International VAT Conference 2020

Webinar series

September 9th 2020

Audits and Disputes

Agenda

1 INTRODUCTION

2 JURISDICTIONS OVERVIEW

3 BINDING POSITION / RULINGS:

KRAKVET MAREK BATKO TJUE HOLDING

Speakers

Maria Antonia

AzpeitiaPartner

mariaantonia.azpeitia

@bakermckenzie.com

Linnea BackPartner

linnea.back

@bakermckenzie.com

Alexander BychkovPartner

alexander.bychkov

@bakermckenzie.com

Mariacristina

ScarpaAssociate

mariacristina.scarpa

@bakermckenzie.com

Ariane SchaafCounsel

ariane.schaaf

@bakermckenzie.com

Piotr TataraAssociate

piotr.tatara

@bakermckenzie.com

David JamiesonPartner

david.jamieson

@bakermckenzie.com

Thierry VialaneixSenior Counsel

thierry.vialaneix

@bakermckenzie.com

Introduction

1

Jurisdictions Overview

2

VAT Audits and disputes: France

General

frameworkTrends

Managing VAT

audit consequences

Standard rules applies

No specific VAT audit process

No «VAT» court for appeals

No VAT audit team per se

Statute of limitation 3 to 10 years

Possibility to have tax audits only

focused on VAT (e.g. after VAT

credit claims)

No specific joint VAT responsibility

except for e-platforms and frauds

5 % penalty on non

self-assessed VAT

Invoices are key elements of the

VAT audit

Importance of formalism in general

(transport documents etc..)

Appetite for penalties applicable to

invoicing requirements (€15 x missing

information on each invoice)

Increasing trend for applying

penalty for voluntary breach of the

law (twice in 6 years criminal

prosecution)

Heavy influence of the CIT approach

for interpreting rules notably on

PE/FE issues

Binding rulings process available but

long (need to anticipate)

Discount on interest and penalties in

case of voluntary disclosure

No possibility to settle on the VAT

due (only on penalties) Exception :

discretionary power to withdraw VAT

reassessment if retroactive recognition

of VAT FE and VAT was self-assessed

by client

VAT Regularization process with

suppliers or B2B customers

available (charging VAT retroactively)

Referral to ECJ is a long process that

remains exceptional

VAT Audits and disputes: UK

General

frameworkTrends

Managing VAT

audit consequences

VAT (specialist) officers and specialist

tax tribunal

Statute of limitation 2-4 years (20 years

if taxpayer is not registered in the UK)

30-100% penalty for undeclared

VAT (if taxpayer did not exercise

reasonable care).

Increased use of "protective"

assessments

Focus on penalties

Uncertain tax positions – proposed

new legislation

Pushing tax enforcement to business

Joint liability for e-commerce

marketplaces

Corporate criminal offence

Binding rulings process available, but it

is not a user-friendly process

Litigation and Settlement Strategy and

Governance processes

Discount on penalties in cases where

there is unprompted disclosure

Brexit – impact on legal process

Audits and disputes: Italy

General

frameworkTrends

Managing VAT

audit consequences

Standard rules applies

No specific VAT audit procedure

No dedicated VAT audit team/auditors

No dedicated VAT courts

Statute of limitation 4 to 10 years

Possibility to have tax audits only

focused on VAT (e.g. in case of

cross-audits)

Penalties generally ranging from 90 to

180% of the unreported VAT amount

Invoices and formalities are key

elements of the VAT audit

Importance of formalism in general

Main focus of VAT audits is on

compliance with VAT formalities,

correct reporting and performance

of IC sales, territoriality rules and

pro-rata rules

Heavy influence of the CIT

approach on deduction of costs

on VAT deduction

Binding rulings process available but

long (need to anticipate)

Discount on interest and penalties in

case of voluntary disclosure

No possibility to settle on the VAT

due (only on penalties)

Settlements available in case of audit

Referral to ECJ is a long process that

remains exceptional

Audits and disputes: Poland

General

frameworkTrends

Managing VAT

audit consequences

Two types of tax offices: Local tax offices

(they carry out desk audits and routine

VAT audits) and tax&customs offices

(thay carry out , aggresive" VAT audits

aimed at imposing VAT sanctions);

Officers are familiar with VAT issues;

Statute of limitation is 5-6 years;

Taxpayers have the right to file a

correction of VAT return after the VAT

audit ends. Otherwise an assessment

proceeding is inititated;

30-100% VAT Sanction (in some

situations, this is 15% or 20%, depending

in procedural aspects).

Does a criminal proceeding (initiated in

an instrumental way) suspend the

statute of limitation period ?

Broad interpretation of FE concept;

Is Polish VAT Sanction in line with the

EU VAT principles (set out in Tibor

Farkas C-564/15 case) ?

Is Polish specific "three months rule"

for reverse-charge transactions in line

with the EU VAT law ?

Binding rulings process available;

During VAT audits the tax authorities

tend to point to the differences between

background facts presented in the tax

ruling request and the facts established

by them during the VAT audit.

Consequently they claim that a tax

ruling is not binding to them;

Binding position / rulings: KrakVet Marek Batko TJUE holding

3

Polish Tax Authorities ruling:

No distance sales regime

Subject to Polish VAT

Poland Hungary

KrakVet

Pet food

Recommended

carrier

Transport

Other carriers

Pick-up at warehouses

Hungarian Tax Audit:

FE in Hungary?

Inquiries to Polish TA

VAT + Interests + penalties: thus,

double taxation

Court TJUE: C-276/18; 18 June 2020

TJUE holding

VAT Directive and Art. 7, 13 and 28 to 30 of Regulation on administrative

cooperation and combating fraud not precluding a MS from unilaterally

subjecting transactions to different VAT treatment from that under which they

have already been taxed in another MS.

Comments

Shows a clear pitfall of VAT system in cross-border transactions, even

if not recognised. Reference to Compass Contract Services, C-38/16 and

its precedents.

How to ensure fair application of TJUE criteria in both MS removing

obstacles like:

■ Statute of limitations

■ Limitations in National remedies

■ Penalty systems

Is VAT being left behind vs. direct taxation in the implementation of solutions

to avoid double taxation?

Questions

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