Update on Belgian and international VAT … on Belgian and international VAT developments Johan Van...
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Update on Belgian and international VAT developments Johan Van der Paal Ivan Massin Thomas Vanhee Deloitte Academy 9 December 2015
Transcript of Update on Belgian and international VAT … on Belgian and international VAT developments Johan Van...
Update on Belgian and
international VAT developments
Johan Van der Paal
Ivan Massin
Thomas Vanhee
Deloitte Academy 9 December 2015
Agenda
• Belgian developments
− The new tax point rules 2016
− Company cars – new circular letter
− The new VAT regime applicable to directors-companies
− Other key changes
• International developments
− European Commission workplan and key projects
− Interesting VAT Committee Guidelines
− VAT Expert Group position papers
− Key European Court of Justice rulings
− OECD VAT/GST guidelines
Belgium
New tax point rules 2016
Tax point rules 2016
• New tax point rules introduced as per 1 January 2013
− In framework of implementation of second Invoicing Directive
− E-invoice promoted
− Invoice wording
− Reliable audit trail
− Etc.
− Tax point rules
− Advance invoice no longer a tax point
− Local transactions
• Supply – completion of service
• Advance payment
Tax point rules 2016
• New tax point rules introduced as per 1 January 2013
− Transitional regimes 2013 – 2014
− Choice between old and new regime
− 2014: advance invoice allowed also under new regime but reporting on the
basis of the legal principles
− ‘Final’ or ‘definitive’ regime 2015
− Advance invoice completely restored as tax point
− Payment and recovery no longer linked ratio of new legislation !
− ‘Window’-periode of 3 months to correct initial recovery
• New government end 2014: ‘evaluation’ of these tax point rules
− New draft law introduced in Parliament
Tax point rules 2016
• New regulation does not change:
− Requirement to issue an invoice
− Invoicing wording
− Term to issue an invoice
− Competent member state to determine the invoicing rules
− Definition of taxable event
• In essence: invoice is restored as central document to determine the tax point
and hence the reporting period of transactions
This presentation is based on draft legislation and may be subject to change
New rules
Local supplies: invoice is
tax point
New rules
Local supplies
VAT becomes due at the moment of issue of invoice
• Main rule: VAT becomes due at the moment of the supply
− Supply of a good (art. 16)
− Completion of a service (art. 22 § 1)
− Only theoretical rule
• By derogation, the VAT becomes due (new art. 17 § 1; new art. 22bis§1):
− When the invoice is issued, irrespective of whether the invoice is issued before or
after the supply
− On 15th of the month following the supply, if no invoice is issued by that date
− When payment is received prior to any of the above tax points
− = Main rule
New rules
Local supplies
VAT becomes due at the moment of issue of invoice
• Relevance of moment of supply (taxable event)
− Starting point of ultimate date to issue an invoice
− VAT becomes due even if no invoice is issued
• Date of taxable event
− Has to be mentioned on the invoice (see above, relevance of date of
supply)
− If different from the invoice date
• Pro memorie: local sale =
− Local supply of goods, loca (reverse charge) services, international B2B
services, cross-border services other than the ones covered by main B2B
rule, …
Cases (local sales)
Jan 2016
15
Month
end
Feb 2016 Mar 2016M
onth
end
2820 8
Invoice issued prior to the supply
• VAT becomes due on 15 January 2016
• Payment VAT due (monthly VAT return) on 20 February 2016
• Deduction (monthly VAT return) on 20 February 2016
Month
end
Apr 2016
Month
end
Month
end
Jun 2016May 2016
Invoice
VAT return
Payment
Supply
Cases (local sales)
Jan 2016
15
Month
end
Feb 2016 Mar 2016M
onth
end
3010 20
Invoice issued past the supply
• VAT becomes due on 10 February 2016
• Payment of VAT due (monthly VAT return) on 20 March 2016
• Deduction (monthly VAT return) on 20 March 2016 (not possible to recover the VAT aleady in
January VAT return lodged on 20 February!)
Month
end
Apr 2016
Month
end
Month
end
Jun 2016May 2016
Invoice
VAT return
Payment
Supply
Cases (local sales)
Jan 2016
17
Month
end
Feb 2016 Mar 2016M
onth
end
225 20
No invoice issued on 15th of month following the supply
• VAT becomes due on 15 February 2016
• Payment of VAT due (monthly VAT return) on 20 March 2016
• Deduction (monthly VAT return) on 20 March 2016 (provided invoice received by then – see
general formal conditions to recover upstream VAT)
Month
end
Apr 2016
Month
end
Month
end
Jun 2016May 2016
Invoice
VAT return
Payment
Supply
15
Cases (local sales)
Jan 2016
15
Month
end
Feb 2016 Mar 2016M
onth
end
3010 20
Payment received prior to supply and invoice
• VAT becomes due on 15 January 2016
• Invoice to be issued ultimately on 15 February 2016 (so, in casu, OK)
• Payment of VAT due (monthly VAT return) on February 20, 2016
• Deduction (monthly VAT return) on February 20, 2016
Month
end
Apr 2016
Month
end
Month
end
Jun 2016May 2016
Invoice
VAT return
Payment
Supply
New rules
When?
• The new rules will enter into force on 1 January 2016
• For supplies when the VAT becomes due as per 1 January 2016
• Transtional rules needed ?
− Supply on 17 December 2015
− Invoice on 10 January 2016
− Tax point 17 December 2015 (old rules) or 10 January 2016 (new rules)?
New rules
Intracommunity trans-
actions: no changes
Other rules
Intracommunity supplies of goods and services
These rules are not changed
• Intracommunity supplies of goods : tax point arises :
− At invoice date, if invoice issued for a supply made
− Ultimately 15th of the month following the supply date, if no invoice is issued by then
− Advance invoice cannot trigger tax point
− Also advance payment is disregarded
• Intracommunity services : tax point arises at :
− Completion of the service
− Receipt of an advance payment
− Advance invoice cannot trigger tax point
• Transitional regimes allow flexibility via administrative tolerances : to be continued ?
Cases (intracommunity supply goods)
Jan 2016
17
Month
end
Feb 2016 Mar 2016M
onth
end
225 20
Invoice issued prior to supply (cf. tolerance)
• VAT becomes due on date of invoice provided the invoice ‘confirms’ the supply = earliest tax
point possible is supply
• Invoice/payment not reported
• Transaction reported in March 2016 VAT return (due on 20 April 2016)
Month
end
Apr 2016
Month
end
Month
end
Jun 2016May 2016
Invoice
VAT return
Payment
Supply
15
Cases (intracommunity services)
Jan 2016
17
Month
end
Feb 2016 Mar 2016M
onth
end
225 20
Invoice issued prior to supply
• VAT becomes due on date of payment = earliest tax point possible is supply
• Transaction reported in February 2016 VAT return (due on 20 March 2016)
Month
end
Apr 2016
Month
end
Month
end
Jun 2016May 2016
Invoice
VAT return
Payment
‘Completion’
15
Local supplies of goods and
services
Export supplies, import of
services
Intracommunity supplies of
goods Intracommunity services
Supply (Yes) No Yes
Advance invoice Yes No No
Invoice post supply Yes Yes No
15th of month
following supply (no
invoice)
Yes Yes No
Advance payment Yes No Yes
New rules
Summarizing matrix B2B
New rules
New cash regime ‘B2G’
New rules
B2G
Introduction of new tax point rule for supplies to ‘public bodies’
• Already administrative tolerance: VAT becomes due at the moment of approval of the
invoiced amount (= date formal approval – Decision nr. E.T. 124.433 dd. 17 April 2014)
• New regulation (new art. 17 § 4 – art. 22bis§ 4)
− Public body = art. 6
− Also includes public bodies with VAT number
− Does not include ‘public companies’ (= regular, art. 4 VAT taxable persons)
− At the moment (part of) the price is received
− Not applicable in the case of reverse charge
− VAT number of the public body (cf. immovable work)
− Immovable transactions (cf. DBFM)
Other rules
B2C
These rules will not change
• VAT becomes due at the moment of receipt of payment
− Even if invoice (voluntarily) is issued prior to payment
Belgium
Company cars
Company cars
• Circ. letter n°. AOIF 36/2015 of 23 November 2015
− Additional comments to regime introduced 2011 (applicable as of 2013)
• Recap
− Private use for free or against consideration
− If for free, private use taxed through recovery limitation (art. 45 § 1quinquies
VAT Code)
− Fringe benefit no longer subject to VAT
− 3 methods
• Kilometres
• Semi lump sum (formula)
• 35%
− If against contribution, VAT due on this contribution
− But de minimis via ‘normal value’
Company cars
• What’s new ?
− Consideration
− Also via R/C – C/C or through ‘salary sacrifice’
− Car options
• Car remains for free
• Full recovery of VAT on option cost
• Conditions
− For free
− Commuting (management companies)
− Recovery requires minimal professional use (10%)
• But not applicable in the case of ‘salary policy’
− 3 methods and mixed VATable persons
• Expense * (50 – 35%) * Pro rata
Other business items
• Fuel card (when not combined with company car)
− 75% rule not allowed
− Real use (kilometre administration – agreement with the VAT authorities)
• Electricity and heating (management company)
− Full recovery
− VAT on fringe benefit income taxes
Belgium
Directors-companies
Introduction
• Decision n°. E.T.125.180 dd. 20.11.2014
− Until now, director acting through a company (‘director-co’) in principle was
subject to VAT, unless ‘option’ not to VAT register (1994)
− Over past period, few changes (option: in principle ‘all or nothing’ and
‘definitive’)
− Directors-physical persons: not subject to VAT
• What changes ?
− Director-co becomes VAT taxable person (option regime is abolished) as of 1
April 2016 (see below on entry into force)
− Director-physical person: no changes
Impact: VAT leakage
• Due to ‘option’ regime, director-co is mostly optimised in practice
− No VAT on director fees if the company in which the director is appointed,
cannot (fully) recover VAT
− Legal qualification as director fee gives blanket VAT exemption
− Limited VAT cost in the hands of the director-co
− Director-co in fully VAT taxable person, mostly subject to VAT
• New regime will imply VAT leakage when director-co is appointed in exempt
business or (passive) holding:
− ‘Care’ sector (hospitals, elderly homes)
− Financial intermediaries
− Non-profit (cultural sector)
− Private equity sector (holdings)
− Public sector
Impact: VAT leakage
• Cut off date of 1 April 2016
− ‘Tantièmes’ : date of approval by the General Assembly
− If later in 2016: then VAT applies, irrespective of closing date annual
accounts ?
− Periodical payments: normal tax point date
− End of period to which the periodical fee relates
• E.g. invoice May 6 for fee covering January – April 2016: no VAT
• ‘Advance’ invoice prior to 1 April 2016 ?
Alternatives (all sectors)
• Switch to director-physical person
− Formalities (dismiss co and appoint physical person)
− Liability
• Regulation for small enterprises (25,000 euro cap as per 1 January 2016)
• Billing before 1 April 2016
− One-off benefit
− ‘Intermediate tantième’ granted prior to 1 April 2016 ?
Alternatives (all sectors)
• VAT grouping
− Director-co’s and Opco create VAT grouping
− Director fees covered by VAT grouping – No VAT
− ‘Large’ interpretation of financial link
• Bottom-up approach
• No link required between the management companies
− No abuse
Alternatives (VAT exempt sectors)
• Combination of director fee with operational services (exempt)
− Most straightforward approach : split between
− director fee as physical person
− VAT exempt operational services by the company
− Split between ‘service fee’ (exempt) and director’s fee
− 25% rule as lump sum allocation of fee to director’s services
− If not possible, combination of 25,000 euro cap for ‘director-co’-fees, with
exemption for remainder regarding operational services
− Contract should foresee in split
− Support for valuation
• ‘Part Service’ case law
Belgium
Other key changes 2016
New rules
New control centre ‘Large enterprises’
• 7 regional control centres (Antwerp, Bruges, Brussels, Charleroi, Ghent,
Liège, Louvain) and 1 central control centre (specialised teams)
• Competent for large enterprises
− Criteria
− > 100 employees, or
− Two out of three:
• (i) Average number of employee 50 or (ii) Annual turnover 7.3 MEUR or (iii)
Balance sheet total 3.65 MEUR
− Always: finanial sector, funds – VAT grouping
− Practical impact
− Who to contact ?
− First experiences ?
New rules
Extension of local reverse charge (announced)
Extension of local reverse charge for a number of specific types of supplies
(immovable work, investment gold, greenhouse gas emission trading)
• Supply of waste products becomes subject to reverse charge
− Current 0% VAT rate
Reverse charge for foreign taxable persons also will apply when recipient is
another non-resident business with a direct VAT registration
− Currently only for recipient resident business and for non-resident with
fiscal representative
Cost sharing exemption
Existing legislation
On EU level and in Belgium, a VAT exemption applies for cost sharing
arrangements if the following conditions are met:
• Independent group of persons supplying services;
• The members render VAT exempt activities or do not qualify as VAT taxable
person;
• The services of the independent group of persons are directly necessary for the
exercise of the (VAT exempt) activities of the members;
• Exact reimbursement of the expenses;
• Should not distort competition.
Infringement by European Commission
The European Commission has initiated a procedure against Belgium on the cost
sharing exemption.
The main points of criticism :
• the eligibility of the Members : possibility to have members who use the shared services
for taxable services within a certain threshold
• the "out of the scope" qualification of the resources shared by a Member towards a cost
sharing association organised as an indivision;
• the deductibility of the input VAT suffered by the cost sharing association at the level of its
members (pass-through VAT).
Also Luxembourg has been attacked before the CJEU on similar points.
Cost sharing exemption
Way forward – change of legal regime
Current “cost sharing exemption” regime is about to change (draft law in preparation)
• Threshold of max 10% of taxable activities abandoned
- Members can have taxable activities but exempt activities should be predominant
- Only services that are directly necessary and contribute to the achievement of the
corporate purpose of the members
- Services can be provided to third parties:
- Services can be to members and non-members but only services to members eligible for
exemption - CSA may become mixed taxpayer
- Limitation: 50% maximum threshold for services to non-members to ensure mutualisation
approach
• Notification of the existence of a cost sharing association and VAT reporting
obligations
Cost sharing exemption
New rules
Changes in VAT rates real estate
• Renovation of dwellings
• Dwellings older than 5 year increased to 10 years
• Transitional regime for dwellings 2007 – 2010 can continue at 6% up till
end of 2017 if :
− Building permit obtained before 31 December 2015
− Contract lodged with local VAT office before 31 December 2015
• Introduction of 6% for construction and renovation of schools
• Introduction of 12% for private investors in social housing
International
developments
Agenda
• International developments
− Introduction
− The European Commission work programme
− VAT committee
− VAT expert group
− Key CJEU case law
− OECD
Introduction
Introduction
• Different key actors on a European and international level which
influence each other
VAT Expert Group
OECD
VAT Committee
European Commission
CJEU
European Commission
EU VAT Agenda2016 work program: no time for business as usual
EU Council
Discussed:
• Vouchers
• FTT
To be withdrawn:
• Standard VAT return
• Financial Services
EU Commission
In progress:
• VAT rates
• VAT on E-Commerce / Implementation
Digital Single Market Strategy
• Definitive VAT regime
Longer term?
• VAT on public bodies
• Passenger transport
• TOMS
Digital Single Market Strategy
Proposal in 2016 – policy options
1. Status quo
2. Abolish the Low Value Consignment Relief (LVCR) and the thresholds for distance
sales – No simplifications
3. Abolish LVCR and distance sales thresholds + implement a low threshold for
incidental cross border supplies (in addition to the local threshold)
4. Add a Single Electronic Mechanism (SEM) applying to all intra-EU B2C supplies of
goods and services and for imports up to 150 EUR
5. Add home country legislation and control, limit SEM to VAT rates and exemptions of
the MS where the supply takes place, or
6. Add fully harmonized rules for the SEM subject to applying the VAT rates and
exemptions of the MS where the supply takes place
European Commission
Explanatory notes on POS services connected with
immovable property
• Article 47 EU VAT directive:
“The place of supply of services connected with immovable property, including the
services of experts and estate agents, the provision of accommodation in the hotel
sector or in sectors with a similar function, such as holiday camps or sites
developed for use as camping sites, the granting of rights to use immovable
property and services for the preparation and coordination of construction work,
such as the services of architects and of firms providing on-site supervision, shall
be the place where the immovable property is located.”
• Provisions Implementing Regulation entering into force on 1 January 2017
• Explanatory notes not legally binding – constitute the view of the Commission
European Commission
Explanatory notes on POS services connected with
immovable property
• Immovable property
• Any specific part of the earth, on or below its surface, over which title and possession
can be created
• Any building or construction fixed to or in the ground above or below sea level which
cannot be easily dismantled or moved
• Any item that has been installed and makes up an integral part of a building or
construction without which the building or construction is incomplete, such as doors,
windows, roofs, staircases and lifts
• Any item, equipment or machine permanently installed in a building or construction
which cannot be moved without destroying or altering the building or construction
European Commission
Explanatory notes on POS services connected with
immovable properties
• Sufficiently direct connection with immovable property
• Where the service is derived from an immovable property and that property makes
up a constituent element of the service and is central to, and essential for, the
services supplied
• Where the service is provided to, or direct towards, an immovable property, having
as their object the legal or physical alteration of that property
• Covered e.g. drawing up plans, site supervision, security services, construction, work
on land, etc.
• Not covered e.g. plans not designated for a particular plot of land, storage of goods
when no exclusive space is assigned, advertising, intermediation in the tourism
sector
• Equipment put at disposal for execution of work is connected with the immovable
property if the supplier assumes the responsibility for the execution of the work
European Commission
Explanatory notes on POS services connected with
immovable properties
• When analysing the following elements should be taken into account (not
comprehensive)
• Where the services cover more than one jurisdiction, the taxation rights should be
split proportionally between the jurisdictions concerned
• Where more than one immovable property is involved in the supply each of them has
to be clearly identified or identifiable
• Several specific immovable properties? Service cannot be considered as lacking a
sufficiently direct connection with immovable property
• Supply off-site, not directly to the owner or to a client in a different country is not
decisive on its own
=> Influence on Belgian practice and practice in other EU MS?
European Commission
VAT Committee
Role & recent topics
• Task:
- Article 398 of the VAT Directive
- To promote the uniform application of the provisions of the VAT Directive
- Advisory committee only, no legislative power
- Cannot take legally binding decisions
- Guidance on the application of the VAT Directive
• Members:
- Consists of representatives of the EU MS and of the Commission
- The chairman of the Committee shall be a representative of the Commission
VAT Committee
Guidelines
The VAT Committee examines questions concerning the application of EU VAT provisions
raised by the Commission or a Member State. As a result of the discussion, the VAT
Committee may agree guidelines on specific matters:
o Merely views of an advisory committee
o They do not constitute an official interpretation of EU law and do not necessarily
have the agreement of the European Commission
o They do not bind the European Commission or the Member States who are free
not to follow them
o Comprehensive summary of guidelines approved by the VAT Committee
between November 1977 and November 2015
o Rapid publication of new meeting documents and guidelines - transparency
VAT Committee
Recent interesting topics discussed - crowdfunding
• Donation based crowdfunding no VAT issues should arise since the contributor
expects no reward and none is given
• Reward based crowdfunding
− Taxable transaction provided there is a direct link between the supply of goods or services
and its correspondencing consideration and the entrepreneur is acting as such
− Goods or services are identified precisely, contribution is regarded as a payment
− Reward is of symbolic value? Needs to be assessed on a case by case basis
• Crowd-investing
- Supply by the entrepreneur is a taxable supply
- If the financial reward is participation in securities, it supply may be exempt
• Crowd-lending
- Taxable transactions which is VAT exempt
• Intermediation by crowdfunding platforms
− Economic activities which could be VAT exempt
VAT Committee
Recent interesting topics discussed
• Scope of Electronically Supplied Services
• Delivered over the Internet or an electronic network
• Essentially automated
• Involve minimal human intervention
• Impossible to ensure in the absence of information technology
Last condition cannot lead to limiting the scope of ESS
PDF knitting patterns are ESS unless commissioned for
Market places and platforms provided ESS unless there is more than a minimal
human intervention
Online gambling is an ESS
Financial services can qualify as an ESS
VAT Committee
Ongoing debate on Skandia America Corporation
ruling (C-7/13)
IT services no VAT?
Skandia Case C-7/13 (17 September 2014)
Branch
2 Main
seat
Branch
3
Branch
4
Subsidiary1
VAT group
Skandia America Corp
Multinational
Bank
Branch1
VAT Committee
CJEU: in that particular case: supply from head office to branch subject to VAT since
branch member of VAT group
Different interpretations in EU Member States… or no interpretation yet
European Commission working paper :
EU VAT Expert group recommendations:
− Strict interpretation (“Swedish” style VAT groups, involvement 3rd countries,
inbound supplies)
− To be seen in context of abuse: only if no anti-abuse provisions implemented
− Change Directive to tax all head office – branch transactions?
Ongoing debate on Skandia America Corporation ruling (C-
7/13)
VAT Committee
© 2015 Deloitte The Netherlands
Has the government / tax authorities taken an official position on the Skandia
case?
EU survey on fixed establishments
59
Yes
In discussion, but yet to publish an official position
No
VAT grouping is not allowed
Legend
No response
• Decision E.T. 127.577 of 3 April 2015
• Apply Skandia with all situation with multiple establishments where one
establishment is in Belgium
• Also apply Skandia between fixed establishments of a taxable person if
one of the fixed establishments is part of a VAT group in Belgium
• VAT recovery depends on the VAT status of the VAT group
• No VAT recovery when supplies invoiced to the Belgian head office but
essentially supplied for the purposes of the foreign branch
• Article 19bis of the Belgian VAT code abolished
• Administration applies the regime as of 1 July 2015
Broad implementation of Skandia principlesBelgian position
VAT Expert Group
Role & recent topics
• Assisting and advising the European Commission on VAT matters
• Members are businesses, business associations and consulting companies
• Relevant recent topics
• Future of intra-community supplies of goods
− According to a recent study:
− A significant reduction in compliance cost is achieved when the regime applicable to intra-community
supplies of goods is aligned with the principles applicable to B2B supplies of services
− A significant reduction in the scale of VAT fraud is achieved when i) taxing goods following the flow of
their goods with the supplier charging the VAT of the MS of destination, or ii) taxing goods following the
contractual flow with the supplier charging the VAT of the MS of destination – reporting through an OSS
- VEG’s opinion
- Need to further study the concept of an enhanced one stop shop, the concept of certified taxable person
(CTP) with the reverse charge mechanism, a special scheme for call-off stocks and possible anti-evasion
measures
EU VAT Expert Group
Role & recent topics
• Proof of evidence for intra-Community supplies
− Uniform documentary evidence for ICS?
− No one size fits all approach but a selection of 3 elements of non-contradictory evidence from
a pre-established list (similar to the provisions in place for TBE-services)
− Will now be submitted to the VAT committee for discussions
EU VAT Expert Group
Court of Justice of the
European Union
On the agenda
Court of Justice of the European Union
• VAT PE (Welmory)
• Use of exemptions & flash title supplies (Fast
Bunkering Klaipeda)
• VAT recovery for holding companies (Larentia +
Minerva)
• Sveda
• NLB Leasing
16 October 2014 - Welmory (C-605/12)
Welmory Sp. Z.o.o Welmory Ltd.
Sale of bids
Bids
Goods
Cooperation agreement
Reverse charge service invoice(advertising, servicing, provision of information & data processing)
FE? Invoice + Polish VAT?
Court of Justice of the European Union
VAT PE
• What can we learn from Welmory?
• Digital services: suitable structure requires computer equipment,
servers & software
• Being able to receive & use the services for performing its
economic activities
• Absence of human presence could suffice
• However reference to the national court, no fixed decision
• Not determining factors:
• Fact that economic activities of both companies, which are linked
to a cooperation agreement, form an economic whole
• Fact that results of combined efforts essentially benefit consumers
in Poland
VAT PE
• What can we learn from Welmory?
• Required suitable structure could be owned by a third party
• Level of control of that structure to be determined
• Seems to allow to still distinguish purchase FE from sales FE (cf.
auxiliary & preparatory)
VAT PE
Requirements & relevance
VAT fixedestablishment
Sufficientdegree of
permanence
Human & technicalresources
Receive / supply
goods or services
Suitablestructure
Place of supply
Licences &
approvals
Liability to
account for VAT –
Local reverse
charge
Simplification for
triangulation
Audit position &
Risk profile
VAT grouping
VAT PE
• Although legal definition & high practical relevance >< concept not fully
clear
• Different notions of “established” for different VAT rules?
• Purchase (passive) FE; Sales (active) FE; other?
• “Suitable structure”
• Determine in function of nature of business carried out?
e.g. fully digitalised services vs. ‘traditional‘ supply of goods
• Also if merely auxiliary and preparatory activities?
• Today: not all questions answered > uncertainty for businesses
… But also opportunities
• National evolutions (rulings, case law, etc.)
• Notion of VAT PE subject to further investigation of EU VAT expert group:
► determine criteria for VAT PE
• being able to perform the full supply vs. preparatory &
auxiliary?
• TP remuneration type (cost plus vs. profit split)?
• technical resources prevail over human presence ?
• business dependent?
=> Report VEG will be submitted to the VAT committee
VAT PE
Background
VAT exemptions & flash title supplies
• Traders established in one country trading goods situated in/moving
between many countries
• VAT exemptions (with credit) are crucial to minimising VAT registration
requirements and cash flow implications of trade:
• Exemptions for intra-Community transactions
• Exemptions on exportation / importation
• Exemptions related to international transport
• Exemptions for transactions relating to international trade (warehouses /
tax suspension)
Fast Bunkering Klaipeda UAB (C-526/13)
VAT exemptions & flash title supplies
FBK (LT) INTERMEDIARIE
S
CUSTOME
R
Sale
VAT?
Sale
VAT exempt?
148 (a) VAT
Dir
• Fuel physically delivered by FBK to vessel operator; legal ownership (and
invoices) through intermediary
• Likely that legal ownership only passed to intermediaries once fuel
delivered to vessel operator
• Fuelling intermediaries prefer not to be charged VAT – and to have no
domestic VAT registration / credit position
Fast Bunkering Klaipeda UAB
VAT exemptions & flash title supplies
Fast Bunkering Klaipeda UAB
VAT exemptions & flash title supplies
Question referred
Article 148(a)- exemption (with credit) on goods supplied for fuelling and
provisioning of vessels:
Must this provision mean that exemption from VAT is available to both
− The supplies to the vessel operator; and also
− The supplies to the intermediaries where the ultimate use of the
goods is known in advance (and duly evidenced in accordance with
national law)?
Fast Bunkering Klaipeda UAB
VAT exemptions & flash title supplies
A judgment of two halves: (a) Velker remains good law
• Velker (C-185-89): exemption may only apply to the final supply to vessel operator – exemption is not applicable to supplies to intermediaries
However… (b) FBK’s facts differed from Velker
• Transfer of ownership in FBK’s case may have taken place only at end of loading > ownership does not transfer to intermediaries until vessel operators are entitled to dispose of fuel (as owners)
• Therefore, intermediaries have at no time been in position to dispose of fuel
• Paragraph 52: Transactions carried out by FBK:
• Cannot be classified as supplies to intermediaries, but instead
• Should be regarded as exempt supplies to vessel operators
• National Court to determine whether ownership transferred “at the earliest at the same time” when vessel operators able to dispose of fuel
Fast Bunkering Klaipeda UAB
VAT exemptions & flash title supplies
Decision raises a number of questions
• What could a “direct supply” from supplier A to vessel operator C mean?
• Could this be applied to commodity chain transactions more generally?
− Are there other situations in which an intermediary never obtains
right to dispose of goods?
• How will individual tax authorities respond?
A B
C
contract
Supply/Invoice
?
contract
Supply/Invoice
?
VAT exempt invoice?
“Supply of right to dispose goods”
Larentia & Minerva (C-108/14, C-109/14)
VAT recovery of holding companies
Larentia &
Minerva
Holding
Sub 1 Sub 2
Administrative +
commercial servicesAdministrative +
commercial services
Costs acquisition participations
(EUR 764k VAT)
L&M: Attraction of EUR 25M new
capital, 77.69% invested in subs
DE tax authorities reject
77.69% of input VAT
Larentia & Minerva
VAT recovery of holding companies
• Confirmation of principle of VAT recovery for holding companies
− actively managing their subsidiaries
− for consideration
• Unless (part of) the services rendered to the subsidiaries should be
considered as VAT exempt
• Mixed holding companies (managing some subs but not all, passive
managment): partial rejection of VAT recovery
• apportionment between economic and non-economic activities
• based on an investment formula, a transaction formula or any other
appropriate formula
Larentia & Minerva
VAT recovery of holding companies
• Former practice:
• often VAT recovery limitations because of out of scope activities
− rejection based on pro rata – including dividends
can now be countered:
assess possibility to reclaim previous non-recovered VAT
• Positive development for holding companies and private equity
investment funds: improve ability to recover VAT
• By developing service activities in those companies (which are now
sometimes in other companies)
Attention point upon restructuring of holding companies
Organisation for
Economic Cooperation
and Development
OECD Technical Advisory Group on VAT
OECD Technical Advisory Group on VAT/GST Guidelines (TAG)
Mixed government and business members, ca 40 in total - Deloitte has two seats
Roundtable discussions twice a year – February, September
Members input in personal capacity as technical experts, Chatham house rules
TAG reports to Working Party 9
Task teams used for technical research and drafting
Player Role
OECD Government
Committee on
Fiscal Affaires
Direction Setting
Working Party 9 Indirect Taxes
Technical
Advisory Group
VAT/GST Guidelines Project
Task Teams Day to Day Technical Work
Global VAT/GST – Recent developments
Working
Party 915 Action
plans
Action 1:
Digital Economy
B2B B2C
VAT / GST
Guidelines
BEPS
Action Plan
Endorsed by
Global Forum on
VAT on
06/11/2015
Endorsed by
Global Forum on
VAT on
18/04/2014
Final BEPS
package
endorsed by
OECD/G20 in
October 2015Includes recommendations
to implement principles
from VAT/GST Guidelines
TAG
VAT/GST Guidelines
International VAT/GST Guidelines
OECD International VAT/GST Guidelines
2
0
1
4
Core features of Value Added Taxes Covered by
the Guidelines
VAT Neutrality
Place of Taxation of B2B Supplies of Services and
Intangibles
Place of Taxation of B2C Supplies of Services and
Intangibles
2
0
1
5Provisions on the Guidelines in Practice
Aim and structure
• The Guidelines are
developed to create
global standard on
VAT/GST to address
uncertainty and risks of
double and non-
taxation.
• The Guidelines are
increasingly used by
Governments of both
OECD and non-OECD
countries as a basis for
changes to their VAT
systems.
International VAT/GST GuidelinesContent of the Guidelines
Destination principle
Guideline 3.1
General Rules Specific Rules
B2B
Customer location
Guideline 3.2 [business location]
Guideline 3.3 [business agreement]
Guideline 3.4 [multiple location
entities]
Evaluation
Framework
E.g. on-the-
spot
supplies
Guideline
3.7
Location of
immovable
property
Guideline
3.8
B2C On spot
Place of performance
Guideline 3.5
Other
Customer’s usual
residence
Guideline 3.6
Core principles
Destination
principle :
Transactions are
subject to VAT in the
jurisdiction of
consumption
Neutrality
principle:
VAT is a tax on final
consumption that
should be neutral for
business
• 3.1 General: destination principle – taxation in the jurisdiction of
consumption.
• 3.2- 3.3 ‘Main rule’ - the jurisdiction in which the customer is located has the
taxing rights. Identity of the customer determined by the business agreement.
• 3.4 Multiple location entities - when customer has establishments in more than
one jurisdiction, the taxing rights accrue to the jurisdiction(s) where the
establishment(s) using the service or intangible is (are) located.
• 3.5-3.6 Specific rules - taxing rights may be allocated by a proxy other than
customer location, when the main rule does not lead to an appropriate result and
another proxy would lead to significantly better result.
• For services and intangibles directly connected with immovable property, the
taxing rights may be allocated to the jurisdiction where the immovable
property is located.
B2B trade in services and intangiblesGuidelines
Objective = levy tax in jurisdiction where the final consumption occurs
• On the spot supplies: For supplies physically performed at an identifiable
location and ordinarily consumed where they are performed in the presence of
both the person performing the supply and the person consuming it: place of
taxation based on the place of performance is recommended
• Other supplies: For other supplies (i.e., those that lack an obvious connection
with a readily identifiable place of physical performance and that are not ordinarily
consumed at the place where they are physically performed): place of taxation
based on the customer’s usual residence is recommended
− Examples: consultancy, accountancy and legal services; financial and
insurance services; long-term rental of movable property; telecommunication
and broadcasting services; online supplies of software and software
maintenance; online supplies of digital content (movies, TV shows, music,
etc.); digital data storage; online gaming; etc.
B2C supplies of services or intangiblesGeneral rules
• VAT collection
• The most effective and efficient approach to ensure the appropriate collection
of VAT on cross-border B2C supplies is to require the non-resident supplier
to register and account for the VAT in the jurisdiction of taxation
• It is recommended that jurisdictions consider establishing a simplified
registration and compliance regime to facilitate compliance for non-resident
suppliers
• B2C specific rules (same as B2B)
• Applicable in cases where the general rules may not give an appropriate result
and another proxy would lead to significantly better result.
• Examples: services directly related to immovable property; international
transport of persons; provision of internet access; services connected with
movable tangible property.
B2C supplies of services or intangibles
Objective = provide guidance to jurisdictions in developing practical legislation
that will facilitate a smooth interaction between national VAT systems, with a
view to minimizing the potential for double taxation and unintended non-
taxation and creating more certainty for business and tax authorities
• Mechanisms: Facilitate the consistent implementation of the principles of the
guidelines in national legislation, as well as their consistent interpretation by tax
administrations, in order to minimize both the risk of such double taxation or
unintended non-taxation and the potential for resulting disputes, and for dealing
with evasion and avoidance
• Mutual cooperation (multilateral and bilateral), exchange of information, and
other arrangements allowing tax administrations to communicate and work
together
• Provide taxpayers with readily accessible and easily understood guidance
• Creation of points of contact with tax administrations allowing for one to make
inquiries as well as to inform on perceived disparities
Supportive provisions
Mutual cooperation and dispute resolution
Next steps
Areas of future work, suggested by the third Global Forum on VAT:
• Development of implementation packages to support consistent implementation of the
Guidelines
• To work on areas not yet covered by Guidelines:
− Research and analysis of approaches to improve neutrality and overall performance of the
VAT systems, e.g. design and implementation of efficient VAT Refund mechanisms and risk
assessment processes
− Develop a framework for exchange of information and enhanced admin. cooperation in VAT
− VAT on cross-border trade on goods, including VAT collection on low value imports and on
good practices to address compliance issues
− Interaction between VAT and international direct tax framework, notably in the area of transfer
pricing
• Design an even more inclusive framework to support and carry out this work with the
involvement of all interested countries and jurisdictions particularly developing
economies, on an equal footing.
International VAT/GST Guidelines
Thank you for your attention
Questions?
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