, Kenya’s legislative policies seem to indicate a shift from the use of the VAT regime to compete for tourists within the region.

Ultimately, these competing VAT regimes will have to be harmonised if the goal of a full economic union in the EAC is to become a reality. The sooner that is achieved, the better the experience will be for tourists who intend to visit the region. Unfortunately, the current strategy of using tax policy to poach tourists from each other does little to expand tourism within the EA.

RITA ZABALI ROBERT BUSUULWAUganda – Kampala [email protected] [email protected]


FRANCEFRANCE’S NEW REVERSE CHARGE MECHANISM ON CONSTRUCTION WORKS

France has implemented a new reverse charge mechanism applicable to subcontracts for construction works

(article 283, 2 nonies of the French Tax Code). This particular reverse charge mechanism applies to subcontracting agreements concluded as of 1 January 2014 related to construction, repair, cleaning, transformation, and demolition of immovable properties. This new mechanism applies only to French subcontractors.

Under this new rule, the French subcontractor issues an invoice to the principal entrepreneur (the party who enters into agreement with the final client) without VAT but it must mention the “reverse charge (auto liquidation)”. Application of this new mechanism does not impact the French subcontractor’s right to deduct input VAT.

It is important to note that this new mechanism is not applicable to foreign subcontractors. Indeed, where a foreign subcontractor performs construction work in France for a principal registered for French VAT purposes, the reverse charge mechanism applicable under article 283.1 sub-paragraph 2 of the French Tax Code (article 194 of the VAT council Directive 2006/112/CE) continues to apply.

The principal entrepreneur has to report in its French VAT return the VAT corresponding to the services performed by the French subcontractor. If the principal entrepreneur fails to do so, the principal entrepreneur incurs a penalty of 5% (article 1788 A of the French Tax Code).

CARINE DUCHEMIN MARIE-CHARLOTTE BAILLYFrance – Paris [email protected] [email protected]


IRELANDMEMBER-OWNED GOLF CLUBS – POSSIBLE CLAIMS FOR VAT OVERPAID ON GREEN FEES

Following the recent ruling by the Court of Justice of the European Union (CJEU) in the case Bridport & West Dorset Golf

Club Ltd v HMRC (Bridport), the Irish Tax Authorities have issued an eBrief (No 09/14) outlining the effects of the court ruling on member-owned golf clubs in Ireland, including such clubs’ revised VAT obligations.

Under Irish VAT legislation there is an exemption from VAT for the provision of facilities for sports activities, including membership fees, annual subscriptions, and capital levies paid by members of privately owned golf clubs.

However, prior to the Bridport ruling, Irish legislation obliged such organisations to charge and account for VAT in respect of income from non-members, such as green fees, at the rate of 9%. (Prior to 1 July 2011, the VAT rate applicable to green fees was 13.5%.)

For VAT purposes, a member is defined as an individual who, having paid their annual subscription fee, is entitled to play golf on the course without having to make a further payment for at least 200 days per year.

Bridport & West Dorset Golf Club, which is a privately owned golf club, appealed the imposition of VAT on green fees by HMRC in the UK, arguing that a privately owned golf club should not be liable to account for VAT on such income.

The case was heard by the CJEU in October 2013 and last December the court determined that, in accordance with the European VAT legislation (Article 133(d) and Article 134(B) of the EU VAT Directive 2006/112), the grant of the right to use a privately owned golf club to a visiting member cannot be excluded from the VAT exemption.

The Irish Tax Authorities have now outlined in their eBrief that, effective 1 January 2014, the green fees charged by member-owned golf clubs to non-members should be treated as VAT exempt, as should the green fee element of competition fees. It should also be noted that, as a result, member-owned golf clubs whose non-member green fees are VAT exempt as of 1 January 2014 will no longer be entitled to VAT recovery on the costs associated with such fees.

In the circumstances, it is reasonable to expect that most, if not all, Irish member-owned clubs now have reasonable grounds for filing claims for the recovery of VAT they accounted for on any such income received over the past four years subject, of course, to making any adjustments on VAT credits previously reclaimed that are no longer allowed because of the newly exempt income stream.

Irish Revenue is currently examining the implications of this ruling in relation to 2013 and earlier years to determine whether making such refunds with respect to historic VAT filings would unjustly enrich the clubs. We expect that Irish Revenue will issue further guidance in the coming months.

LISA COLEIreland – Dublin [email protected]

LATVIAFURTHER IMPROVEMENT OF LATVIA’S VAT LEGISLATION

Latvia introduced some minor amendments to its VAT Law, effective 1 January 2014.

Input VAT deduction right in case of contribution in kind

As a result of the amendments, taxpayers are not required to refund to the government the input VAT they deducted with respect to assets (other than immovable property) invested in the share capital of another legal entity, so long as the invested assets are to be used for provision of taxable transactions. As a result, in the case of investments in kind, no input VAT corrections must be made.

A taxable person who made an investment in kind in 2013 of an asset (other than immovable property) in the share capital of another entity and who has partially refunded the input VAT deducted can adjust their VAT return and increase their deductible input VAT for the amount of the refunded input VAT.

Expansion of the rights to deduct input VAT for lost /damaged goods

Previously under Latvian VAT, a taxpayer had to adjust input VAT deductions for any lost or damaged goods, unless the goods were stolen or destroyed as a result of a natural disaster, or due to other forced actions, and only if the taxpayer could provide documentation to prove the loss or damage.

As of 1 January 2014 taxpayers do not have to adjust their input VAT deductions for lost or damaged goods if the value of such goods does not exceed the projected quota of losses for the enterprise. If the quota has been exceeded, corresponding adjustments of input VAT deductions must be made for the amount of the excess. The projected quota of losses is calculated by an enterprise based on the data related to its history of lost goods over the three previous taxation years.

INITA SKRODERE GITA AVOTINALatvia – Riga [email protected] [email protected]


ROMANIACJEU JUDGMENT C-424/12 – SC FATORIE SRL VS. GENERAL DIRECTORATE OF PUBLIC FINANCE BIHOR

On 6 February 2014 the Court of Justice of the European Union (CJEU) issued its decision in a case

concerning Fatorie SRL (Fatorie), deciding that the taxpayer is responsible for accounting for VAT under a domestic reverse charge procedure, even if it had paid VAT on the basis of an incorrectly created invoice and the supplier had become insolvent.

Fatorie, a Romanian company, exercised its right to recover the tax on acquisition of goods and services (input VAT) based on an incorrect invoice it received from its Romanian supplier, Megasal Constuctii SRL (Megasal). The invoice was incorrect because it included VAT, rather than applying the local reverse charge mechanism.

Fatorie actually paid the invoiced tax to Megasal and then claimed that amount as input VAT. This treatment was allowed by the Romanian tax authority in its initial tax audit but, in a subsequent audit the tax authority rejected Fatorie’s VAT deduction right and concluded that Fatorie must pay the VAT amount plus late payment penalties, even though Fatorie had simply relied on the invoice Megasal provided. Meanwhile, Megasal became insolvent and it failed to pay to the government the output VAT it collected from Factorie. Fatorie challenged the Romanian tax authority’s assessment in court.

In the case, the CJEU was asked to rule on whether, under the provision of EU Council Directive 2006/112 EC, a taxable person’s claim to a VAT deduction could be rejected, even though the taxpayer paid the VAT based on an invoice that it had been issued by the taxpayer’s supplier and even though the taxpayer did not realise the supplier should have applied the local reverse charge mechanism.

The CJEU was also asked to decide on whether application of the legal certainty provision prohibits the Romanian tax authority from changing its initial assessment that acknowledged Factorie’s ability to claim the amount as input VAT.

The ECJ ruled that in a transaction subject to the reverse charge regime, Council Directive 2006/112/EC and the principle of fiscal neutrality do not preclude Fatorie from being deprived of the right to deduct the VAT that it paid on the basis of an incorrectly drawn up invoice, even where the invoice cannot be corrected because the supplier is insolvent.

Additionally, the court ruled that the principle of legal certainty does not preclude an administrative practice whereby, within a limitation period, the tax authority reverses a decision it had taken that had granted the taxpayer the right to deduct VAT and then, following a new investigation, it orders the taxpayer to pay that tax with late payment interest.

DAN BARASCU HORIA MATEIRomania – Bucharest [email protected] [email protected]


All imports of goods into Singapore are subject to GST at the standard rate (currently 7%) payable to Singapore

Customs at the point of importation. Import GST is recoverable from the Inland Revenue Authority of Singapore (IRAS) through periodic GST submissions, subject to input tax recovery conditions. Businesses that do a lot of importing and exporting may face cash flow problems because there is no output GST collected on their export sales against which they can offset the import GST paid to Singapore Customs.

To alleviate cash flow problems of businesses that are considered major exporters, IRAS has introduced the Major Exporter Scheme (MES). This favourable scheme allows for suspension of the 7% GST on non-dutiable goods imported into Singapore. Businesses that qualify for this special scheme can clear non-dutiable goods without having to pay GST to Singapore Customs, which reduces their cash flow costs. In July 2006 the suspension of import GST was extended to goods removed from the Zero GST warehouse (a designated area approved by Singapore Customs for storing imported non-dutiable goods on which the GST has been suspended) by MES businesses. The 7% GST is only charged if the goods are subsequently supplied in Singapore – they remain zero rated (GST 0%) when they are exported out of Singapore.

To qualify for the MES, the taxpayer’s zero rated supplies must be more than 50% of their total supplies. This is determined based on the sum of their standard rated supplies (GST 7%) plus zero rated supplies (GST 0%) and exempt supplies. Alternatively, a taxpayer qualifies where the value of its zero rated supplies is more than S$10 million for a 12-month period. In determining the zero rated supplies that meet the criteria to qualify for the MES, the zero rated supplies must be of goods for export and “international services” as provided under Section 21(3) of the GST Act.

Applicants for the scheme that have good internal controls and proper accounting records and a good compliance history with IRAS and Singapore Customs stand a higher chance of being awarded the MES status. In certain situations, IRAS may require a letter of guarantee before MES status is approved or renewed.

Newly set up companies with no historical financial data can be granted provisional MES status, though additional information and a letter of guarantee are usually required in such cases.

IRAS may revoke a taxpayer’s MES status for misuse. A taxpayer can only use its MES status to import its own goods for business purposes or to import goods of non-GST registered overseas persons that the taxpayer acts as a GST agent for pursuant to the GST Act.

MES renewal

MES status is not granted indefinitely; it must be renewed every three years. The IRAS formally invites businesses that continue to satisfy the qualifying conditions to apply for renewal of their MES status. The renewal process has undergone a number of changes in recent years.

Previously, approved MES businesses were required to submit an auditor’s assurance report that their numbers were true and fair. In January 2009 a new procedure was introduced whereby an approved MES business had to complete a self-review checklist and submit a formal declaration form.

With effect from 1 January 2013, the self-review checklist and formal declaration form were replaced with the GST Assisted Self-Help Kit (ASK) declaration form. ASK is a comprehensive self-assessment review package designed to help GST registered businesses effectively manage their compliance.

Now all new applications and renewals must undergo the ASK review process using the ASK package. The ASK declaration form must be reviewed and certified by a tax professional (either in-house or external) who has been accredited by the Singapore Institute of Accredited Tax Professionals as either an Accredited Tax Advisor (ATA (GST)) or as an Accredited Tax Practitioner (ATP (GST)). The certified ASK declaration form is then subject to IRAS review and approval. If approved, MES status is valid for another three years.

How BDO can help

The three year period will soon be up for a group of businesses that have had MES status and recently they have been invited by IRAS to apply for renewal of their status. These businesses will need to submit their certified ASK declaration form based on the new requirements by the due date the IRAS specified in their letter.

BDO Singapore assists and supports companies who are applying for, or renewing, their MES status by performing the ASK review of past GST submissions and providing ASK certification.

BDO recommends GST registered businesses conduct their ASK review early, well in advance of the deadline provided by IRAS, to avoid the losing their MES status.

EU CHIN SIEN YVONNE CHUASingapore [email protected] [email protected]

SINGAPOREMAJOR EXPORTER SCHEME


SPAINSPANISH VAT EXEMPTION ON DELIVERIES OF GOODS TO ANOTHER EU MEMBER COUNTRY

On 17 October 2013, the Central Economic-Administrative Court (CEAC) ruled on the issue

of proving a taxpayer’s status in claims for exemption from VAT on deliveries of goods from Spain to another EU Member Country. The CAEC has held that Spain’s requirements for information to support the exemption have been too strict.

Under Article 25 of the Spanish VAT Act the delivery of goods can be treated as exempt from VAT when they are dispatched or transported to another Member Country if the party acquiring the goods is registered for VAT purposes in a Member Country other than Spain. Proof of the acquiring party’s VAT registration is currently done by presentation of the tax identification number issued to the acquiring party in the Member Country to which the goods are to be delivered. Before a transaction, taxpayers delivering goods to countries within the EU are required to check, via the VIES database, the validity of the tax identification or VAT number of the party acquiring the goods.

As a result of the above rules, Spanish courts were refusing claims for exemption on deliveries within the EU if the seller was unable to provide the tax identification or VAT number of the purchaser, or when the purchaser’s number was invalid at the time of conducting the transaction.

However, based on the decision of the European Union Court of Justice in its judgment in VSTR dated 27 September 2012, (ref. C-587/10), the CEAC concluded that the principle of tax neutrality, which prevails in VAT cases, is violated when the right to exemption on deliveries within the EU is dependent on compliance with mere formalities.

Consequently, a VAT exemption may only be denied where the taxpayer has failed to meet the material requirements to support the VAT exemption. Thus, mere provision of the tax identification or VAT number of the party acquiring the goods serves to prove the tax status of the party acquiring is sufficient. However, if the seller is in a position to prove status by other means, it would be unlawful to refuse exemption, even if the tax identification or VAT number of the party taking delivery of the goods is not valid on the date of delivery.

DAVID SARDÁ ALEX SOLERSpain – Barcelona [email protected] [email protected]

Introduction of VAT ledger statement

Recent amendments to the Slovak VAT Act introduced a new reporting requirement: the VAT Ledger

Statement, effective 1 January 2014. The new requirement is one of the measures aimed at battling carousel fraud schemes from 2012 to 2016.

The VAT Ledger Statement is a required filing that must be submitted by a VAT payer with respect to every taxable period, along with a VAT return, both of which must be submitted within 25 days of the end of a taxable period. Ledger Statements must be electronically submitted.

The VAT Ledger Statement must provide tax authorities with details about business transactions involving VAT payers. The information for the VAT Ledger Statement is derived mainly from invoices the VAT taxpayer has received and issued. All transactions involving a place of supply in Slovakia must be included in the taxpayer’s VAT Ledger Statement. One of the main purposes of the VAT Ledger Statement is to make it easier for the tax authorities to crosscheck transactions between suppliers and their customers to verify claims to input VAT.

VAT payers are not required to file the VAT Ledger Statement if the tax liability and/or input tax deduction they report in their VAT return is zero, nor does this new filing obligation arise if the only types of transactions reported by the VAT payer in its Slovak VAT return relate to the following:

• Intra-community supplies of goods from Slovakia to purchasers in another EU-member state,

• The supply of goods in intra-community triangular transactions, and

• The export of goods to a non-EU country.

Mandatory electronic filing of documents

From 1 January 2014 selected taxpayer must electronically file all tax and customs documents. The requirement applies to all tax payers that are VAT registered or that are represented by a tax advisor. Those required to make electronic filings must sign their submissions using an advanced electronic signature or they must file a written agreement regarding electronic communication with the Slovak tax authorities.

Other changes

Several other changes were made to the VAT law, including:

• The statutory deadline for a VAT taxpayer to file its EC Sales List has been changed from being due by the 20th day of the month following the relevant VAT period to the 25th day of the following month.

• When a new member joins a VAT group, the change in VAT group registration can now be made any time in the calendar year. Previously, such changes were only effective from 1 January of the following calendar year.

• The obligation to pay a VAT guarantee has been extended as follows:

– To VAT payers who are automatically registered under the law, and

– Where a taxpayer’s VAT registration status changes from being registered as a foreign VAT payer to being registered as a domestic VAT payer or from being registered for distance selling over a threshold to being registered as a domestic VAT payer.

VLADIMIR BIL MIROSLAV TAINSlovakia – Bratislava [email protected] [email protected]

SLOVAKIASLOVAKIA’S RECENT LEGISLATIVE CHANGES


This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained herein without obtaining specific professional advice. Please contact the appropriate BDO Member Firm to discuss these matters in the context of your particular circumstances. Neither the BDO network, nor the BDO Member Firms or their partners, employees or agents accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

Service provision within the international BDO network of independent member firms (‘the BDO network’) is coordinated by Brussels Worldwide Services BVBA, a limited-liability company incorporated in Belgium with its statutory seat in Brussels. Each of BDO International Limited (the governing entity of the BDO network), Brussels Worldwide Services BVBA and the member firms is a separate legal entity and has no liability for another such entity’s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network.

BDO is the brand name for the BDO network and for each of the BDO Member Firms.

© Brussels Worldwide Services BVBA, March 2014. 1403-07

CONTACT PERSONS

The BDO VAT Centre of Excellence consists of the following persons:Ivor Feerick (Chair) Ireland Dublin [email protected] Haslinger Austria Vienna [email protected] Boumans Belgium Brussels [email protected] Pogodda-Grünwald Germany Berlin [email protected] Padian Ireland Dublin [email protected] Loquet Luxembourg Luxembourg [email protected] Geurtse Netherlands Rotterdam [email protected] Giger Switzerland Zurich [email protected] Kivlehan United Kingdom Reading [email protected]

Indirect Tax News, March 2014

Economy & Finance

Transcript of Indirect Tax News, March 2014