Financial Services VAT Alert. Tracking EU VAT Developments

Transcription

1 Financial Services VAT Alert Tracking EU VAT Developments May 2012 Edition 2012/5

2 Editorial Dear readers, Hereby we present the May edition of the FS VAT Alert. In this edition you will find the most important VAT developments that have occurred over the past month. Especially interesting in our view, is that the judgment of the Dutch Court of Appeal regarding the provision of 'leads' being VAT exempt became definitive since no further appeal has been lodged. Enjoy reading! Contents EUROPEAN UNION 1. Advocate-General's opinion in Deutsche Bank AG: individual portfolio management not VAT exempt 2. Opinion of the Committee of the Regions on a common system of taxation of financial transactions 3. Expert study on the feasibility and economic impact of a common EU standard VAT return CZECH REPUBLIC 4. Increased VAT rates as of Amendment of the Czech VAT Act NETHERLANDS 6. No further appeal in Court judgment about the provision of 'leads' being VAT exempt 7. New Dutch VAT rules regarding the VAT liability for the supply of mobile phones and computer parts, effective 1 June Refund of Dutch VAT beyond the VAT Directive's deadline, only possible by submitting paper requests 9. VAT rate increased to 21%, effective 1 October of 8

3 EUROPEAN UNION 1. Advocate-General's opinion in Deutsche Bank AG: individual portfolio management not VAT exempt Advocate-General Sharpston is of the opinion that in the case of Deutsche Bank AG, the (discretionary) portfolio services granted to private investors are outside the scope of the VAT exemption. Background Deutsche Bank provides asset management services to private investors, consisting of executing orders of securities, at its discretion and without prior permission of the investors, however in accordance with a strategy chosen by the investor. The main question raised by the German judge to the European Court of Justice, is whether the management services provided by Deutsche Bank to private investors should be classified as VAT exempt "transactions in securities". Judgment The Advocate-General considers that: 1) Portfolio management services form a single supply for VAT purposes; and 2) Such services do not fall within the exemption provided for in Article 135(1)(f) of Council Directive 2006/112/EC. The Advocate-General is in effect giving comfort to the status quo, whilst acknowledging that the point is nonetheless finely balanced. The Advocate General comments that she does not in principle consider that the arguments presented by the Appellant and the Commission (which submitted that the exemption was capable of extending to individual portfolio management for individual investors) are unreasonable, and goes further to state that it is possible that a future amendment will settle the matter clearly in favour of the exemption. It therefore remains to be seen what the European Court will decide. However, whatever the decision reached, it will be of great significance to a wide range of investment funds, as well as their managers and administrators. Irrespective of the eventual outcome in this case, the Advocate-General has appeared to open the door to exemption in circumstances where the parties agree that transactions in securities are the most important activity undertaken. Elmar Jaster [email protected] 2. Opinion of the Committee of the Regions on a common system of taxation of financial transactions The Committee of the Regions gave its opinion on a common system of taxation of financial transactions following the proposal for a Council Directive on a common system of financial transaction tax in the EU. The Committee of the Regions welcomes the submission of a Commission proposal for a Council Directive on a common system of financial transaction tax in the EU, as requested in its 2011 work program. The Committee considers the introduction of a European financial transaction tax (FTT) to be a further important step towards the urgently needed reestablishment of the supremacy of democratic politics over the serious discrepancies which have occurred in the functioning of financial markets. In addition the Committee highlights that the financial transaction tax is an important tool for ensuring that the financial sector plays its part in achieving greater solidarity and fairness, and for reducing 3 of 8

4 speculation. The Committee supports the objective of EU-wide application of the planned harmonisation and, should that not prove feasible despite all efforts made, calls for the immediate establishment of a European FTT system using the enhanced cooperation instrument, to include the euro area at the very least Expert study on the feasibility and economic impact of a common EU standard VAT return The EU Commission has appointed PwC to conduct an expert study on the feasibility and economic impact of a common EU standard VAT return. On 31 May a conference will be held in Brussels. This conference is aimed at giving a broad base of stakeholders (covering businesses, business organisations and tax authorities) the opportunity to get involved in this project. EU Member States have long been aware of the difficulties and administrative burdens caused by the differences in national VAT returns. In response to this and in line with the Communication on the future of VAT released in December 2011, the EU Commission has appointed PwC to conduct an expert study on the feasibility and economic impact of a common EU standard VAT return CZECH REPUBLIC 4. Increased VAT rates as of 2013 The Czech Government has approved the additional economic measures which should keep the deficit of the state budget in the next three years under three percent of gross domestic product. The revenue side of the budget should be supported by, amongst others, increasing the VAT rates as of The VAT rates will be increased to 15 % and 21 %. The increase in VAT rates will only apply in the years 2013 to The extent of supplies subject to a particular rate will not change with the exception of the transfer of some medical devices and children s nappies to the basic VAT rate as application of reduced VAT rate on these products is in violation of EU legislation. Martin Divis [email protected] 4 of 8

5 5. Amendment of the Czech VAT Act Possible changes in the Czech VAT Act relating to the exemption of insurance activities as of January The draft amendment of the Czech VAT Act replaces the terms "insurance or reinsurance activities" with more accurate "provision of insurance" and "provision of reinsurance" limiting the scope of exemptions strictly to provision of these services. In case of related activities, incl. insurance and reinsurance intermediation, the exemption will only apply to services provided by insurance intermediaries. Activities concerning the insurance claims settlement will be excluded from the exemption. Martin Divis DID YOU KNOW? LUXEMBOURG VAT rates pegged for current legislative period Jean-Claude Juncker, Prime Minister of Luxembourg, has declared in his 'State of the Union' speech on May 8, 2012, that the Luxembourg VAT rates will not increase during this legislative period (most likely ending in 2014). Marie-Isabelle Richardin NETHERLANDS 6. No further appeal in Court judgment about the provision of 'leads' being VAT exempt As mentioned in the April 2012 edition of the FS VAT Alert, the Court of Appeal ruled that the provision of 'leads' by an intermediary, to providers of financial products, is VAT exempt. The Ministry of Finance has not appealed against the Court judgment. Therefore that judgment is definitive. Background The company in this case operates a website where consumers can compare financial products. The data of the potential consumers are available, against payment, to selected financial institutions. After payment these financial institutions are able to get in contact with these potential consumers. Judgment The Court of Appeal ruled that for the exemption for insurance negotiation services to apply, the most decisive factor is that the negotiation activity of the company must be aimed at enabling two parties, the potential consumer and the insurer, to reach an agreement. In that regard, the Court has held that negotiation is an act of mediation, which may consist in pointing out to one of the parties to the contract suitable opportunities for the conclusion of such a contract. On these grounds the mediation activities of the company in this case is exempt of 8

6 7. New Dutch VAT rules regarding the VAT liability for the supply of mobile phones and computer parts, effective 1 June 2012 On 29 May 2012, the Dutch State Secretary of Finance announced that he has taken measures to combat VAT carousel fraud. From 1 June 2012, an optional reverse charge mechanism applies to the supply of mobile phones and computer parts. The announced rules do not apply to supplies with a value below Euro 10,000. Under the reverse charge mechanism, the recipient of a supply is liable for the VAT due on this supply. He can deduct this VAT amount in the same VAT return, insofar as he is entitled to deduct VAT. The State Secretary needs the approval of the European Commission and the entire Council for his plan to make the application of the reverse charge mechanism mandatory for the mentioned supplies. This approval has been applied for, but because finalising such procedures takes 10 months on average, the State Secretary has decided to implement the system as optional from 1 June He reasons that if a customer is faced with a supplier that categorically wants to charge VAT, this could be a indicator for possible VAT fraud which means that the customer should be on the alert for this. In the Decree published on 30 May 2012 a definition of mobile phones and computer parts is given to clarify to which transactions the reverse charge mechanism can be applied. The list provided by the State Secretary merely provides examples and is not exhaustive. The Euro 10,000 threshold applies per total invoice amount and this is a VAT exclusive amount. Please note that under the current rules, businesses can already be held jointly liable for the VAT charged on these supplies under the Dutch Tax Collection Act. For more information about these new rules, please contact your regular PwC VAT adviser. Jeroen Bijl [email protected] 8. Refund of Dutch VAT beyond the VAT Directive's deadline, only possible by submitting paper requests A Dutch VAT return on 'older' periods than the prescribed period in the Refund Directive, can only be submitted to the Dutch tax authorities on paper and not through the portal site. In case Dutch companies charge VAT to recipients( entrepreneurs) in EU member states, these recipients are able under Dutch policy to submit a Dutch VAT return on 'older' periods than the prescribed period in the Refund Directive. For this purpose they should submit the refund requests on paper. This only applies to countries with which the Netherlands has made specific agreements. It concerns the following countries: Belgium, Bulgaria, Cyprus, Greece, Hungary and Sweden. In case entrepreneurs from other EU countries want to reclaim Dutch VAT, they should submit a VAT return request through the local portal site of their own tax authorities of 8

7 9. VAT rate increased to 21%, effective 1 October 2012 As mentioned in the April 2012 edition of the FS VAT Alert, the standard VAT rate will increase from 19% to 21% from 1 October The VAT rate increase may affect the pricing of products, but will also lead to a higher cost for businesses that cannot fully reclaim input VAT. These changes will also have to be included in the businesses bookkeeping systems. We expected that transitional measures would be introduced, which would be comparable to the transitional measures introduced with regard to previous changes of the VAT rates. Under such transitional measures, the tax point is based on the time of the actual supply. As a result, possible VAT advantages created by payments made before the VAT increase for supplies made after the VAT increase are undone. These earlier transitional measures also address, for example, real estate projects that have commenced before the VAT increase and that are completed after the VAT increase. However no reference was made to such transitional measures. We would advise businesses to discuss the impact of this VAT increase with their PwC VAT adviser. Jeroen Bijl [email protected] 7 of 8

8 Contact For more information, please do not hesitate to contact your local PwC Indirect Tax expert or one of the experts mentioned below: Austria Christoph Wagner tel: [email protected] Belgium Koenraad de Bie tel: [email protected] Bulgaria Nevena Haygarova tel: [email protected] Cyprus Chrysilios Pelekanos tel: [email protected] Czech Republic Martin Diviš tel: [email protected] Denmark Jan Huusmann Christensen tel: [email protected] Estonia Tanja Kriisa tel: [email protected] Finland Juha Laitinen tel: [email protected] France Stéphane Henrion tel: [email protected] Germany Felix Becker tel: [email protected] Greece Mary Psylla tel: [email protected] Hungary Tamas Locsei tel: [email protected] Ireland John Fay tel: [email protected] Italy Alessia Angela Zanatto tel: [email protected] Latvia Ilze Rauza tel: [email protected] Lithuania / Belarus Kristina Krisciunaite tel: [email protected] Luxembourg Marie-Isabelle Richardin tel: [email protected] Malta David A. Ferry tel: [email protected] The Netherlands tel: Norway Yngvar Engelstad Solheim tel: [email protected] Poland Marcin Chomiuk tel: [email protected] Portugal Mario Braz tel: [email protected] Romania Diana Coroaba tel: [email protected] Slovakia Valeria Kadasova tel: [email protected] Slovenia Marijana Ristevski tel: [email protected] Spain Miguel Blasco tel: [email protected] Sweden Lars Henckel tel: [email protected] Switzerland Tobias Meier Kern tel: [email protected] United Kingdom Jamie Randell tel: [email protected] United States Evelyn G Lam tel: [email protected] Disclaimer. Clients receiving this Alert should take no action without first contacting their usual PwC Indirect Taxes Advisor. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. PwC is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. 8 of PricewaterhouseCoopers Belastingadviseurs N.V.(KvK ). All rights reserved.