recent developments in the field of vat: a view from the european commission
DESCRIPTION
This workshop has been held at Legal Business Day on 8 September 2011.This presentation takes you through the future of VAT from an EU perspective, giving detailed background information on the future VAT reforms and insight into what can be expected in the future VAT framework in Europe. Special attention is paid to the practical implications of the new European Council Regulation clarifying the existing VAT rules.During this workshop DLA Piper specialists shared information concerning the key decision makers in Europe and the value of early participation in the legislative process for your business. A case study was presented, which focuses on the practical issues you may face if your business were to get involved in the legislative process.TRANSCRIPT
The future of VAT
A view from Brussels
Daan Arends
Emma GreenowDeze presentatie is
beschikbaar op legalbusinessday.nl
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 3
Topics
Practical implications of latest EU VAT rules Current issues - case study
Insight in legislative proces: where are we? New VAT rules on financial and insurance services
Future of VAT
How can you participate?
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 4
VAT Package 2010 - New place of supply of services
New general rule place of supply of cross-border B2B services as of 2010 Place where the customer is established (subject to certain
exceptions)
EU Council Regulation No 282/2011 applies from July, 1, 2011
Key concepts of new POS rules: VAT status of customer
Supplier and customer location
Who is liable for VAT
New rules coming up in 2013 and 2015
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 5
VAT status of customer: B2B or B2C?
"B2B" - Business to Business Customer = “taxable person”
Includes businesses performing taxable and non-taxable activities (eg local governments, "active" holding & financing companies)
Includes businesses trading below registration threshold
Includes wholly non-taxable legal person "identified" for VAT in its jurisdiction
VAT planning opportunities!
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 6
B2C vs B2B: VAT planning
Supplier Holding
SupplierHolding
plus
19% NL VAT
NL LUX
15% LUX VAT
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 7
New EU Council Regulation - Place of business of a taxable person
May differ from the place from which the activities are carried out!
Factors to be taken into account
Mere presence of postal address may not be taken into account unless it meets the criteria
-> see Planzer Luxembourg
Concept of "fixed establishment" for VAT now in Regulation
Supplier location: the "intervening" fixed establishment
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 8
New EU Council Regulation - customer location
Customer location: Where the customer is established in more than one place, the
services are - as a general rule - taxable in the place where the customer has established his business.
If provided to a fixed establishment -> taxable at that place.
EU VAT Committee Customer is responsible for determining at which location service
is received!
List of factors to be taken into account
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 9
Case study
GERSupplier
GERCustomer
Global Contract
Which establishment is providing the service?Does the local fixed establishment intervene?Reverse charge mechanism applicable?
CS FESU FE
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 10
Dutch Guidelines
Example 1 A software provider contracts with a branch of a multi-national
business customer with branches in various jurisdictions for licensing services, and such branch “distributes” the licensing services to other branches of the customer.
Example 2 A Dutch business customer engages with a German branch office of
a multi-national consultancy firm with branch offices throughout the world for the performance of consultancy services. In rendering the services the German branch office involves employees from its Dutch branch.
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 11
"Use and enjoyment" override
Criterion of "effective use and enjoyment"
Changes place of supply to where service is used and enjoyed (consumption principle)
ECoJ case law -> Athesia Druck Srl.
Inbound- and outbound EU
Overrides fallback rule for B2B and B2C
Various EU jurisdiction's have implemented EU&E rules which may lead to potential conflicts and double taxation
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 12
Effective use & enjoyment override
Supplier US co
23% Greek VAT
No VAT
transfer of IP
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 13
Modernisation of VAT on insurance and financial services - update
2007: Proposal for Directive and implementing Council Regulation
Objectives:
Increase legal certainty and reduce administrative burdens
Consistent application throughout the EU
Allow businesses to manage better the impact of non-deductible VAT on their activities
Measures:
Redefining existing VAT exemptions -> Council Regulation
Introduction option to tax
Introduction industry specific exemption on (cross-border) cost sharing arrangements
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 14
Compromise text Directive 13 May 2011: Insurance and reinsurance -> "transfer of insurance and reinsurance
contracts "-> SwissRe
New definition: processing of (re)insurance claims in Directive -> Skandia
-> "means a bundle of services necessary for making a decision on (re)insurance claims"
Modernisation of VAT on insurance and financial services - update
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 15
See also new compromise text of Council Regulation May 13, 2011
New definition of processing of insurance and reinsurance claims shall cover at least:
(a) receipt and handling of insurance or reinsurance claims;
(b) accepting and rejecting claims and making any necessary policy or premium adjustments.
However, processing of insurance and reinsurance claims shall not, in particular, cover the following:
(a) claims settlement;
(b) damage assessment.
Modernisation of VAT on insurance and financial services - update
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 16
Compromise text Council Regulation May 13, 2011
financial transfers - included is: "(d) the execution of transfers of monies into other money media allowing temporary storage of the value of these monies and subsequent payment for goods and services, such as smart card based electronic purse systems, telephone cards, and credits for mobile phones:"
Excluded is:"(b) the electronic transport of messages between" financial service providers while ensuring their integrity and security."
Nordea Pankki Suomi Oyj, C-350/10, July 28, 2011:
"SWIFT’s responsibility is limited to technical aspects and does not extend to specific, essential elements of the financial transactions"
Modernisation of VAT on insurance and financial services - update
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 17
Hungarian Presidency identified four major outstanding issues:
1) transfer of insurance and reinsurance contract portfolios;
2) outsourcing;
3) management of investment funds;
4) derivatives.
Modernisation of VAT on insurance and financial services - update
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 18
A VAT View from Brussels
Shift of focus in Brussels Following the financial crisis - generating revenues
A global and EU approach
Modernisation of system
Lisbon Treaty - shift of institutional power
Enhanced powers for the Commission
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 19
Measures to generate revenue
Financial Transaction Tax
At the Paris summit today Chancellor Angela Merkel and President Nicolas Sarkozy said they planned to introduce the tax as part of their response to the sovereign debt crisis. Mr Sarkozy said: "The French and German ministers will table a joint proposal at the EU level next September for a tax on financial transactions. This is a priority for us." Telegraph, 17/8/11
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 20
Sticking points
Its been a difficult few months for the European Commission
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 21
Ongoing work to be finalised
Proposals which still need completion: VAT Package implementation - 1 January 2011
VAT Refund Directive - 1 January 2010
VAT Financial Services and Insurance - ongoing
Forthcoming proposals including: VAT treatment of vouchers
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 22
The future of VAT
European Commission want to change VAT in Europe Fundamental reassessment in 2011
New economic realities, technological processes, fraud patterns etc - lead to new challenges in Europe
Issues in recent legislation - limited European Commission power to intervene without more legislation in implementation
Recent consultations are inconclusive of action - level of standard rates in VAT and CCCTB
Often resistance by national governments on VAT - emotive issue to find agreement upon
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 23
Green Paper
Green Paper looking at the Future of VAT launched on 1 December 2010
Green Paper designed to gather stakeholder information by asking 32 questions about the whole of VAT in Europe including:
Scope of VAT - including derogations, exemptions and definitions;
System of deductions reform;
VAT accounting; and
Protection from fraud.
System replaced by an origin based system (country of seller)
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 24
Green Paper
New, modern system of VAT collection;
Further harmonisation;
Increasing the power of the European Commission;
European Parliament are currently considering their response to the Green Paper;
Following Green Paper feedback Commission will draft a number of proposals.
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 25
Feedback from Green Paper
Greater simplification, certainty and fairness;
Exemptions, derogations and exceptions;
Implementation of tax law;
More transparency;
Tax fraud prevention;
Hybrid system.
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 26
Input into process
Green Paper is still the initial stage
European Commission seeking input from business and other stakeholders
Process of analysis of feedback to determine what is placed within the proposals
Now is the time if you have concerns to become involved - once the text is drafted it may be too late to radically change!
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 27
Case Study
How do we work
Understand the issue of our client
Develop a strategy for engagement at EU level
Draft and develop key messages
Organise contact with key stakeholders
Assist with drafting legislative amendments
Conduct follow up and understand the needs of the stakeholder
Involve the media
National involvement
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 28
Case study
Client expressed concern relating to the implementation of EU law
Formed an informal coalition of other companies
Developed helpful, business based information for EC
Conducted stakeholder meetings
Carried out continuous follow up
Positioned the client as a 'business representative'
Worked with the institutions to find a solution
Positive outcomes
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 29
Contact
Daan Arends
Emma Greenow
E: [email protected]: 020 5419 315
T: + 32 2 500 1623
08-09-2011DLA Piper - Legal Business Day 2011 - Recent developments in field of VAT 30
legalbusinessday.nl
Twitter mee over Legal Business Day: #LBD11 #dlapiper