TAX NEWS LEGAL NEWS WORLD NEWS CASE LAW€¦ · Tax and Legal Update / PMG Czech Republic NOVEMBER...
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NOVEMBER / 2015 Tax and Legal Update / KPMG Czech Republic 1 Follow us TAX NEWS LEGAL NEWS WORLD NEWS CASE LAW TAX AND LEGAL UPDATE 11
Transcript of TAX NEWS LEGAL NEWS WORLD NEWS CASE LAW€¦ · Tax and Legal Update / PMG Czech Republic NOVEMBER...
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 1
Follow us
TAX NEWS
LEGAL NEWS
WORLD NEWS
CASE LAW
TAX AND LEGAL UPDATE 11
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 2
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantagesruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
Pavel RochowanskiPartner
Tax Services
Introduction byPavel Rochowanski
Dear readers,
Itishardnottonoticehowbusyeverybodygetsatthistimeoftheyear–bothatworkandonthehomefront.Accountantsaregettingreadyforfinancialclosings;managersareplanningtheirfinancialgoalsforthecomingyear;andeventheconstructionsectorisrunningatfullblast,needingtouseupallthosepublicfunds.And,ontopofallthat,gardensandweekendhouseshave to be winterized and prepared for the harsh weather that’s predicted.
Theactivityofpublicbodies,bothnationalandinternational,mayalsobelikenedtogardenworkunderthecodename“huntthemole“–ideallysothathewon’tshowupnextyearoratleastabandonhisundergroundeconomyruns.SeveralinstructionmanualshavealreadybeenwrittenaboutCzechVATpestcontroltools,includingVATledgerstatementsandelectronicreportingofsales.Inthisissue,wewillintroducetoyousomeoftheEuropeaninnovations inthisfield,abouttobeimplementedinourlegislationsoonerorlater.
FollowingtheFourthAMLDirective,theMinistryofFinancehassubmittedtothegovernmentan amendment to the Act on Certain Measures against Legalisation of Proceeds from Crime and TerroristFinancing.Theamendment,amongothers,providesamoreprecisebeneficialownerdefinitionandstipulatesanewdutytoregistertheminpublicregisters.TheOECDrecommendsunifyingnationalregulationsinthefieldofhybridmismatcharrangements,controlledforeigncompanies or patent box tax regimes.
TheEuropeanCommissionhasalsokeptbusy,investigatingtaxregimesofcertainmultinationalsandbeingnottooshytorequestinformationfromotherstates,thecompaniesinquestion, ortheircompetitors–surely,thereisnothinglikehealthyrivalry!TheVATareacannotgounnoticedeither–here,wefocusonthepossibilityofbreakingthroughthenationallimitationperiodforthe prosecution of VAT-related offences if a criminal court of a member state concludes that suchaperioddoesnotprovidesufficientprotectiontothefiscalinterestsoftheEU.Finally,we include at least one judgement where the Supreme Administrative Court stood up for the taxpayer–protectinghonesttaxpayersfrombeingliablefortheiruncontactablesuppliers. All’swellthatendswell.Isincerelyhopethatourupdatewillnicelyshortenatleastoneofyourlong November evenings.
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 3
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
TAX NEWS
End of restructuring in the CR?
Last week the Supreme Administrative Court published its long-awaited decision regarding the application of the abuse of law concept to intra-company reorganisations. The court examined the deductibility of interest on a loan provided by a related party for the purpose of financing the purchase of ownership interests in companies acquired from this related party.
Thedecisioninvolvedthemergerofacreditorwiththeacquiredcompanies,asaresultofwhichthetaxableprofitgeneratedbythesuccessorcompanyfromitsbusinessactivitieswasreducedbytheinterestexpenseassociatedwiththeloandrawnfortheacquisition.Simultaneously,the“Czech”partoftherestructuringwasthepartofthegroupreorganisationconsisting ofseveralphases,oneofwhichwastheestablishmentofafinancingandholdingarrangementintheNetherlandsandLuxemburg.Thisneworganisationalschemeinvolvedhybridfinancing,i.e.interestonaloanwastreatedasdeductibleinonecountryand,simultaneously, astax-exemptdividendinthecountryinwhichtheinterestwasreceived.
Inthisparticularcase,theSACagreedwiththetaxauthority’sconclusionsabouttheabuseofarighttoclaiminterestontheloaninquestion.Initsreasoning,thecourtfurtherelaboratedthatitdoesnotingeneraldisputemethodsoffinancingviadebtorthepossibilitytoacquireownershipintereststocarryoutasubsequentmerger.Thecourtneverthelessemphasisedthat such transactions must be made for clear economic and justifiable reasons and not just for tax purposes. It is therefore not surprising that a substantial part of the SAC’s decision wasprimarilydedicatedtoexaminingtheeconomicgroundsoftheintra-companytransactionatissue.Thecourtfoundthereasonspresentedbythetaxpayerneithersufficientnoreconomicallyorrationallyjustifiable.AccordingtotheSAC,therestructuringinquestiondidnotleadtoachangeintheoverallownershipstructure,anewacquisition,theintegrationofmanagement or to the reduction of operating expenses. The court was of the opinion that the mergerresultedintheindebtednessofathrivingbusinesswithoutanyeconomicgrounds.Otherfacts,suchastheconditionsforthedrawingoftheloan,onlyhelpedthecourtfurtherrealisethattherewerenosufficienteconomicbutmainlytaxreasonsfortherestructuring.Thecourtalsoheldthat,inthecontextoftheabuseofarighttodeductinterestfortaxpurposes,thecompliancewiththincapitalisationrulesclaimedbytheCzechentitymayonlyberelevantinthecaseofeconomicallyjustifiableintra-groupfinancing.
Thecourt’sdecisionfurtherconfirmsthetaxadministration’stendencytoexamine intra-companyrestructuringprocessesinmoredetail.Itisquiteobviousthatitisnecessarytoassessallassociatedrisksandcarefullydocumentproperandeconomicreasonsbeforeundertakinganyreorganisation.
Alena Švecová [email protected] T:+420222 123 618
Jana Fuksová[email protected]
T:+420222 124 319
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 4
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
TAX NEWS
Green light to old age savings
While proceeding with its plan to terminate the Pillar 2 pension scheme, the government is also planning to increase tax support for other old age pension insurance products.
InaccordancewithagovernmentdraftamendmenttotheIncomeTaxActcurrentlydiscussedintheChamberofDeputies,pensionspaidoutoveraminimumperiodoftenyearsviathemajorityofpensionproductsoughttobeexemptfromincometaxfrom2016.Ithassofarbeenpossibletoexemptfromtaxonlythepensionsforwhichapay-outperiodhadnotbeenset.Theplannedchangehasalreadyraisedinterpretationdoubtsregardingtheapplicationofthisexemptioninpractice.Itisnot,forexample,clearwhetherthepensionpay-outperiodhastobesetbeforehandasfixedandunchangingorwhethertheactualfactthatapensionhasbeenpaidoutforatleasttenyearswillsuffice.Thequestionofwhetherornotanexemptionfromtaxshouldbeappliedwithrespecttoindividualclientswillbequitevitalforinstitutionsthatpayoutpensionsandareactuallyresponsiblefortheircorrecttaxation.
The government also proposes changing the limit for claiming tax exemptions regarding employers’contributionstopensionproductsfromCZK30thousandtoCZK50thousand ayear.Similarly,limitsfordeductionsfromthetaxbaseshouldincreasetwo-foldto CZK24thousand.Thisappliestobothsupplementarypensioninsurance,thePillar3pensionschemeandprivatelifeassurance.Iftaxpayersmakeuseofalltheseincentives,theywillbeabletosaveanadditionalCZK44thousandcomparedtowhattheymaysavenow.
Alena Švecová [email protected] T:+420222 123 618
Jana Švecová[email protected]
T:+420222 123180
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 5
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
TAX NEWS
Nine pitfalls of VAT ledger statements
VAT ledger statements are about to be launched. What areas deserve special attention? Below we summarise the most problematic ones.
An interface for XML file testing AccordingtotheGFD,aninterfaceforthetestingofsoftwareforthegenerationofVATledgerstatements will not be disclosed sooner than at the beginning of December.
Application of a five-day deadlineAfive-daydeadlinetorespondtoacallfromthetaxauthorityhasbeenintroducedalongwiththeVATledgerstatementduty;thesamelimitshallapplytosubmittingasubsequentVATledgerstatement.Attentionshouldbepaidtodifferentdefinitionsofthesedeadlines:toreacttoacallfromthetaxauthority,thefive-daylimitinvolvesfive calendar days;tofileasubsequentVATledgerstatement,thefive-daylimitincludesfive workdays.
ID data boxes vs. e-mail addressesThetaxadministratorplanstocommunicatewiththetaxpayereitherviaadataboxorviae-mailifthetaxpayerdoesnothaveadatabox.Eachcommunicationchannelhasspecialdeliveryeffects.Whensendingmessagesbye-mail,thedeliverydatewillbethedate thee-mailissentbythetaxauthority.Thisoptionmayturnouttobequiteimpractical.
Submitting a zero VAT ledger statementAccordingtopreliminaryinformation,itwillbepossibletofileazeroVATledgerstatementonlyafterthetaxauthoritycallsonthetaxpayertoconfirmthatthetaxpayer’sdutytofile aVATledgerstatementhasnotreallyarisen.However,toavoidanypotentialsanctions,werecommendfilingzeroVATledgerstatementsalsoinperiodsinwhichyoudonotcarryoutanytransactionswhichhavetobeincludedinVATledgerstatements.Thefinancialadministrationpromised that the submitted zero VAT ledger statements will be accepted.
Tax document numberBoththesupplierandthecustomermuststatethesametaxdocumentnumbersetbythesupplier,includingallalphanumericcharacters.Bewarethatsomeaccountingsystemsmaynotacceptanythingelsebutnumericcharacters.
Tax documents with different types of taxable suppliesAccordingtopreliminaryinformation,alimitofCZK10thousand(incl.tax)willdecidewhether atransactionwillbereportedinA.4orA.5,orB.2orB.3.Itseemsthatthelimitshouldconcernonlythevalueofataxablesupply.Ifonetaxdocumentincludesasupplythatistaxableaswellasasupplythatisexemptfromtax,onlythetaxablesupply’svalueshouldthusbedecisiveforreportingpurposes.Thecorrecttreatmentis,however,stilldiscussedwiththetaxauthority.
Summary tax documentsIfasummarytaxdocumentincludestaxablesuppliesforaperiodlongerthanonemonth,thesetaxablesuppliesshouldbereportedintwoVATledgerstatementsimmediatelyfollowingoneanother.ThelimitofCZK10thousand(incl.tax)shouldthenbeconsideredwithrespecttothetotalofsuppliesincludedinthesummarytaxdocumentforeachindividualtaxableperiodseparately.
Correction of internal accounting entriesInternalcorrectionsofaccountingentriesthatdonotaffectcustomers,relevanttaxdocumentsorrelevanttaxablesuppliesshouldnotbereflectedinVATledgerstatements.Iftheyarereflectedthere,thereisariskthatthegiventransactionwillnotmatchthetaxablesupplyreportedbytherelevantbusinesspartner.Insuchcases,thetaxadministratorwillissueautomaticcalls.
Corrective tax documents – credit notesTheissueofcorrectivetaxdocumentswherethedateonwhichthedutytoreportthecorrectionvaries for the supplier and the customer remains unresolved. It is not obvious what date will be used to match the corrections for both parties.
Iva Císařová [email protected]
T:+420222 123 709
Veronika Jašová [email protected]
T:+420222 123 754
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 6
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
LEGAL NEWS
Accounting and tax outsourcing may be worthwhile for statutory bodies
Members of statutory bodies of corporations have the duty to exercise their offices with due care and are liable for any damage the corporation may incur as a result of a breach of this duty. This liability also covers the duty to maintain accounting records and tax compliance. Recently, the Supreme Court confirmed that statutory bodies act with due care even when assigning the task of maintaining the company’s accounts and filing its tax return to a qualified entity.
Thecaseinquestioninvolvedaccountingforareceivablefromamemberofalimitedliabilitycompany.Thememberclaimedthereceivabletobenon-existent,andarguedthatthecompany’sexecutivewasliablefordamagecausedbyrecordingthispurportedlynon-existentreceivableinthecompany’saccountsandincludingitintheincometaxbase.Generalcourtsdidnofindtheexecutiveliable,since,byappointingaqualifiedentitytokeepthecompany’saccountsaswellasataxadvisortosupervisetheentity,hehadactedwithduecare.TheseconclusionsweresubsequentlyalsoconfirmedbytheConstitutionalCourt.
TheSupremeCourtjudgementsinthiscaseprovideageneralsummaryofthefurtherdutiesofstatutorybodiesensuinginconnectionwithassigningthetaskofmaintainingthecompany’saccountstoanotherentity:indoingso,thestatutorybodieshavethedutytocheckwhethersuchentityisqualified,toestablishconditionsforexercisingitsoffice,and,lastbutnotleast,toeffectivelysupervisetheexercisingofthetaskthusentrusted.
Thisdoesnotmeanthatexecutivesorboardmembersmayfullyrelievethemselvesfromtheirdutiesbyassigningtheircorporation’saccountingtoanotherentity;however,providedthatcertainpreconditionsaremet,itmayhelplimitthestatutorybodies’liabilityfordamageincurredasaresultofincorrectaccounting.Thesameshouldalsoapplytoassigningtaxmatters to tax advisors.
Jana Pytelková Svobodová [email protected] T:+420222 123 483
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 7
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
LEGAL NEWS
AML and registration of beneficiary owners
As a consequence of a European regulation, an amendment to anti-money-laundering and public registers legislation is underway. It should involve the obligatory registration of the beneficiary owners of legal entities and trusts. Other changes will affect the process of client checks by liable entities, the definition of which is to be extended. The regulation of virtual currencies is also being prepared.
FollowingtheFourthAMLDirective(Directive(EU)2015/849onthepreventionoftheuse ofthefinancialsystemforthepurposesofmoneylaunderingorterroristfinancing), theMinistryofFinancehassubmittedtothegovernmentadraftamendmenttoActNo.253/2008Coll.,oncertainmeasuresagainstlegalisationofproceedsfromcrimeandterroristfinancing(theAMLAct).
ThepresentwordingoftheAMLActalreadycontainsthedefinitionofabeneficialowner: foranentrepreneur,itisanindividualexercisingdirectlyorindirectlycontrollinginfluence;holding(aloneorwithothers,underagreementorconcert)morethan25%ofvotingrights;orreceivingentrepreneurialproceedsonothergrounds.Asimilardefinitionappliestobeneficialownersoffoundationsandassociations.Theproposedamendmentnowaddsthedefinitionofwhoisdeemedtobeabeneficialownerofatrust:i.e.thefounder,trustee,beneficiary,apersonexercisingsupervisionorcontrol,apersoninwhoseinterestthetrusthasbeenestablishedorisoperating,orthepersonexercisingthesuprememanagerialoffice.
Yet,themostimportantchangeconcernstheActonPublicRegisters.Undertheproposedamendment,thefollowingdataofthebeneficialownerswillberecordedinapublicregister:nameandsurname,birthdate,citizenship(fullypublicinformation),aswellasthereasonwhythepersonisdeemedtobeabeneficialowner(privateinformation).Thefullextractfromtheregister,includingthisinformation,willbeavailable,uponrequest,tocourtsandotherstipulatedentities.AccordingtotheFinancialAnalysisUnit(FAÚ),thedatawillberecordeddirectlyintheCommercialRegister.
OtherchangesintendedbytheproposedamendmentincludethetransformationoftheFinancialAnalysisUnit(currentlyapartoftheMinistryofFinance)intoanindependentFinancialAnalysisAuthority,thereductionofthelimitforentrepreneursas“obligedentities”fromEUR15000toEUR10000forcashtransactions,theextensionofthedefinitionofobligedentitiestoalsoinclude operators of lotteries and entities providing services connected with virtual currencies (bitcoin),andanewregulationoftheprocessofchecksonpoliticallyexposedpersons.
TheFourthAMLDirectivewasadoptedinMayofthisyearandistobetransposedintoCzechlawwithintwoyears.Theproposedamendmentnowawaitingdiscussionbythegovernmentshouldbecomeeffectivefrom1July2016;thepartconcerningbeneficialownersfrom 1January2017.
Martin Hrdlí[email protected]
T:+420222 123 392
Linda Kolaříková [email protected] T:+420222 123 889
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 8
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
WORLD NEWS
OECD recommends unifying national rules
The OECD presented its final package of measures within the BEPS Action Plan. The implementation of these recommendations may well mean the end of the “tax world” as we know it. BEPS is divided into three main pillars, which we will cover in a series of articles. Today, we will focus on recommendations in the area of unification of domestic regulations.
Hybrid mismatch arrangements Hybridmismatcharrangementsinvolvesituationswherecertaintransactionsaretreateddifferentlybythenationallegislationsofcontractualstates,resultingindoublenon-taxationordoublededuction.Forinstance,acertainpaymentmaybetreatedasatax-deductibleexpensebyasubsidiary,whileonthepartoftheparentcompanyitmaybetax-exemptas aprofitdistribution.WithinthisActiontheOECDrecommendsintroducingdomesticlegislation(oramendingtheexistingone)totheeffectthathybridmismatcharrangementswouldnotbringanybenefittotaxpayers.Itisexpectedthattheproposedruleswillbeimplementedextensively:forinstance,thetaxexemptionofcertaintypesofincomemayinthefuturebeconditionaluponthenon-taxdeductibilityofthepaymentsinthecountryofthepayer.Multinationals should thus consider whether their structures contain certain special-purpose transactions or entities falling under the proposed rules. CFC rules AnumberofcountrieshaveimplementedControlledForeignCompany(CFC)regimestotackleaggressivetaxplanningviaestablishingsubsidiariesincountrieswithlowtaxation.WithinBEPSAction3,theOECDprovidesaframeworkandtoolfortheimplementationofeffectiveCFCregimesincountrieswheretheyhavenotbeenimplementedyet. Financing – tax deductibility of interest BEPSAction4focusesontheapplicationofanetinterest/EBITDAratio,introducingasignificantchangefromtheexistingthincapitalisationrules.AccordingtoOECDrecommendations,thenetinterest/EBITDAratioshouldbebetween10and30%;interestinexcessofthestipulatedlimitwouldnotbetaxdeductible.Allinterestandsimilarpayments,includingthosepaidtoindependententities,aretobecombinedforpurposesofthetaxdeductibilitytest. Theintroductionofthisrulewillmeantheneedtoreviseexistingfinancingsetupsandthecapital structures of subsidiaries.
Harmful tax practices BEPSAction5aimstoidentifypreferentialregimesthatare“misused”bymultinationalgroupsfor tax optimisation. One of these practices is using IP or patent boxes based in countries withpreferentialtaxregimes.Companiesplacetheirintangibleassets(patents,etc.)andrelatedincomeintosuchIPboxes,whilethesehollowentitiesdonotactuallycontributetothegenerationanddevelopmentofsuchassets.Action5,amongothers,makesusingsuchpreferentialregimesconditionaluponcarryingoutasubstantialactivityinthedevelopmentofsuchintangibleassets,andrecommendsintroducingtheautomaticexchangeofinformationonawardingsuchregimes.Somemultinationalsmaythusbeforcedtorevisetheirstructuresbased on using the IP regime.
Martin [email protected]
T:+420222124358
Daniel Szmaragowski [email protected]
T:+420222123841
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 9
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
WORLD NEWS
EC: Luxembourgian and Dutch selective tax advantages ruled illegal
According to a decision by the European Commission, Luxembourg’s and the Netherlands’ granting of selective tax advantages to Fiat and Starbucks is contrary to the European rules on granting public support.
BothrulingsinquestionwereissuedbythegovernmentsofLuxembourgandtheNetherlandsinaccordancewithnationallegalregulations;fromthisperspective,theyarelegal.However,astheCommissionargued,bothsupportartificialandrathercomplexmethodsofdeterminingthecorporateincometaxbaseofthecompanies:theydonotreflecteconomicreality,andthe approved manner of setting transfer prices between related parties within the group doesnotcomplywiththearm’s-lengthprinciple;therefore,fromtheperspectiveofstateaidregulations,theyareillegal.AccordingtotheCommission,taxadministratorsintheirrulingscannot use transfer pricing methods that would lead to an excessive reduction of taxable profitsandtheirshiftingintocountrieswithloworzerotaxation.Thiswouldcreateanunfaircompetitiveadvantageagainstotherbusinesses,inparticularsmallandmedium-sizedones.The Commission thus ordered the governments of Luxembourg and the Netherlands to recoverEUR20to30millionfromthecompanies,andtorepealtherulings.BothgovernmentsannouncedthattheywillappealtheCommission’sdecision.
TheEuropeanCommissioncontinuesitsinvestigationintofurthercases,involvinge.g.BelgiumandIreland(Apple,Amazon).IthasstartedusinginformationrequesttoolsunderRegulation734/2013,whichallowstheCommissiontorequestadditionalinformationwithinitsstateaidinvestigationsfromothermemberstatesandalsodirectlyfromthecompanyinvolvedand its competitors. Another tool is being prepared: a directive on the automatic exchange ofinformationonadvancetaxrulings(DACIII);itsdraftwasapprovedbyECOFIN(CouncilofEUfinanceministers)inOctober.ThedetailedwordingistobecompletedbytheendofthisyearandmemberstatesshouldtransposetheDACIIIdirectiveintotheirnationallegislationsbytheendof2016.
Daniel Szmaragowski [email protected]
T:+420222123841
Lenka Fialková[email protected]
T:+420222123536
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 10
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
CASE LAW
Punishment for VAT crimes scrutinised by the EU
In September, the Court of Justice of the EU gave the national criminal courts a free hand to decide on the length of VAT crime prosecution.
TheCourtofJusticehadtorespondtoaquestionraisedbyanItalianpenalcourt.Thepenalcourtwasconcernedthatowingtothecomplexityofacaseinvolvingagroupofcompaniescommitting VAT fraud its decision would not enter into legal force before the end of the limitationperiodprescribedbyItaliancriminallegislation(C-105/14).TheCourtofJusticeheldthatundersuchspecificcircumstancesthememberstates’criminalcourtsmaybreaktheintrastatelimitationperiodsforVATfraudprosecutioniftheybelievethattheprescribedperioddoesnotsufficientlyandeffectivelyprotecttheEU’sfiscalinterests.TheCourtofJusticeemphasisedthattheintrastatepenalcourtmaybreakthelimitationperiodbasedonitsowndecisionaftertakingintoaccountthespecificsofaparticularcase.Thepenalcourtsneitherneedtoaskanyhighercourts,includingtheCourtofJustice,nordotheyhavetowait for a legislative change.
TheCourtofJustice’sdecisionderivesfromthememberstates’dutytoimposeeffectiveanddeterrentsanctionstoprotecttheEU’sfiscalinterestsembeddedintheTreatyontheFunctioningoftheEuropeanUnionandtheVATDirective.Partsofrevenuesgeneratedbyindividual member states from VAT form an important source of the EU budget. The decision might also be applicable in criminal proceedings whose subject-matter is the protection of other EU budget sources such as customs or EU budget expenses such as subsidies.
ThequestionishowtheextensionofthelimitationperiodforcriminalprosecutionwouldbeviewedbythejudgesoftheCzechConstitutionalCourt.TheirpreviousdecisionsindicatethattheyhaveleftthemselvesabackdoortobeabletointervenewhereEUlawclasheswiththe boundaries of the Czech constitution.
Alena Švecová [email protected] T:+420222 123 618
Eva Doložílková[email protected] T:+420222 123696
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 11
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
CASE LAW
Uncontactable supplier card overtrumped
The Supreme Administrative Court has recently issued a decision in favour of taxpayers. When deciding on the entitlement to VAT deduction, the court did not accept the tax administration’s trump card arguing the uncontactability of a supplier.
WithinVAT-relatedinspectionstheCzechtaxadministrationhasrecentlyshownanincreasedtendencytoarguetheuncontactabilityofasupplier,especiallywhereitrelatestochainselling.Inpracticeitisdifficult,sometimesevenvergingonimpossible,forcompaniestoanticipatesomeoftheirsuppliersbeing,accordingtothetaxadministration,“uncontactable”sometime in the future.
Thetaxauthoritiesaregenerallyimposingincreasinglydemandingandhighlydetailedrequirementsontaxpayersregardingtheexaminationoftheirsuppliers.Theserequirementsoftengobeyondthescopeofpubliclyavailableinformation.TheSACdidnotagree withthetaxadministration’stendencytoproceedinthismannerandinrecentDecision No.5Afs180/2014stoodupfortaxpayers.Thecourtunambiguouslydeclaredthattheuncontactabilityofasupplierwhohadexistedatthetimeofasaleorapurchase,continuedtoexistandwasfilingcorporateincometaxreturns,cannotbeassessedretrospectivelyandcannotautomaticallyprejudicethesupplyrecipient.
This particular case involved the purchase of a steel structure from a disassembled hall. Itwasinprincipleclearthatthetaxpayerhadreallyacquiredthesteelstructureatissueandhadsubsequentlyresoldit,butwitnessesdidnotrememberanydetailsandtheirtestimonywasveryvague.Thefactthatthepaymentforthesteelstructurehadnotbeendepositeddirectlytothesupplier’saccountfurtherdeterioratedthetaxpayer’sposition.Accordingtothetaxauthority,thetaxpayerdidnotprovethatthepurchasehadbeencarriedoutasreportedin invoices and thus failed to meet the conditions to claim the entitlement to VAT deduction. Thiswasfurtherconfirmedbythefirst-instancecourt.
TheSACexpressedadifferentopinion,emphasisingthattheentitlementtoVATdeductionis abasicrightofthetaxpayerembeddedintheverynatureofthetaxsystem,despitetheformalrestrictions applicable to tax documents. The SAC also highlighted that the tax administration maynotdemandthesubstantiationoffactsrelatingtootherpersons,i.e.suppliers,fromtaxpayers.Itisalsoworthmentioningthatthesupplierinquestionwasanexistinglegalentitywhosetaxesshouldhavebeenadministeredbytheappropriatetaxauthority.AccordingtotheSACjudges,theuncontactabilityofsuchasupplierduringataxinspectionperformedthreeyearsafterthedeliveryofgoodscannotprejudicethetaxpayer.
WecanonlyhopethatthishelpfulapproachadoptedbytheSACtowardshonesttaxpayerswill beat the existing trump card of the tax administration when dealing with the entitlement toVATdeduction.Hopefully,thiswillnotbethelastindicationofashiftinthestrictness of the courts’ interpretations.
Aleš Krempa [email protected] T:+420222 123 551
Alena Švecová [email protected] T:+420222 123 618
Jana Fuksová[email protected]
T:+420222 124 319
NOVEMBER / 2015Tax and Legal Update / KPMG Czech Republic 12
Follow us
TAX NEWS
/ End of restructuring in the CR?
/ Green light to old age savings
/ Nine pitfalls of VAT ledger statements
LEGAL NEWS
/ Accountingandtaxoutsourcingmaybeworthwhileforstatutorybodies
/ AMLandregistrationofbeneficiaryowners
WORLD NEWS
/ OECDrecommendsunifyingnationalrules
/ EC: Luxembourgian and Dutch selective tax advantages ruled illegal
CASE LAW
/ Punishment for VAT crimes scrutinisedbytheEU
/ Uncontactable supplier card overtrumped
WORLD NEWS
• NoticeoftheMinistryofLabourandSocialAffairsNo.272/2015Coll.,prescribingthereductionlimitstoadjustdailyassessmentbasesforsicknessinsurancein2016, was published in the Collection of Laws.
• TheEuropeanCommissionhasopenedapublicconsultationwiththeaimtoidentifywaystosimplifytherulesforVATpaymentsoncross-bordere-commercetransactionswithin the EU.
• The government has submitted to the Chamber of Deputies an amendment to the Act onImmovablePropertyAcquisitionTax,whichisplannedtobecomeeffectivefrom 1April2016.
• TheMinistryofFinanceannouncedthatadoubletaxationtreatybetweentheCRandPakistanenteredintoforceon30October2015.Thetreatywillbeeffectivefrom1January2016intheCRandfrom1July2016inPakistan.
News in brief
Theinformationcontainedhereinisofageneralnatureandisnotintendedtoaddressthecircumstancesofanyparticularindividualor entity.Althoughweendeavor toprovide accurate and timely information, there canbenoguarantee that such informationisaccurateasofthedateitisreceivedorthatitwillcontinuetobeaccurateinthefuture.Nooneshouldactonsuchinformationwithoutappropriateprofessionaladviceafterathoroughexaminationoftheparticularsituation.©2015KPMGČeskárepublika,s.r.o.,aCzechlimitedliabilitycompanyandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternationalCooperative(“KPMGInternational”),aSwissentity.Allrightsreserved.
Czech regulatory and tax framework for qualified investor funds, 1 December 2015
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