IPT ANNUAL CONFERENCE
VAT DEVELOPMENTS IN THE EUROPEAN UNION Zdenek Vajnlich
Simon Kelly
Senior VAT Manager Meridian Global Services White Plains, NY Zdenek.Vajnlich@meridian globalservices.com
Manager – International Indirect Taxes Group KPMG Santa Clara, CA
[email protected]
AGENDA Trends VAT rate changes, challenges, news… VAT administration changes and approach EU VAT Package
IPT 2014 ANNUAL CONFERENCE
TRENDS Constant changes in VAT legislation, VAT rates increases (and decreases) Increased cooperation between VAT administrations Exchange of information between VAT authorities Increased VAT audit activities Pursuing of non-compliance VAT authorities seeking additional revenue
IPT 2014 ANNUAL CONFERENCE
WHAT IS NEW... Croatia becoming part of the EU (7.1.2013) as the 28th EU Member State Invoicing Directive (1.1.2013) Aligning rules for electronic and paper invoicing Invoice sent via email in pdf considered as eletronically issued invoice Authenticity of origin Integrity of content Legibility of invoices
IPT 2014 ANNUAL CONFERENCE
WHAT IS NEW... Invoicing Directive (1.1.2013) Harmonized rules for some aspects of invoicing (exemption / reverse charge statements, simplified invoices, exchange rates, etc)
Italy Invoices issued to private individuals have to include fiscal code of the customer
Filing frequency changes VAT authorities do not inform tax payers, late payment of VAT > penalties, interests (CZ) Supplies of certain products required to file monthly VAT returns irrespective of turnover (PL) IPT 2014 ANNUAL CONFERENCE
WHAT IS NEW... VAT audits Increased activity of the VAT authorities Focus on intra-Community supplies input VAT deductions supplies subject to reduced VAT rate
Proof of payments part of audit trail Cross checking of information with tax administration from other EU Member States
IPT 2014 ANNUAL CONFERENCE
CUSTOMERS´ LIABILITY Reverse charge mechanism
List of commodities in the VAT Directive expanded for which domestic reverse charge mechanism can be applied without approval from EU Commission Mobile phones, integrated circuit devices, gas and electricity, defined telecommunication services, game consoles, tables and laptops, cereals and industrial crops, raw and semi finished metals
Poland Customer liable for VAT for supplies of sensitive products in case of fraud
Czech Republic
Customer liable for VAT if payment is made on supplier´s bank account that is not registered with the Czech tax administration IPT 2014 ANNUAL CONFERENCE
VAT RATES VAT rates in the EU continue to rise Average VAT rate in EU-28 is 21.4% Many VAT rate changes in the past 12 months Belgium – services performed by lawyers subject to 21% VAT Cyprus 18% > 19% France 19.6% > 20% Italy 21% > 22% (October 1st, 2013, final confirmation by IT administration given in the eve of September 30th) IPT 2014 ANNUAL CONFERENCE
VAT RATES VAT rates changes Luxembourg 15% > 17% (1.1.2015) Poland – plans to reduce VAT rate 23% to 22% Czech Republic – plans to introduced one flat rate or 2nd reduced VAT rate
IPT 2014 ANNUAL CONFERENCE
NEW REPORTING REQUIREMENTS Germany Gelangenbestätigung (certificate of entry) to prove exemption / zero rating of intraCommunity supply
Slovakia Control listing – electronic submission of all transactions performed
Italy Spesometro / Communication of Data – supplier / customer listing IPT 2014 ANNUAL CONFERENCE
CHALLENGES Spain Reverse charge mechanism for non established suppliers applicable irrespective of VAT status of business customer Challenges with input VAT deduction
Netherlands Late submission of VAT returns and late payment of VAT considered as criminal offense
IPT 2014 ANNUAL CONFERENCE
VAT ADMINISTRATION Cross border VAT rulings Project extended until end of 2014 15 EU countries are participating in this trial cross border VAT rulings Mid term review is being conducted in June ´14 Participating EU Member States Belgium, Cyprus, Estonia, Finland, France, Hungary, Latvia, Lithuania, Malta, Netherlands, Portugal, Slovenia, Spain, Sweden, UK
IPT 2014 ANNUAL CONFERENCE
VAT ADMINISTRATION Quick Reaction Mechanism (QRM) Introduction of reverse charge mechanism on specific supplied of goods/services Valid for limited time (12 months) Request shall be granted within 1 month after obtaining all necessary information from the Member State concerned Standardised form for submission / request
IPT 2014 ANNUAL CONFERENCE
VAT ADMINISTRATION VAT collection and control procedures Administrative cooperation and combating VAT fraud Promoting compliance Standardised VAT return Simplified Intrastat reporting IPT 2014 ANNUAL CONFERENCE
EU VAT PACKAGE Long-term Car Hire EU 2015 Changes
Latest Updates Compliance Options Evidence for Determining Place of Supply Supply Chains and Intermediaries System Changes and Data Storage
E-Commerce in South Africa Japan Updates
IPT 2014 ANNUAL CONFERENCE
2015 COUNTDOWN
IPT 2014 ANNUAL CONFERENCE
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LATEST UP DATES
Mini One-Stop-Shop (MOSS) Working Group ■ Up to seven Member States will not have a working MOSS Portal by 1 January 2015 ■ The UK is on track to be ready ■ Plans for an EU web portal with VAT rates, invoicing rules etc ■ The Commission is aiming to publish ‘audit and control’ guidance later this month or early June
EU Commission’s Explanatory Notes ■ Final version was released on 4 April. ■ 92 pages. ■ Contain a glossary of terms, helpful examples and diagrams
IPT 2014 ANNUAL CONFERENCE
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EU COM M ISSIO N ’ S EX P LANATORY NOTE S
IPT 2014 ANNUAL CONFERENCE
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COM P LIA N CE OP TIONS – MINI ONE STOP SHOP Mini One Stop Shop
Shorter payment and filing deadlines
Less admin
Longer record keeping
Slower input tax recovery
Cons Pros
IPT 2014 ANNUAL CONFERENCE
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COM P LIA N CE OP TIONS – LOCAL VAT REGISTRATIONS Local VAT Registrations
Shorter record keeping
Faster input tax recovery
Longer filing and payment deadlines
More admin
Pros Cons
IPT 2014 ANNUAL CONFERENCE
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COM P LIA N CE OP TIONS – WHEN CAN YOU USE THE MOSS? Supplies of broadcasting, telecoms and eservices to customers in a Member State where the supplier has established his business or has a fixed establishment cannot be reported under the MOSS
State ofMember Identification
Fixed establishment
Keys: Can use MOSS
Fixed establishment
Cannot use MOSS
IPT 2014 ANNUAL CONFERENCE
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E VIDENCE FOR DET ERMIN I N G P LACE OF SUP P LY Ar ticle 1 8(2) “...the supplier of telecommunications, broadcasting or electronically supplied services may regard a customer... as a non-taxable person as long as that customer has not communicated his individual VAT identification number to him.” It is optional for the supplier to rely on the communication of a VAT Identification number. However, the burden of proof will then be on his shoulders regarding the business status of the customer.
IPT 2014 ANNUAL CONFERENCE
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E VIDENCE FOR DETERMIN I N G P LACE OF SUP P LY Presumptions Article
Which services?
Evidence presumption
24a
Supplied at a location (e.g. Wi-Fi hot spot, internet cafe etc.) where the physical presence of the customer is required
Location of the service
24b(a)
Supplied through a fixed line
Place of installation of the fixed line
24b(b)
Supplied through mobile networks
Mobile country code of the SIM card used
24b(c)
Supplied through a decoder or similar, or viewing card
Where the decoder or similar is located, or where the viewing card is sent
24b(d)
All other circumstances
2 items of non-contradictory evidence
IPT 2014 ANNUAL CONFERENCE
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EVIDENCE FOR P LACE OF SUP P LY Does the supplier know or should he have known (under normal commercial circumstances) that the supply is made…
Via a telephone box, an internet café, a Wi-Fi hot spot or similar and is the physical presence of the customer required at the location?
Via a fixed land line?
Via mobile networks?
Via a decoder or a viewing card without the use of a fixed land line? With hotel accommodation or similar?
Yes
Is it located on board a means of transport travelling within the EU?
Yes
Yes No
Place – where the fixed lane line is installed
Yes
Place – country of SIM card used to receive the service
Yes
Place – where the decoder is located or the viewing card is sent to be used
Yes
Place – where the hotel is located
No
The supplier could not and should not have known whether the supply was made via any of the above mentioned channels
Place – identified with 2 items of non-contradictory evidence
Place – the country of departure of the journey within the EU Place – where the telephone box or similar is located
Rebuttable 1. If desired by the supplier with 3 items of non-contradictory evidence 2. By a tax administration in case of indications of abuse or misuse Evidence ■ Billing address ■ IP address ■ Bank details ■ SIM card country code ■ Location of fixed land line ■ Other commercially relevant information Rebuttable by a tax administration in case of indications of abuse or misuse
IPT 2014 ANNUAL CONFERENCE
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EVIDENCE FOR P LACE OF SUP P LY Do you know/should know that Article 24a, or 24b(a)-(c) apply?
Yes
■ Wi-Fi hot spot etc
Do you want to rebut the specific presumption?
Yes
■ Fixed line ■ Mobile network
Has the local tax authority rebutted the specific presumption?
■ Decoder/viewing card ■ Decoder ■ With hotel accommodation (e.g. bundled)
Yes
Evidence according to Tax Authority rebuttal
Specific presumption applies.
Yes
No
Has the local tax authority rebutted the general presumption?
No
Evidence required = three pieces of non-contradictory evidence
Evidence according to Tax Authority rebuttal
Evidence required = specific presumption
No
General presumption applies. Evidence required = two pieces of non-contradictory evidence
IPT 2014 ANNUAL CONFERENCE
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EVIDENCE FOR P LACE OF SUP P LY Evidence required under the general presumption Article 24f ... a) the billing address of the customer; b) the Internet Protocol (IP) address of the device used by the customer or any method of geolocation; c) bank details such as the location of the bank account used for payment or the billing address of the customer held by that bank; d) the Mobile Country Code (MCC) of the International Mobile Subscriber Identity (IMSI) stored on the Subscriber Identity Module (SIM) card used by the customer; e) the location of the customer's fixed land line through which the service is supplied to him; f)
other commercially relevant information."
IPT 2014 ANNUAL CONFERENCE
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EVIDENCE FOR P LACE OF SUP P LY
Q
What if the presumptions clash? Some presumptions have a hierarchy (e.g. fixed line prevails over decoder). Other clashes must be assessed according to all available information. See section 7.5.4 of the EU Commission’s Explanatory Notes for guidance.
Q
Under the general presumption, what if the evidence is contradictory? Continue to look for evidence until two pieces are non-contradictory. This may require gathering ‘other commercially relevant information’, which is allowable as evidence. If a customer’s usual residence clashes with their permanent address, guidance can be found in the new wording of Article 24 of the Directive.
IPT 2014 ANNUAL CONFERENCE
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E -SE RVICES THROUG H INT ERMED IAR IES – ARTIC LE 9A
1. For the application of Article 28 of Directive 2006/112/EC, where electronically supplied services are supplied through a telecommunications network, an interface or a portal such as a marketplace for applications, a taxable person taking part in that supply shall be presumed to be acting in his own name but on behalf of the provider of those services...
IPT 2014 ANNUAL CONFERENCE
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E -SERVICES THROUG H INT ERMED IAR IES – E X AM P LE Basic case – all the intermediaries are caught by the presumption
A (Electronic or internet telephone service provider) Invoice Content
For each transaction in the supply chain, each intermediary is deemed to have received and onward supplied the electronic service Therefore each intermediary in the chain is required to account for VAT
B (Intermediary) Invoice
Content
C (Intermediary) Bill or receipt
Content
F (Consumer)
IPT 2014 ANNUAL CONFERENCE
2 01 5 VAT C H A N G E S E - S E R V I C E S T H R O U G H I N T E R M E D I A R I E S – R E B U T TA L O F P R E S U M P T I O N 1. For the application of Article 28 of Directive 2006/112/EC, where electronically supplied services are supplied through a telecommunications network, an interface or a portal such as a marketplace for applications, a taxable person taking part in that supply shall be presumed to be acting in his own name but on behalf of the provider of those services unless that provider is explicitly indicated as the supplier by that taxable person and that is reflected in the contractual arrangements between the parties
In order to rebut the presumption at Article 9a: 1. The invoice issued by each taxable person taking part in the supply of the eservices must identify those services and the supplier, and 2. The bill or receipt issued or made available to the customer must identify the eservices and the supplier And the taxable person must not: a. Authorise the charge to the customer, or b. Authorise the delivery of the services, or c. Set the general terms and conditions of the supply
IPT 2014 ANNUAL CONFERENCE
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SYSTEM S C HANGES AND DATA STORAGE Front office customer experience
28 different tax rates
Pricing
Customer master data
Tax decisions
Data storage
Invoicing
Local invoicing rules (language, currency, invoice contents)
Up to 10 years storage and data protection laws IPT 2014 ANNUAL CONFERENCE
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SYSTE M S CHANG ES AND DATA STORAGE – EX AM P LE ISSUE S Invoicing requirements. Example: Italy In Italy, it is compulsor y to issue a VAT invoice to all customer s of broadcasting, telecoms and e-ser vices. A simplified tax invoice (currently for sales less than €100) should contain the following minimum information: • Date of issue; • Sequential numbering that “uniquely identifies the invoice”; • Supplier’s VAT number; • Company’s name, name and surname, residence or domicile of the seller or supplier, or the fiscal representative, as well as the location of the permanent establishment for non-resident persons (if any); • Customer’s fiscal code (Italian ID number); or name and surname, residence or domicile of the private customer; • Quantity, quality and nature of the goods/services supplied; • Tax rate, amount of the tax and taxable amount (for each rate); or the total VAT inclusive price and the VAT rate applied. For example, you could state: “90€ IVA inclusa (22%)”. VAT invoices can be in English, but the currency must be Euros, and the Italian Tax Authorities can request a translation into Italian.
IPT 2014 ANNUAL CONFERENCE
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SYSTEMS CHANG ES A ND DATA STORAGE – EX AMP LE ISSUE S (C ONT.) Data storage rules Member states have local rules around data storage of invoices and records. Regardless of whether your business opts to use the MOSS or local registrations, it will need to comply with these areas in relation to invoices: • Length of physical/electronic data storage • Place of physical/electronic data storage • Local data protection laws
IPT 2014 ANNUAL CONFERENCE
Q&A
Thank you for you attention!
IPT 2014 ANNUAL CONFERENCE