BKR International -Tax Meeting, Amsterdam 26 November 2012 EU VAT HARMONISATION STILL A LONG WAY TO GO

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1 BKR International -Tax Meeting, Amsterdam 26 November 2012 EU VAT HARMONISATION STILL A LONG WAY TO GO Alan Pearce VAT Partner - Blick Rothenberg London

2 VAT harmonisation where are we? European Commission report on the future of VAT (December 2011): Working towards a simpler, more robust and efficient VAT system tailored to the single market Origin system abondoned after almost 20 years now considered politically unachievable EU VAT system based on destination principle first sustained efforts in this regard since 1993 But no mention of harmonisation on standard rates, registration thresholds, etc.

3 The EU Commissions priority initiatives 1. The One Stop Shop (B2C) Implementation expected 1 January 2015 for telecoms, broadcasting and electronic services high priority with a broadening of this concept for other supplies going forward 2. Standardising VAT obligations New invoice requirements from 1 January 2013 with the same approach to be adopted for other obligations, e.g. registration 3. A more efficient VAT system Restricted use of reduced VAT rates with clear and binding information of eligible goods and services Proposals in 2014 to define the taxation of intra-eu trade 4. Measures to combat VAT fraud

4 Changes to invoice requirements Implementation date : 1 January 2013 Removes the requirement to issue a VAT invoice for exempt supplies Removes the requirement to use specific technology such as electronic signatures and EDI EU wide simplified VAT invoices for supplies under 250 ( 300) Standard references on invoices to support the VAT treatment: Exempt Margin Scheme: works of art; antiques or collectors items; second hand goods; or tour operator, as appropriate Self-Billing Reverse Charge removing the requirement to quote EU or country specific legislation

5 Change to UK registration threshold Implementation date : 1 December 2012 Nil threshold for non-established businesses All other thresholds remain: 77k for UK established businesses highest in the EU? 70k for EU distance sales - 100k or 35k in most other Member States

6 Place of supply of goods General Rule : Where the goods are located at the time of supply Intra EU : Where dispatch or transport of the goods to the person acquiring them ends Therefore most B2B transactions are dealt with under the EU acquisition rules (reverse charge by customer) with the exchange of VAT ID numbers required

7 Transfer of own goods Goods moved from one EU Member State to another without change of ownership The EU movement of own goods is a Deemed Supply for VAT purposes Normally results in the business having to register in the country of arrival in order to comply with the acquisition rules (account for reverse charge) and then account for the onward sale

8 Call off stock Arrangement where goods are moved and stored at under the customer s control but ownership (legal title) does not transfer until stock is called off by the customer NB: This is different to consignment stock where the supplier retains control of the goods Customer can chose to account for the acquisition VAT to avoid supplier having to register in the customer country Availability and conditions differ in each EU Member State

9 Person liable to account for VAT Article 194 of EU Directive 2006/112 states: Where the taxable supply of goods or services is carried out by a taxable person who is not established in the Member State in which the VAT is due, Member States may provide that the person liable for payment of VAT is the person to whom the goods or services are supplied Is this a simplification?

10 UK s position The UK has not adopted Article 194 Therefore, unless the call off stock procedure is adopted a nonestablished business holding stock in the UK would need to register for VAT (unless the goods are zero-rated or subsequently exported or sold and removed to customers outside the UK) Remember current 77k threshold will be removed from 1 December 2012 for all non-established businesses

11 Dutch position The Netherlands has fully implemented Article 194 This allows non-established businesses to move stock to the Netherlands (and even buy and sell stock that remains in the Netherlands) without having to register Provided the onward sale is to a Dutch VAT registered customer who accounts for acquisition VAT (reverse charge)

12 French position France has adopted Article 194 with specific conditions Non-established businesses can move stock to France without the need to register provided it is sold to a French registered customer within 3 months of arrival French registration is required for sales made where the goods are removed out of France (even though no French VAT is payable) or if the non-established businesses is expected to retain ownership in France for more than 3 months

13 Opportunities for BKR member firms Harmonisation of EU VAT rules - still a long way to go Basic principles are the same, but compliance obligations differ significantly from country to country In addition, there is a long list of EU derogations and optional simplifications that Member States MAY adopt There are also many areas where Member States interpret the law differently when adopting EU legislation into domestic law Use of local resources is often essential to service the needs of clients involved in international and EU cross border supplies