VAT in the European Union and in BiH. Wolfgang Berger

Transcription

1 VAT in the European Union and in BiH Wolfgang Berger 1

2 Principles of VAT Between Business partners neutral Charging VAT on every stage VAT deduction fur purchase Economically only VAT charge for difference between purchase and selling price Therefore the name -Value added tax Final consumer carries VAT completely 2

3 Example: Purchase price 100, selling price 150, rate 20% VAT: 30, VAT deduction 20, really due to tax office 10 (that is exactly the VAT for 50) 3

4 Taxable transaction Supply of Goods and services Import VAT Intra community acquisition (within EU) 4

5 Taxable persons (articles 9-13) A 'taxable person' is any person who independently carries out any economic activity Condition - is deemed to be more than one occasion - That means the aim is a permanent activity E.G.: Somebody byes every year a new car and sells the old one - no economic activity 5

6 Goods 6

7 The supply of goods Definition (article 14(1)) - The supply of goods is the transfer of the right to dispose of tangible property as its owner. - Contract alone performs no VAT transaction - Important is the physical transfer from one person to another - Not important is the really legal ownership on goods - Important is only to have power on a good in an economic way 7

8 Place of supply of goods (articles 31-39) where the goods are located at the time the supply takes place, if they are not dispatched or transported [Article 31 of the VAT Directive] If an Estonian manufacturer hiring a machine in Estonia from a German company decides to purchase the hired machine, the place of supply is Estonia rather than Germany and Estonian VAT must be paid. a pleasure boat was sold, which is laying at the harbor of Split - the contract is made between an Austrian and a BiH business company - Place of supply Split 8

9 Supply with transport where the goods are located when the dispatch or transport to the customer begins, if they are dispatched or transported by the supplier, by the customer, or by a third person [Article 32 of the VAT Directive] Example: German VAT will have to be charged on goods transported by the supplier himself or by a transporter appointed by him, from Hamburg to a customer in Berlin (place of supply is Hamburg). But motley exempt transaction. Example: When goods supplied are subsequently transported from Bratislava to a customer in Prague by the customer or by a transporter appointed by him, the supply will be subject to Slovakian VAT. 9

10 Distance sale EU where the goods are located when the dispatch or transport to the customer ends for distance sales when the supplier's annual sales are above the threshold(14 Kb)applied by the customer's Member State [Article 33 of the VAT Directive] A HR company is selling CDs via the internet to private customers throughout the EU. When CDs are sold to customers in Denmark, Danish VAT must be charged when the Danish threshold is exceeded while Dutch VAT must be charged to customers in the Netherlands when the Dutch threshold is exceeded. 10

11 assembling where the goods are being installed or assembled, if done by the supplier [Article 36 of the VAT Directive] Example: Romanian VAT must be paid on the supply of a machine installed in Romania by the BiH supplier for his customer. Should the machine instead be installed by the customer himself, the supply will be taxable in BiH (an exempt exportation in BiH followed by an input VAT on importation in Romania will take place). 11

12 services 12

13 supply of services (24 29) Definition (articles 24-29) A supply of a service is considered to be any transaction, which does not constitute a supply of goods - Active doing (hairdresser) or - Passive behaviour (renting immovable property) 13

14 self supply Supplies of services for the use of goods forming part of the assets of a business - for the private use of the taxable person or - of his staff or - more generally for purposes other than those of his business Condition - the value-added tax on such goods is wholly or partly deductible; 14

15 Example A wine seller give an old bottle of wine (purchase price 500, selling price 1.000) as gift to his friend Self supply, taxable base

16 Self supply services supplies of services carried out free of charge by the taxable person for his own private use or that of his staff or more generally for purposes other than those of his business Example: - worker of a building company are building the private house of the owner 16

17 place of supply of services 17

18 Place of supply of services (articles 43-59) The place of taxation is determined by where the services are supplied. This depends not only on the nature of the service supplied but also on the status of the customer receiving the service. A distinction must be made between a taxable person acting as such (a business acting in its business capacity) and a nontaxable person (a private individual who is the final consumer). The concept of a taxable person covers anyone who independently carries out an economic activity, even if that person is not identified for VAT purposes, but it also includes a non-taxable legal person identified for VAT purposes [Article 43 of the VAT Directive]. Only once the exact nature of the service and the status of the customer are known can the place where the services are supplied be correctly determined. The supply of services between businesses (B2B services) is in principle taxed at the customer's place of establishment, while services supplied to private individuals (B2C services) are taxed at the supplier's place of establishment. 18

19 B2B services [Article 44 of the VAT Directive]. The place of supply of services supplied by a company in Salzburg to a business client in Vienna will be Vienna. As the supplier is established in Austria, he will charge Austrian VAT to his client. For accountancy services supplied by a Bulgarian company to a business customer with his place of business in Austria, Austrian VAT must be charged. If the Bulgarian supplier is not established in Austria, the Austrian customer will account for VAT under the reverse charge mechanism. Finnish VAT must be charged (by the customer using the reverse charge procedure) where legal services are supplied by a Polish company to a customer whose place of business is in Sweden but provided to the customer's fixed establishment in Finland. Advertising services supplied by an Italian company to a public authority in Spain which, because of its intra-community acquisitions of goods, is identified for VAT purposes, are taxed in Spain using the reverse charge mechanism. 19

20 B2C services [Article 45 of the VAT Directive]. For consultancy services provided by a supplier established in Lisbon to a private customer who resides in Denmark, Portuguese VAT must be charged. A supplier established in Greece will need to charge Greek VAT to a business customer established in Romania who acquires legal services to be used for his private purposes. 20

21 Reverse Charge B2B taxable supply of services is made by a taxable person not established within the Member State of supply main rule B2B person who is liable to pay tax is the customer Goal of this measure is, that traders effecting cross-border supplies will not have to pay VAT in a Member States where they have no permanent establishment. Applicable also for supply of goods and other services 21

22 example an advocate A from an other country supplies his services to a taxable person B the place of supply would be at the place of the taxable person B. the advocate A may invoice without VAT the taxable person B is liable for that tax. 22

23 intermediary B2C B2C services provided by an intermediary are taxed at the location where the main transaction, in which the intermediary intervenes, is taxable [Article 46 of the VAT Directive] The private owner of a summer cottage in France who wants to move some furniture to his home in Sweden may ask an intermediary to find a company that will take care of the removal. No matter where the intermediary is established, French VAT will be due on the commission fee because the place of taxation of the intra- Community transport of goods is the place of departure. Note: B2B at the place where the costumer has his residence 23

24 Example An Austrian company is acting on behalf Customers in order to find a BiH singer who sings a) at a private party for an Italian I in Zadar b) at a company party for a German company DE in Split He invoices 10% of the fee of the singer to I and DE. a) taxation place is Zadar (HR) place of performance b) taxation place is Germany place of customer 24

25 immovable property B2B and B2C services connected with immovable property are taxed where the immovable property is located [Article 47 of the VAT Directive]. Hotel services, building services: An architect based in France hired to design a summer house in Spain will charge Spanish VAT to his customer. A guest staying in a hotel in Nicosia will have to pay Cypriot VAT on the hotel accommodation. 25

26 Movable goods B2C B2C services consisting of valuations of or works on movable tangible property are taxed at the place where the services are physically delivered [Article 54 of the VAT Directive] When a car driven by a Lithuanian private individual breaks down in Poland and is repaired there, Polish VAT must be charged. When a person residing in London asks a company to go to Ireland for an appraisal of the value of his private assets there, Irish VAT must be charged. A watch is repaired by an Austrian for a) a private person (Germany) b) for a watch shop (Italy) Result: a) taxable in Austria, b) taxable in Italy with reverse charge principle 26

27 passenger transport B2B and B2C passenger transport is taxed according to the distances covered [Article 48 of the VAT Directive]. The price of a bus ticket for a trip from Poland to France through Germany will include Polish, German and French VAT, proportionate to the distances travelled in each of these countries. 27

28 B2C transport of goods and ancillary services B2C transport of goods, other than intra-community transport, is taxed according to the distances covered [Article 49 of the VAT Directive] - For goods transported for a private customer from Paris to Marseille, the company carrying out the transport must charge French VAT irrespective of where it is established. B2C intra-community transport of goods (goods departing from one Member State and arriving in another) is taxed at the place of departure [Article 50 of the VAT Directive] - For goods transported from Germany to France for a private customer, German VAT must be charged on the transport irrespective of where the company carrying out the transport, or the customer is established. B2C ancillary services to the transport of goods, such as the loading and unloading services, are taxed in the Member State where those services are physically carried out [Article 54 of the VAT Directive] - A Danish company unloads a truck in Rotterdam for a private individual, the supplier will need to charge Dutch VAT.

29 cultural services etc B2B services in respect of admission to cultural, artistic, sporting, scientific, educational, entertainment and similar events will be taxed at the place where those events actually take place [Article 53 of the VAT Directive]. The other services B2B are covered under the main rule. B2C services relating to cultural, artistic, sporting, scientific, educational, entertainment and similar activities will be taxed at the place where those activities actually take place [Article 54 of the VAT Directive] 29

30 examples When an Irish company for business purposes pays for the entry to an opera in Verona, the ticket will contain Italian VAT. That applies whether the ticket is bought on-line or at the ticket booth. For a conference organised in Stockholm for participants paying a fee to attend, Swedish VAT is charged. The work of drawing up a scientific report by the University of Cologne for a pharmaceutical company in Denmark will be subject to Danish VAT and accounted for by the Danish company (because it is not a service in relation to the admission to an event). This service will instead be taxed under the general rule of Article 44. A ticket bought by a tourist going to England for a football match played in Liverpool will contain UK VAT. A student living in Antwerp who follows a management course in a business school in the Hague will be charged Dutch VAT. 30

31 restaurant and catering services B2B and B2C restaurant and catering services, other than those supplied on board ships, aircraft or trains during the section of a passenger transport effected within the EU, are taxed at the place where the services are physically carried out [Article 55 of the VAT Directive] Guests dining at a restaurant in Lanja Luka will be charged BiH VAT. A company which caters for an event in Zadar, arranging for food and drinks which it prepares and serves to the guests must charge HR VAT on the services, no matter where it is established. When B2B and B2C restaurant and catering services are supplied on board ships, aircraft or trains during the section of a passenger transport effected within the EU, tax is paid at the place of departure of the transport [Article 57 of the VAT Directive]. A meal served in a restaurant on board a ferry sailing from Split to Brindisi (or any EU port) is subject to HR VAT. 31

32 B2B and B2C short-term hiring of means of transport B2B and B2C short-term hiring of means of transport is taxed at the place where the means of transport is actually put at the disposal of the customer [Article 56 of the VAT Directive]. Short term covers the continuous possession or use of a means of transport throughout a period of not more than 30 days or, in the case of vessels, not more than 90 days. A Belgian, on holiday or on business, in the Baltic countries arrives at Riga airport and picks up a car hired for two weeks, Latvian VAT will be charged on the hire. For a boat hired in Sardinia for 2 months, the hire will be subject to Italian VAT regardless of who is hiring the boat and where it goes. 32

33 B2C long-term hiring of means of transport B2C long-term hiring of means of transport will be taxed at the place where the private customer is established, has his permanent address or usually resides [Change to Article 56 of the VAT Directive] except for cases where the supplier of a pleasure boat is established in the same Member State in which he puts the boat at the disposal of the customer. Austrian VAT must be paid on a rental car hired from anywhere in the EU when a private person residing in Vienna hires it for six months. When a pleasure boat is hired by a German resident from Sweden for use year round, German VAT must be charged. However, if the boat is actually put at the disposal of the customer in Sweden by a supplier established there, Swedish VAT will be due. 33

34 VAT on electronic services From 1st January 2015, Directive 2008/8/EC VAT on telecommunications, broadcasting and electronic services will also be charged in the Member State where the customer belongs. For this purpose, EU and non-eu businesses will use a web portal in the Member State in which they are identified to declare the VAT due in the Member State of their customer. 34

35 Chargeable event and chargeability of VAT (articles 62-67) - tax point Tax time - Principle - The chargeable event occurs and the tax becomes chargeable when the goods are delivered. - The delivery occurs when the right to dispose thereof as owner is transferred. Services - when services are performed - E.g. painting of a wall is finished 35

36 Payment in advance However, where a payment on account is made before the goods are delivered, the tax is chargeable on that amount at the time of receipt of the payment. Example: I buy a Computer for by a Computer store. The Computer is delivered in June 2011, I had to pay 500 at time of ordering in May. For 500 VAT is due for May, for 500 for month June Corresponding VAT deduction 36

37 Taxable amount (articles 72-92) Principle price and additional costs For deemed supplies the taxable amount is the purchase price of the goods or of similar goods. - e.g. self supply, or cost price determined at the time of supply Example: Purchase price 1000, additional the supplier charges 50 for transport Tax base

38 Deduction of VAT The right to deduct is granted - For taxable persons - who have the right to deduct VAT - when the goods and services are really performed and - used for taxable activities - keep a correct invoice - only for domestic VAT possible Example: A taxable person (hairdresser) purchase a) Perfume and b) a bottle of wine for private purposes 38

39 Right to deduct Also for purchase from intra community acquisition Example: Austrian Company AT purchase an Computer from a) Media Market Vienna and b) Media Market München for 1000 a) Media Market Vienna charges 1200 inclusive 20% VAT, AT can deduct 200 VAT from tax office. b) 200 VAT for acquisition is due, but in the same moment 200 VAT deduction is possible. 39

40 Right to deduct The right to deduct is also granted for the following transactions: exempt (zero-rated) exports; and imports. 40

41 Persons liable to pay VAT Once the place of supply is known, it is necessary to determine who is liable for payment of any tax on the transaction. The taxable person carrying out the taxable supply of goods or services, is liable to pay the tax due on the transaction in principle. Except reverse charge system is applicable 41

42 INTERNAL MARKET 42

43 43

44 44

45 intra-community acquisition The intra-community acquisition of goods constitutes the supply or deemed supply of goods by the supplier to the person acquiring the goods in which course the goods are moved from one Member State to another. 45

46 intra-community acquisition The acquirer has to account for the VAT due in the country of destination of the goods. Consequently, the Member State of the place where the transportation begins treats the supply as VAT-exempt. 46

47 Example An Slovenian company S purchases computer from an German company G and the computer are transported from Munich to Maribor. G can make the supply VAT exempt, S has to charge VAT for acquisition and has right to deduct Conditions: correct invoice, valid VAT numbers and evidence of cross border transport 47

48 intra-community acquisition of goods The place of taxation is determined by where the intra-community acquisition of goods is made (i.e. the Member State where the goods are finally located after transportation from another Member State). Goods acquired by a taxable person acting as such (a business in its business capacity) or by a non-taxable legal person (for example a public authority) are subject to VAT. For simplification reasons, goods acquired by a taxable person covered by the SME scheme or the flat-rate scheme for farmers or by a non-taxable legal person are not subjected to VAT if annual acquisitions are below an annual turnover threshold set by their Member State (minimum EUR ), though it is still possible to opt for taxation. The acquisition of goods is taxed in the Member State issuing the VAT number (Member State of identification) under which the acquisition is made. Should the goods be transported to another Member State (Member State of arrival) tax must be paid there. This will be followed by an adjustment of the VAT paid in the Member State of registration. 48

49 Examples taxation in the Member State of identification [Article 41 of the VAT Directive] French VAT must be paid on goods acquired from another Member State by a company under its French number for use at its factory in Strasbourg. Where a company acquiring goods from Spain provides its supplier with the VAT number under which it is identified in Slovakia, VAT must be paid on the acquisition in Slovakia. taxation in the Member State of arrival of the goods [Article 40 of the VAT Directive]: If goods acquired by a company using its Slovakian VAT number are in fact sent from Spain to Germany, VAT must be paid on the acquisition in Germany and any tax due in Slovakia will be reduced accordingly. 49

50 Control With the introduction of the single market on 1 January 1993, fiscal customs based controls at internal frontiers were abolished and a new VAT control system was put in place for intra-community trade. The most significant benefit was the reduction of the administrative burden on companies; with the elimination of some 60 million customs documents per annum. A computerised VAT Information Exchange System (V.I.E.S.) was set up to allow for the flow of the data held across the internal frontiers which: e=en 50

51 B2C principle of taxation at the place of origin B2C transaction in general Except distance sale Different thresholds of MS Between and that means ordering by distance (e.g. AMAZON) tax place can switch 51

52 Examples A French tourist on a visit to Ireland buys a sweater from a retailer in the State. Irish VAT arises on the purchase, as the place of supply is where the goods are when the purchase takes place. 52

53 Distance sale Distance selling means that a supplier sells goods to private individuals or customers established in another Member State who do not apply VAT to their intra-community acquisitions of goods. The supplier takes care of the transport of the goods to the customers. A typical example is mail order companies. VAT of the Member State of destination is applied if sales in that Member State exceed a certain threshold (EUR or or the equivalent in national currency). Even if the threshold is not exceeded, traders can still opt to identify for VAT in the Member State of the consumer and charge the VAT applicable in that country. 53

54 Importation of goods 54

55 Importation of goods When goods are imported from non-eu countries or non-eu territories, the place of importation is determined by where the goods are at the point of entry into the EU. This is also applicable for BiH now The importation is in principle taxed in the State where the goods arrive [Article 60 of the VAT Directive]. BiH VAT must be paid on oil from Russia when it arrives in BiH where it is declared to customs. If upon entry, goods are put under a suspense customs procedure or similar arrangements, the importation will be in the Member State where the goods leave that procedure or arrangement [Article 61 of the VAT Directive]. Example: For consumer goods which, upon entry into the EU in Poland, are placed under the transit procedure until their final destination in the Netherlands where the goods leave the customs arrangements, Dutch VAT will be due. 55