Olivier Hody, PartnerJohan Van Der Paal, PartnerBruno Roelands, Senior DirectorKaren Truyers, Senior ManagerSandeep Shinde, Manager
Pan European VAT updateDeloitte Global Tax Center (Europe)27 May 2019
2
• Introduction
• Global VAT developments
• EU VAT developments
− European Council & Commission
− CJEU
• VAT compliance 2.0
− MTD, SAF-T, real time reporting and split payment
• Pan EU VAT compliance update
− VAT rates
− Import VAT
− E-filing, upload file, XML schema, due dates
− Local reverse charge
− New obligations relating to e-commerce
− E-invoicing via government platform
• Brexit
• Conclusion
Agenda
4
2016 20192018
Gulf Cooperation Council states (GCC)
VAT implementation progress timeline
2017 20212020
*Sep 2019Oman
2021*Kuwait
Jan 2018UAE & KSAVAT implementation
Jan 2019BahrainVAT implementation
Nov 2017USA and KSA commit
to go-live by Jan 2018
June 2016GCC VAT Agreement signed by all six Member States
Jan 2020*Qatar
* Still to be officially confirmed
5
Global VAT developments
Other updates
o China
Reduction of the VAT rates on 1 April 2019:
o 16%/10% has been reduced to 13%/9%
o 6% rate remained unchanged
Angola
VAT introduction:
o Wave 1: large taxpayers, 1 July 2019
o Wave 2: remaining taxpayers, 1 January 2021
Russia and South Africa
• Change in the rules for VAT registration requirements for foreign taxpayers providing B2B electronic services to local companies
o Russia : Since January 2019
o South Africa : Since April 2019
8
Study on domestic and cross border intra-EU VAT refunds
European Commission
8th Directive refund claim
• Average value / claim: EUR 4.700
• Longer delays in
Greece Romania Italy
• Additional queries percentage: 9% but significantly higher in
Greece Romania Malta
• Approval rate: 94% (97% with VAT agent) with the lowest approval rate Greece Croatia Malta
• Main reasons for rejection are:
1. Suppliers incorrectly charging VAT
2. Non-refundable VAT
3. Lack of correct supporting document
• In case of dispute, taxpayers win in 57% of the case and tax authorities 43%
Taxpayers
57%
Tax authorities
43%
9
Study on domestic and cross border intra-EU VAT refunds
European Commission
VAT reimbursements via VAT return
• Average value / claim: EUR 27.000
• Longer delays in
Greece Romania Italy
• Average delay before effective reimbursement: 16,4 weeks with Italy at 62,6 weeks
• Approval rate: 99,5%
• Main reasons for rejection are:
1. Invoice discrepancies
2. VAT incorrectly charged by the supplier
3. Lack of documentary evidence
4. Lack of business purpose of the expenditure
10
Study on domestic and cross border intra-EU VAT refundsEuropean Commission
Recommendations:
• Increasing adherence for late interest payments
• Improved follow-up processes within national tax administration
• Guidelines on VAT reimbursement claimsfrequency
• Improved additional information request procedures (including IT solutions)
• Awareness of Member State of refund rules and requirements (including IT solutions)
• Verification of pro-rata calculations (including guidelines)
• Recovery of incorrectly charged VAT
• Better targeted request for additional information
• Use of established business languages in the VAT refund process
8th Directive refund claims VAT reimbursements via VAT return
11
Simplification for transport allocation in chain supplies
Simplification proof of transport
Call of stock arrangements
EU VAT number requirement for Intracommunity
supplies
Quick fixes 2020
The Quick fixes
12
Harmonised call-off stock arrangements
Quick fixes
Physical flow of the goods
DE
IT
StockSupplier Customer
Single VAT exempt IC supply
VAT taxable
IC acquisition• Upon dispatch : record keeping
required, no tax reporting
• Upon sale : reporting in VAT
return and ESL
• Maximum 12 month period
13
Harmonised call-off stock arrangements - conditions
Quick fixes
In order to use this simplification for call-off stock arrangements, certain conditions have to be fulfilled:
• Both the supplier and the intended acquirer are taxable persons;
• The supplier has not established his business nor does he have a fixed establishment in the Member State to which the goods are dispatched or transported;
• The supplier records the dispatch/transport of the goods to the stock in a register held by him;
• The supplier mentions the identity and VAT identification number of the intended acquirer in his recapitulative statement (only that, not the value of the goods) submitted for the period of the transport of the goods;
• The intended acquirer is identified for VAT purposes in the Member State to which goods are transferred;
• The acquirer’s identity and VAT identification number are known by the supplier at the time when dispatch or transport begins;
• The goods are transported from one Member State to another, excluding imports, exports and supplies within a single Member State from the simplification;
• The goods are supplied after arrival at a later stage.
14
Simplification for chain transactions - situation
Quick fixes
Chain transactions are now defined in the VAT Directive as situation where :
• Goods are supplied successively. Therefore, it is necessary that at least three persons are involved in the chain transaction, but this can be more;
• Goods are dispatched or transported from one MS to another MS. As a result, chain transactions involving imports and exports, or involving only supplies within the territory of a Member State, are excluded from the provision;
• Goods are transported or dispatched directly from the first supplier to the last customer in the chain.
Issue for VAT: what is the supply to which the transport or dispatch of the goods is to be ascribed, that is to say, what supply is the intra-Community supply ?
15
Simplification for chain transactions - graphic
Quick fixes
Logic for attribution of cross border transport to single supply within a transaction chain if transport performed by intermediate supplier
DE
IT
FR
Supplier Customer Physical flow of the goods Invoice flow
Intra-Community
or local supply?
Intra-Community
or local supply?
Intermediate supplier
16
Simplification for chain transactions – default situation
Quick fixes
Default: IC transport is allocated to the supply made by the intermediate operator to his customer
DE
IT
FR
ICS
Local supply
Supplier Customer Physical flow of the goods Invoice flow
Intermediate supplier
17
Simplification for chain transactions - exception
Quick fixes
IC transport is allocated to the supply made by the provider to the intermediary operator
• The intermediary operator communicates the name of the MS of arrival to the provider;
• The intermediary operator provides to the supplier his VAT identification umber in a MS other than the one in which the dispatch or transport of the goods begins
DE
IT
FR
ICS
Local supply
Supplier Customer Physical flow of the goods Invoice flow
Intermediate supplier
18
Simplification proof of transport
Quick fixes
Simplified proof of transport – Rebuttable presumption
Transport or dispatch by or on behalf of the CTP supplier
Transport or dispatch by or on behalf of the CTP customer
2 non-contradictory documents attesting to
the transport
Supplier’s possession :
• Written statement by the acquirer
• 2 non-contradictory documents attesting
the transport
o Transport documents
o Receipt acknowledgement
o Official documents issued by public authority
o Receipt confirming storage
o Certificate by professional body
o Contract
o Correspondence
o VAT return
EXW
FCA
Quick fix providing legal certainty on evidence requirements
19
VAT identification number as substantive condition for an exempt intra-Community supply
Quick fixes
Substantive conditions
• Evidence of cross border transportation of the goods
• Capacity of the buyer as a taxable person
• Taxed IC acquisition
Tax authorities controls
• Valid EU identification number of the buyer
• ESL reporting of the supplies towards that number
CJEU : If this condition is not met
• Fines or administrative sanctions can be imposed by MS
• But the application of the exemption cannot be refused
New legislation includes as substantive condition
• A valid VAT identification number of the acquirer in a MS other than that in which transport of the goods begins
And also as substantive condition :
• The correct filing of the European Sales Listing by the supplier
• Distinction will be made betweenexcusable and non-excusable errors
When a valid VAT number is not available
• Refusal of exemptions
• VAT of the Member State of departure of the goods should be charged
• This VAT can be recovered bypurchaser via refund procedure
20
E-commerce VAT changes
Current status of 2021 changes
Current status
• VAT E-commerce main legislation adopted in Dec 2017 – marketplace deemed reseller provisions added in Council negotiations
• Additional Directive change adopted in March 2019 to provide clarifications needed to implement deemed reseller provisions
• Implementing Regulation providing precise rules on marketplace obligations and different OSS regimes adopted in March 2019
Next steps
• Commission’s Explanatory Notes– for guidance only, not law – expected end of 2019
• IT system changes both on customs and VAT side – EU and national level – testing in 2020
• MS and industry consultations
• Implementation on 1 January 2021
Communication on the future of VAT
December 2011
Digital Single Market Strategy
May 2015
December 2016: e-Commerce
proposals
By end of 2019:
Explanatory Notes
VAT action planApril 2016
1 Jan 2021: E-Commerce
entry into force
December 2017: e-Commerce
proposals adopted
December 2018: Implementing Regulation & VAT Directive
proposals
March 2019: further VAT
Directive changes and IR
adopted
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C-647/17 – Srf Konsulterna – 13 March 2019
Place of supply
Facts
Decision of the CJEU
• The five-day course on accountancy is taxable where the event takes place (following article 53 of the VAT Directive)
• The fact that the courses were subject to advance registration and payment is irrelevant.
“admission to event or B2B service?
Upfront
registration
Upfront
payment
5 days educational course for taxpayers (B2B)
23
C 275/18 – Vinš - 28 March 2019
Export:
Facts
Decision of the CJEU
CJEU applies the substance over form principle
If it is clear that the goods actually leave the EU territory the exemption cannot be denied only because the export document is missing.
CZ Authorities denied the VAT exemption for export because there is no export document
Post documents as proof of export
No export document
24
C-691/17 – PORR Építési Kft. – 11 April 2019
VAT deduction and VAT refund:
Facts
Decision of the CJEU
• VAT authorities can refuse the right to deduct VAT on an invoice that incorrectly applies VAT instead of reverse charge.
• VAT authorities are not obliged to examine prior whether the supplier is able to correct the invoice and reimburse the VAT to the recipient.
• The VAT authorities are in principle also not obliged to reimburse the VAT to the recipient of the credit note unless the reimbursement of the VAT by the supplier is impossible or excessively difficult (f.e. suppliers’ insolvency)
(same conclusion in the Farkas case)
CustomerVWFS
The input VAT deduction is rejected by the VAT authorities
Invoice for construction work incorrectly with HU VAT
Credit note with HU VAT
25
VAT refund claim
in France
‘Sea Chefs’ Authorities asked additional information
(DE) ‘Sea Chefs’ failed to provide it
(within 1 month)
C-133/18 – Sea Chefs Cruise Services – 02 May 2019
VAT deduction and VAT refund:
Facts
Sea Chefs’ refund claim was rejected
Decision of the CJEU
• The time limit of one month to respond to a request for additional information is not an expiry due date
• A taxable person may regularize its VAT refund application by presenting additional evidence during an appeal procedure (pursuant to Article 23 of Directive 2008/9)
28
Roadmap
Making Tax Digital (MTDfV)
Impact assessment and challenges in the VAT compliance process in terms of data quality, review efficiency and control and requirement to comply with Making Tax Digital for VAT
Jan
2019
July2019
Oct 2019 Apr
2020
Apr2019
Start of Digital Linking requirements
Start of digital submission requirement for non-deferred taxpayers
First Digital Submission period for taxpayers: M (April 2019) and Q (Apr-June 2019 quarter)
May2019
Start of Digital submission requirement for deferred taxpayers
2015 2018
MTD Pilot launched MTD Pilot extended MTD first announcement
30
SAF-T
Poland
JPK_VDEK SAF-T
Scope: All taxpayers registered for VAT in Poland
- Large taxpayers (Jan 2020)
- Remaining taxpayers (July 2020)
Abolition of the traditional returns:
VAT-7, VAT-7K, VAT-27, VAT-ZZ, VAT-ZT, VAT-ZD
ESPL return shall remain Other considerations:
- Frequency: monthly
- Data requirements: definitive data fields are not yet available
- Penalties: PLN 500 each for non-compliance, errors and irregularities
Introduction of the extended SAF-T obligation (JPK_VDEK)
31
JPK_VAT JPK_VDEK
SAF-T
Poland
Comparison reporting data: current JPK_VAT and VDEK SAF-T obligation
32
January 2020 (wave 1)Version 1: All postings, incl. G/L, customers, suppliers and VAT account; A/R (balances, customer master data, etc.); A/P (balances, customer master data, etc.)
TBC (Wave 3)Version 3: Movement during period of inventories and non-current assets, etc.
TBC (Wave 2)Version 2: Detailed invoice information and source documents, etc.
SAF-T
Norway
33
SAF-T
Hungary
• Proposal to introduce SAF-T obligation as from January 2020
• In addition to the current real time reporting obligation
• Further details are not yet available
35
Real time reporting
Recent changes
Hungary
• Technical updates:
o New upload file XSD version 1.1 is applicable as from 4 June 2019 (previously: 2 May 2019)
o Version 2.0 is also expected from January 2020
37
Split Payment
Poland
Scope
Bank Account
In practice
Mandatory split payment
1 Sep 2019*
• Mandatory, for all VAT registered taxpayers (including non-established) where:
o B2B transactions above PLN 15 000 ando Transaction relates to *certain goods or
services - subject to reverse charge (as listed in appendix 15 of the Polish VAT law)
• “Special VAT bank account” to opened with Polish banks only
• Taxpayers would have limited rights to this bank account
• Bank charges would be reimbursed by the tax authorities - upon taxpayer request, on a quarterly basis
• Invoicing requirements: should include the wording 'split payment mechanism’
• Penalties: 100% of the VAT amount in question/per invoice and also criminal offence (personal liability) in certain circumstances foreseen
Abolition of the domestic
reverse charge
Cash-flow
impact?
* Still to be adopted by Parliament
40
VAT rates
Expected changes
Croatia
• The standard VAT rate to be decreased from 25% to 24% from 1 January 2020 (subject to further approval from the Parliament)
Greece
• Special VAT status abolishment for the remaining 5 islands (Lesbos, Chios, Samos, Kos, and Leros) is further postponed from January 2019 to July 2019
Italy
• The VAT rates applicable in 2018 (i.e. standard rate 22%, reduced rate 10%) continues to apply in 2019, despite initial plans to increase the VAT rates end of 2018
• Subject to further approval from the Parliament:
o Reduced VAT rate may increase from 10% to 13% on 1 January 2020;
o Standard VAT rate: Increase from 22% to 25.2% on 1 January 2020 and to 26.5% on 1 January 2021
Lithuania
• Proposal to decrease the standard VAT rate from 21% to 18% from January 2020 has been rejected by the government on 5 May 2019
Likely to be postponed to 2020
42
General VAT compliance updates
Import VAT
C79 SAD
United Kingdom and Ireland
Import VAT reverse charge
post-Brexit
43
General VAT compliance updates
E-filing / upload files / XML schema / due dates
EstoniaChange in the mandatory e-filing process: 1 May 2019
Czech RepublicVATR: April 2019 LSPL: Sep 2019
HungaryReal time reporting XSD schema version 1.1: 4 June 2019
Switzerland(Proposal) Introduction of mandatory e-filing: 1 January 2020
FinlandNew VAT return form: January 2020
Belgium, Demark, Norway, Sweden, SpainSummer extensions
44
Local reverse charge
General VAT compliance updates
United Kingdom
• Introduction of the local reverse charge on supplies in the construction industry
• Go-live date: Oct 2019
Lithuania
• Introduction of local reverse charge on IT equipments (tablets, laptops, smartphones,…)
• Go-live date: August 2019
Poland
• Abolition of the local reverse charge on certain goods and services
(as listed in the Appendix 15 of the Polish VAT Act)
• Approximately 150+ goods and services in scope:
(IT equipments such as tablets, laptops, smartphones; building and construction services,
steel and metal products,…)
• Cash flow impact, as these transactions would now be subject to the mandatory split
payment regime
45
General VAT compliance updates
New obligations related to e-commerce
Italy
• Scope: Online marketplaces who facilitate distance sales of goods in Italy
• Obligation : Provision of informative (non-VAT related) information
• Filing frequency : Quarterly, July 2019
• Contents of the obligation : data for each supplier:
o The name, address and email account
o The total number of units sold in Italy
o The total amount of sales prices or the average selling price of the units sold in Italy
Bulgaria
• Scope: Certain online retailers who perform distance sales of goods in Bulgaria
• Obligation : register in a specific public database maintained by the government
• Due date: 29 June 2019
46
General VAT compliance updates
E-invoicing
Link
47
General VAT compliance updates
E-invoicing - recent updates
SwedenB2G 1 April 2019
CroatiaB2G 1 July 2019
NorwayB2G 1 April 2019 (at least 100 000 NOK)
The NetherlandsB2G (Wave 1: 1 January 2017, Wave 2: 18 April 2019)
PolandB2G (Wave 1: 18 April 2019 – at least EUR 30 000, Wave 2: 1 August 2019)
Ireland:B2G (Wave 1: 18 April 2019, Wave 2: 1 August 2019)
Portugal:B2G (Wave 1: 18 April 2019, Wave 2: 1 August 2019)
Greece:B2G (Wave 1: 18 April 2019, Wave 2: 1 August 2019)
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