IVA Meeting 30 April 2004 Warsaw

1
IVA Meeting 30 April 2004Warsaw

2
AGENDA

• 9.00 gt 9.30 Introduction and Welcome J.C.
  Bouchard
• 9.30 gt 10.30 Update on candidate
  countries Antoni Turczynovich
• 10.30 Coffee
• 11.00 gt 12.00 The commission's plans W.
  Blockmans
• - One stop shop
• - Simplifications
• - Modernisation
• 12.00 gt 12.30 Questions
• 12.30gt 13.30 Place of supply of Services J.C.
  Bouchard
• 13.30 Lunch

3
AGENDA

• 14.30 gt 15.00 ECJ Update S. Dale
• 15.00 gt 15.30 When is Input VAT
• not Input VAT R. Yewdall
• 15.30 gt 16.00 Code of Practise J.C. Bouchard
• 16.00 Tea
• 16.30 gt 17.00 Election of the Council All
• 17.00 gt 17.30 Statutes/insurance P. Beighton
• and accounts R.Yewdall
• 17.30 gt 18.00 Subscriptions J.C.Bouchard
• 18.00 Closing remarks J.C. Bouchard

4
Introduction and WelcomeJ.C. Bouchard
5
Update on the candidate countriesA. Turczynovich

6
IVA Conference 2004

• VAT Recovery in the Accession
• Countries
• 30 April 2004, Warsaw
• Antoni Turczynowicz

7
The next 30 minutes!

• What are the 8th and 13th Directives?
• When do they take effect in the new Accession
  countries?
• Can I obtain a refund of foreign VAT incurred on
  all goods and services acquired in the course of
  business?
• How can I apply for a VAT refund under these
  Directives?

8
8th EU VAT Directive

• Requires all EU countries to implement a mutual
  VAT refund system from 1 January 1981, or later
  if they joined the EU after that date.
• As good as this seems, as usual there are some
  requirements
• (a) a business must be registered for VAT in
  another EU member state,
• (b) not have any establishment or residence in
  the country from which the refund is requested
  and
• (c) generally speaking, the business must have
  made no supplies of goods or services in the
  country of claim other than
• Certain transport services and services
  associated therewith or
• Services which are treated as supplied where the
  recipient is located.
• There are some variations to these rules
  depending on the country.

9
13th EU VAT Directive

• Requires all EU countries to introduce refund
  arrangements for businesses established outside
  the EU from 1 January 1988.
• States that the refund system must not favour
  non-EU countries over EU countries and
• Refund is conditional upon the non-EU country
  introducing reciprocal arrangements in respect of
  its own turnover taxes. For example, currently
  the Czech Republic does not refund to Spanish
  businesses as there are no reciprocal
  arrangements in place between the 2 countries.
• This position will change post 1 May 2004 as all
  EU member states must offer a mutual VAT refund
  system.

10
10 Accession Countries
(in case you needed a reminder)
Estonia
Czech Republic
Latvia
Poland
Slovakia
Lithuania
Slovenia
Hungary
Malta
Cyprus
11
The Position Now
Q Do the Accession countries currently operate
their own refund procedures? YES Czech Republic,
Poland, Hungary, Slovak Republic, Slovenia,
Estonia, Latvia and Cyprus NO Malta
12
Non-refundable VAT

• In general, no refund will be given for VAT
  incurred relating to
• Supplies and services that are not used for
  business purposes
• Supplies within that country
• Exempt business activities.
• Entertainment

13
How long has their refund mechanism been in place?
This varies enormously 1999 Slovenia 2003
Latvia (before that only claims relating to
transport services were accepted) 2004 Malta
14
The position post 1 May 04

• The new member states will be obliged to comply
  with the 8th Directive which means
• Granting VAT refunds to businesses resident in
  all the 25 Member States no selection process
  based on reciprocity agreements and
• Complying with all the conditions laid down in
  the Directive e.g. refunds should be granted
  within 6 months of the date on which the
  application was lodged.

15
Hotels

• YES
• Lithuania
• Latvia,
• Hungary and Estonia
• NO
• Poland, Czech Republic,
• Slovenia, Slovak Republic.

16
Entertainment
YES Hungary MAYBE Poland NO Lithuania, Czech
Republic, Estonia, Slovenia, Slovak Republic and
Latvia
17
Food and Drink
YES Lithuania No Poland, Czech Republic,
Estonia, Slovenia, Slovak Republic, Latvia,
Hungary
18
Fuel

YES Estonia (only partially refundable) MAYBE Lith
uania NO Poland, Czech Republic, Slovenia, Slovak
Republic, Latvia and Hungary.
19
Can I submit a claim for any amount?

• The 8th Directive sets minimum claim limits for
  EU businesses of
• 200 for quarterly claims and
• 25 for annual claims.
• EU countries may approve higher limits if they so
  wish.

20
What else?
ORIGINAL invoices and any import documents,
bills, vouchers, receipts or customs clearance
forms. COPIES WILL NOT BE ACCEPTED.
21
What is the deadline?

• The claim year runs from 1 January to 31 December
  i.e. 1 calendar year.
• The deadline for submission of the claim is 30
  June following the end of the calendar year.
• Therefore, for invoices dated 2003, the deadline
  for submission of the claim is 30 June 2004.
• Deadline is fast approaching!

22
Are some tax authorities more lenient?
No they are not! However some current EU Member
States are Belgium 3 years The Netherlands 5
years . . .from the 1 January following the year
the VAT was incurred.
23
When can I expect the refund?
This can vary greatly between the countries, for
example Latvia has stated that a refund will be
granted within 1 month! Hungary the time stated
is 7 months! However, as we know from current EU
countries the reality can be significantly
different. It can take up to 3 years for refunds
to be granted in some current EU Member States!
24
Can I expect interest if my refund is taking
longer than expected?
? Member States must grant interest when the
claim has not been paid within 6 months of the
date of submission. However this interest can
take up to 1-2 years to arrive!
25
Will refunds only be paid into local bank
accounts?
YES Poland, Hungary, NO Czech Republic, Estonia,
Lithuania, Latvia, Slovenia, Slovak Republic
26
Transitional period

• VAT incurred in the Czech Republic up to 30 April
  2004 by a Spanish company
• No refund?
• Refund under Czech rules
  (if reciprocity exists)?
• Refund under EU rules?
• Can one refund request be submitted for all of
  2004?

27
13th Directive
If the new Accession countries incur VAT in a
country outside the EU e.g. Switzerland, this VAT
will be refundable in accordance with Swiss
law. As mentioned previously, a refund will then
only be granted by the claimant country if there
is a reciprocity agreement in place with the
resident country of the applicant. Some countries
may require that a different application form is
completed.
28
Summary

• Check that you have no establishment in the
  claimant country.
• Ensure that the VAT is deductible in the claimant
  country
• Obtain the appropriate application form and
  complete it in the correct language
• Enclose a certificate of taxable status and the
  original invoices with the claim
• Send it to the tax authority in the claimant
  country by the deadline
• Wait for your money to arrive . . . .!
• If in doubt, ask! But who ?

29
COFFEE

30
The Commission's plans
Werner Blockmans European Commission DG Taxud C3
31
The Commissions VAT Strategy A review and
update of the priorities
32
New communication

• review of the progress made since the
  Commission's communication of 7 June 2000 on the
  new VAT strategy
• present new initiatives and emerging guidelines
  for future action

33
General guidelines

• taxation at the place of consumption
• simplification of fiscal obligations

34
General guidelines

• Applying the general guidelines to
• B2B goods
• B2B services
• B2C goods
• B2C services

35
B2B Goods

• No need to change the place of
• taxation
• Simplification by reverse charge
• - supply with installation or assembly

36
B2B services

• Proposal presented end of 2003
• change of general rule
• consequence extension of reverse charge

37
B2C Goods

• Minor changes of the place of taxation rules
• - distance sales
• Simplification by one stop shop

38
B2C services

• Obligation to review e-commerce before 30 June
  2006
• extend this review to all B2C services
• Ensuring taxation at place of consumption
• Simplification by one stop shop mechanism

39
The one stop shop

• - public consultation is ongoing
• - scope
• BC supplies by a business not established in the
  MS where the supply is taxed
• optional scheme

40
The one stop shop

• VAT return
• VAT due by rate
• VAT deductible
• Payment directly to Member States where VAT is
  due
• Control
• maintain control capabilities
• coordinated control procedures

41
Proposals discussed in Council

• B2B services
• VAT rates
• Tour Operators
• Postal services
• Recast of the Sixth Directive

42
Proposals planned for 2004

• Adoption of implementing measures
• A mechanism to avoid double taxation in
  individual cases
• Vouchers and payment cards
• Rationalization of existing Article 27
  derogations
• Simplification of obligations

43
The Future

• After 1 May 2004 adoption in Council requires
  approval of 25 Member States
• More complex files
• presented to the Council
• to be presented in the near future

44
Place of supply of ServicesIs the profession
impacted ?J.C. Bouchard
45
LUNCH

46
ECJ Update
Stephen Dale
47
Recent cases and Opinions

• Cookies World case C-155/01 Austria and
  illegal use of a self-supply charge to stop cross
  border leasing.
• Gil Insurance case C-308/01 compatibility of
  an insurance tax and VAT approval under Art
  27 Opinion. Decision 29 April.
• Océ van der Grinten case C-58/01 withholding
  taxes.
• Commission v Italy case C-437/01 Italy
  applying an excise duty on lubricating oils
  beyond that provided in the Excise directives.
• Webers Wine World case C-147/01 principles
  of equivalence and effectiveness Excise duties.

48
Recent cases and Opinions

• Taksatorringen case C-8/01 scope of insurance
  exemption Art 13B a and Art 13A 1 f groupings
  distortion of competition.
• dAmbrumenil case C-307/01 medical fees and
  exemption detailed list provided of types of
  services taxable and exempt.
• Unterpertinger case C-212/01 whether medical
  experts fees are exempt under Art 13A (1) c
• Zita Modes case C-497/01 transfers of
  undertakings must be capable of being exercised
  whether legally allowed or not.

49
Recent cases and Opinions

• Terra Baubedarf-Handel case C-152/02 decision
  on 29 April when does right to deduct arise
  date of tax point or date of receipt of invoice?
  Opinion.
• Faxworld case C-137/02 transfers of going
  concerns two entities no supplies made VAT
  deductible? Opinion decision 29 April
• Commission v Germany case 109/02 application
  of reduced rate distortions of competition.
• Karegeorgou case C 78/02 - VAT charged in
  error due to the State under Art 21?
• Christoph Dornier- Stiftung - case C-45/01
  medical care Art 13A 1 b - direct effect of the
  Article.
• Dansk - case C-169/02 - case dropped.

50
Recent cases and Opinions

• Lindfors case C-365/02 Finnish car taxation
  on EU goods Opinion
• Harbs case C-321/02 special scheme for
  farmers Opinion
• Cimber Air - case C-382/02 Internal flights not
  exempt even if the company mostly flies
  international routes Opinion
• VermietObjekt Kirchberg case C-269/03
  Conditions for option to tax Opinion
• Bockemühl case C-90/02 reverse charge
  invoices
• Stenholmen case C-320/02 second hand horses?

51
Recent cases and Opinions

• Commission v Italy case C-381/01 grants being
  part of the price of the goods art 11A
  Opinion.
• Commission v Finland case C-185/00 excise
  duties on gas-oil.
• Lipjes case C-68/03 Place of supply of
  intermediary services Opinion.
• Commission v Greece case C-475/01 taxation of
  Ouzo excises Opinion.
• Commission v Belgium case C-415/02 taxation
  of share transfers non VAT Opinion
• Meiland Azewijn case C-292/02 Excise duty on
  marked fuels restrictions of use in another
  M/State. Opinion.
• Transport Service case C-395/02 - ?

52

• Questions

53
When is Input VATnot Input VAT ?
R. Yewdall
54
When is input VAT not VAT?

• Article 17 Sixth Directive (77/388/EEC) defines
  the origin and scope of the right to deduct
• Article 17(2) allows deduction in respect of
  goods or services for the purpose of taxable
  transactions by a taxable person

55
When is input VAT not VAT?

• Under Article 18 (1) (a) Sixth Directive to
  exercise a right to deduct a taxable person must
  hold a valid tax invoice
• Article 22 (3) lays down the criteria for what
  must be on the invoice

56
When is input VAT not VAT?

• Article 4 VAT Sixth Directive defines a taxable
  person - any person who independently carries
  out in any place any economic activity

57
When is input VAT not VAT?

• In the ordinary course of business if a VAT
  invoice is issued by a taxable person there is an
  automatic right to deduct the VAT shown on that
  invoice by the person receiving the goods or
  services.
• The responsibility for accounting for the VAT
  charged is that of the supplier

58
When is input VAT not VAT?

• In the UK and other EU Member States a problem
  with Missing Trader Fraud where a VAT
  registered business charges VAT but disappears
  and fails to pay any VAT charged to the tax
  authorities
• Usually happens as part of a chain of
  transactions involving businesses in other Member
  States

59
When is input VAT not VAT?

• Missing Trader Intra Community Fraud (MTIC Fraud)
• Involves high value goods

60
When is input VAT not VAT?

• Computer chips
• Mobile phones
• Jewellery
• Mont Blanc Pens

61
When is input VAT not VAT?

• Bond House Systems Limited
• A UK VAT Tribunal case
• Disallowed recovery of input VAT even though the
  business had purchased goods in good faith and
  held a VAT invoice

62
When is VAT not input VAT?

• Bond House Systems Limited

63
When is input VAT not VAT?

• Bond House Systems Limited

64
When is input VAT not VAT?

• In Bond House input VAT was disallowed on the
  basis that the chain of transactions lacked
  Economic Substance
• The transactions were not looked at individually
  but globally
• The transactions formed part of a series which
  was fraudulent

65
When is VAT not VAT?

• ECJ cases including Leclerc and others v Sàrl Au
  blé vert and others (229/83)- a device to
  circumvent the French net book agreement, and
  Emsland-Stärk GmbH v Hauptzollamt Hamburg
  (C-110/99) - the use or abuse of legal form in
  order to obtain a benefit - were cited in
  support of the decision

66
When is VAT not VAT

• The transactions formed part of a series which
  was fraudulent
• The criteria by which such transactions are to be
  judged are wholly objective
• The transactions are devoid of economic substance
• The VAT charged was not VAT and not recoverable

67
When is VAT not VAT?

• Further attempts to disallow VAT even where VAT
  invoice is held by means of imposing joint and
  several liability in similar cases where failure
  to make reasonable checks in regard to buyers
  and sellers.
• S77A VAT Act 1994

68
When is input VAT not VAT?

• Both the Bond House case and a challenge to the
  provisions imposing Joint and Several Liability
  are now under appeal and referred to the ECJ

69
Code of Practise
J.C. Bouchard
70
TEA

71
Election of the Council
72
Statutes/insurance and accounts
P. Beighton R. Yewdall
73
Change of Status and Legal Position
74
Statutes Legal Position

• Our position in 2001
• IVA established for 10 years
• Known to represent Member's refund interests
  worldwide
• An important vehicle for presenting issues of
• concern to the Commission and VAT authorities
• A need for a permanent establishment
• Preference for Brussels

75
Statutes Legal Position

• Our position in 2002
• We enlisted the assistance of PwC Belgium for
  legal advice.
• PwC proposed two options
• Both non-profit making associations
• ASBL - AISBL

76
Statutes Legal Position

• Our position in 2002contd
• AISBL recommended as more flexible
• Must be non-profit making
• Limited commercial activities with a view to
  developing their non-profit making purpose
• Requires government approval
• Currently no specific accounting obligations
• We began preparing draft Articles of Association

77
Statutes Legal Position

• Our position in 2003
• We continued preparing the draft Articles of
  Association
• We put the draft Articles to our members
• We finalised the documents and signed the Final
  Version of Articles of Association in Belgium on
  2nd July 2003
• We received the Royal Decree from the King of
  Belgium on 17th December 2003

78
Statutes Legal Position

• Our position in 2004
• We now have a full legal personality in Belgium
• We have a registered head office in Belgium
• However correspondence should continue to be sent
  to the Secretary in the UK
• Please note there is no PHYSICAL presence in
  Belgium
• FULL ARTICLES OF ASSOCIATION HAVE NOW BEEN
  DOWNLOADED ONTO THE WEBSITE

79
Activities
80
International VAT Association Activities - 2003

• Incorporation
• Insurance
• Luxembourg Claims
• Agreement with Spanish Administration
• Liaison with potential new members
• Requests from members / students
• Web site Development

81
(No Transcript)
82
Country Information

• Today there are currently 15 Member States within
  the EU
• Tomorrow we will have 25 member states
• Our web site contains basic filing information on
  only 10 of those countries
• We still do not have information on the following

• Austria
• Belgium
• Greece
• Luxembourg
• Portugal

• ANY of the new
• member states

83
Acceding Countries

• New Member States
• Cyprus Czech Republic
• Estonia Hungary
• Latvia Lithuania
• Malta Poland
• Slovak Republic Slovenia

84
Accounts Financial Position
85
(No Transcript)
86
(No Transcript)
87
(No Transcript)
88
Membership andSubscriptions
J.C. Bouchard
89
WTHOUT YOUR PAID SUBSCRIPTIONSTHE ASSOCIATION
WILL NOT BE ABLE TO FUNCTION
90
Membership subscriptions

• 2003
• Officially
• 54 Members
• Inc. 1 Honorary
• (no subs required)
• Paid Up Members
• 46
• 3 members have promised to pay
• 3 members are yet to confirm

• 2004
• Officially
• 63 Members
• (inc. 1 Honorary)

91
2004 subscriptions

• Subscription invoices to existing members were
  issued on 7th January 2004
• New members invoices were issued at later dates
• New members have been keen to pay their 2004
  subscriptions!

92
2004 Membership

• From 64 Active Members

• Officially 66 Members
• 2 members
• Did not pay for 2003
• Have not paid for 2004
• Have lost touch
• Leaving
• 64 Active Members

93
Ways of Reducing Expenses

• Members what can you do to help?
• Please pay your own bank charges!
• Last year we lost 245 on subscription fee
  transfers
• Please pay your subscriptions promptly!
• We are a non-profit making organisation and the
  interest we earn is used for your benefit

94
Ways of Reducing Expenses

• IVA Council What can we do to help?
• Our President has agreed to pay subscription fees
  in the same way as any other member!
• Restrict the number of Guest speakers we invite
• We are reviewing costs for bank charges and the
  possibility of changing banks to reduce charges
• We are reviewing costs vs usage for the Website

95
Income vs Expenditure

• What can we do ?
• Restrict our activities immediately
• OR
• Increase our subscription fees

96
Income vs Expenditure

• What can we do ? Conclusion
• We MUST
• Increase our subscription fees

97
2005 Subscription Fees

• To balance an increase in subscriptions, we would
  like to
• continue to act on behalf of our members in
  issues such as the difficulties being experienced
  with Luxembourg
• Forge ahead with the competent Authorities
• Update our website
• Continue to provide regional information via the
  website
• Provide regular updates, via the website and
  email, along the lines of the newsletter that
  used to be issued

98
2005 Subscription Fees

• 600 per member company
• Part II, s3 and s4(1) and in the Statutes prior
  to Incorporation
• EACH Legal Entity must be a member in its own
  right.

99
Closing remarks J. C. Bouchard
100
IVA Meeting 30 April 2004Warsaw