uk indirect tax conference 2015 making things in a changing … · 2019-10-29 · uk indirect tax...
TRANSCRIPT
UK Indirect Tax Conference 2015
Making things in a changing world –
Industry 4.0 & Indirect Taxes
Contents
1. Introduction
2. Industry 4.0 – The future of manufacturing
3. The future of taxation
2
Myles Duckworth
Partner
+44 151 429146
Gareth Pritchard
Director
+44 2920 26 4294
Stephen Hodgson
Senior Manager
+44 20 7303 8439
3
Introductions
Jeffrie Mann
Senior Manager
+44 20 7007 6975
Aili Nurk
Senior Manager
+44 20 7007 8392
Who we are
Industry 4.0 – The Future of
Manufacturing
5
What is Industry 4.0?
Background
End of 18th century Beginning of 20th century Today
First industrial revolution
Second industrial revolution
through introduction of mechanical production facilities with the help of water and steam power
through introduction of mass production with the help of electrical energy
Deg
ree o
f co
mp
lexit
y
Industry 1.0
Industry 2.0
First mechanicalweaving loom1784
First assembly line1870
1970s onwards
on the basis of Cyber-Physical Production Systems (CPPS), merging of real and virtual worlds
Third industrial revolution
Fourth industrial revolution
through application of electronics and IT to further automate production
Industry 3.0
Industry 4.0
First programmable logic control system1969
6
Why is Industry 4.0 important now?
Exponential growth technologies
7
Scope of Industry 4.0
Extent to which it will affect day to day life
Internet ofthings
Internet ofdata
Internetof services
Internetof people
Smart homes
Smart buildings
Smart logistics
Smart grid
Smart mobility
Business web
Social web
CPPS
Industry 4.0
Smart factory
8
Impact on the manufacturing landscape
Four main shifts
Value creation
vs.
Value capture
9
What Industry 4.0 could mean for supply chains
The implications
Creating value
networks
rather than
value chains
Provision of
new services
and a ‘shift to
services’ for
traditional
suppliers of
goods
Adding
services to a
‘product
company’
Additive
manufacturing
10
Case Study
Adding services to a ‘product company’
A tyre manufacturer has launched a
new service designed to help truck
fleet managers reduce fuel
consumption. Trucks are fitted with
sensors to collect data on fuel
consumption, tyre pressure,
temperature, speed, and location.
The data is transmitted to a server
where the data is analysed and
recommendations are provided to
the fleet managers.
Place of supply
Valuation
Capital expenditure
Time of supply
Single / Multiple supply
11
Case study
Creating value networksWho is moving
product?Clearing
shipments
VAT Registration
Deal structure
Legal
Status
Establishment Supply of IP
A company is launching an innovation
challenge. As part of the challenge it
will make existing patents available to
the entity that comes up with the best
value creating idea. The company will
then enter into a collaborative
arrangement with them.
12
Case study
Shift to services
A large manufacturer adapts its
business model so that in
addition to selling engines
outright to its customers it also
rents them out and charges
based on use. The rental
includes servicing, repairs and
upgrades.
Compliance requirements
Time of supply
VAT liability
Single / Multiple supply
13
Case study
Additive Manufacturing
Parisair, a French headquartered business, holds stock in the UK for a UK customer and is not VAT registered in the UK as a result of the call-off stock rules
Due to the complexities of the new supply chain, Parisair is now considering holding no stock in the UK and simply providing a CAD file to its customer for them to 3D print. What is the impact? What if the CAD file is held on a U.S. server?
Rather than holding finished parts in the UK, Parisairsimply holds a stock of 3D printing material in the UK. When its UK customer wants the part, Parisair sends a file to a subcontractor in the UK who prints the product. How does this change the VAT analysis?
The customer requires customised parts for its product. What implications does this have?
14
Additive manufacturing
How it will become more relevant in the future
“3D printing has the
capacity to transform
the supply chain.
Reliance on highly
specialised suppliers
for complex parts can
be reduced with 3D
printing, as can the
number of suppliers
involved across the
supply chain, bringing
down the cost of
supply chain
management.”
Raphael Urech, Alstom
Schweiz, Knowledge
Manager Hybrid Parts,
Thermal Power sector
Business model
evolution
• Mass customisation• Manufacturing at point
of use• Supply chain
disintermediation• Customer empowerment
High impact on product
High impact on supply chain
Low impact on product and supply
chain
Product evolution
• Customisation to customer requirements
• Increased product functionality
• Market responsiveness• Zero cost of increased
complexity
Stasis• Design and rapid
prototyping • Production and custom
tooling • Supplementary or
“insurance” capability• Low rate production/no
changeover
Supply chain evolution• Manufacturing closer to
point of use • Responsiveness and
flexibility• Management of demand
uncertainty • Reduction in required
inventory
1
43
2
Pro
duct
impact
Supply chain impact
Source: Deloitte . 3D Opportunity: Additive manufacturing paths to performance, innovation, and growth
Additive manufacturing: Strati 15© 2015. For information, contact Deloitte Touche Tohmatsu Limited.
16
Impact of additive manufacturing on operations
Considerations for business functions
Information technology• CAD/CAM systems
• Integration of IT systems with R&D and manufacturing platforms
Finance• Fixed and variable cost
comparisons between additive manufacturing and traditional manufacturing
Supply chain management• Decisions related to in-house
over outsource
• Choice of suppliers drivenby their 3D capabilities
• Co-production with suppliers and customers
Legal
• Intellectual property issues
• Regional and country regulations
R&D/Production• Choice of components that favor 3D manufacturing over traditional
• Crowd-source ideas to break existing design/manufacturing limits
Human Resources• Need for lower headcount
• Talent with requisite skills in areas such as design and material sciences
17
Case study
Additive Manufacturing
Parisair, a French headquartered business, holds stock in the UK for a UK customer and is not VAT registered in the UK as a result of the call-off stock rules
Due to the complexities of the new supply chain, Parisair is now considering holding no stock in the UK and simply providing a CAD file to its customer for them to 3D print. What is the impact? What if the CAD file is held on a U.S. server?
Rather than holding finished parts in the UK, Parisairsimply holds a stock of 3D printing material in the UK. When its UK customer wants the part, Parisair sends a file to a subcontractor in the UK who prints the product. How does this change the VAT analysis?
The customer requires customised parts for its product. What implications does this have?
18
Case study
Existing supply chain
Parts
Parts
Goods
Held as call
off stock for
specific UK
customer
• Parisair, a French headquartered business, holds stock in the UK for a UK customer.
• It is not VAT registered in the UK as a result of the call-off stock rules.
• It receives components from Spain and France which it processes into goods and sends to its warehouse in the UK.
19
Case study
Potential supply chain
• Parisair, a French headquartered business, holds no stock in the UK. It simply holds base material for additive manufacturing.
• When a customer requires a spare part it provides the relevant CAD file to the UK customer enabling the customer to print their own spare parts.
• The customer sources the base material required for 3D printing.
CAD file
Base
material
purchased
from China
The Future of Indirect
Taxation
BEPS
What is it?
21
“Tax planning strategies that exploit gaps and mismatches in tax rules to
make profits ‘disappear’…or shift profits to locations where there is
little or no real activity but the taxes are low resulting in little corporate tax
being paid.”
OECD website: ‘BEPS Frequently asked questions’
BEPS
In a nutshell
Are countries getting their fair share of revenue?
22
High Taxed CountriesInterest
Royalties
Products
Services
Low Taxed Countries
BEPS
How is it relevant for Indirect Tax?
Changes to definition of ‘permanent establishment’
Overseas companies will have branches locally, digital businesses become localised?
‘Transfer pricing aligned to value creation’
Changes to how and where products are valued?
Major changes to existing operating models and supply chains
The end of some ‘traditional’ supply chain models, major re-wiring of intercompany supply chains, systems, legal agreements, etc?
Changes to intercompany financing arrangements
100 page step plans, partial exemption, VAT grouping?
Data exchange / disclosure of tax planning
More onerous rules, cross-border tax authority challenges?
23
VAT Developments in the EU
Future of cross-border B2B supplies
Definitive VAT regime for intra-EU trade = Taxation at destination.
This addresses the two fundamental issues:
1. the place of taxation; and
2. the person liable for tax
Significant aspect: tackling intra-EU VAT fraud (e.g. MTIC, carousel)
Following in-depth analysis five options have been identified as possible solutions, looking
first at B2B supplies of goods.
The rules applicable to other intra-EU supplies, such as the VAT treatment of services and
business-to-consumer (B2C) supplies, are reviewed in parallel aiming to arrive at a more
consistent and simpler VAT regime for all intra-EU transactions
24
VAT Developments in the EU
The Commission published in June 2015 a feasibility and economic evaluation
study on “Implementing the ‘destination principle’ to intra-EU B2B supplies of
goods”
25
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, and its network of member firms, each of
which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
Deloitte LLP is the United Kingdom member firm of DTTL.
This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the
particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication.
Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of
care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.
© 2015 Deloitte LLP. All rights reserved.
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