Table of Contents Contributors 541 1. Introduction 543 2. Taxable Persons 547 2.1. VAT grouping 547 2.1.1. Austria 548 2.1.2. Belgium 548 2.1.3. Cyprus 549 2.1.4. Czech Republic 549 2.1.5. Denmark 550 2.1.6. Estonia 550 2.1.7. Finland 551 2.1.8. Germany 551 2.1.9. Hungary 552 2.1.10. Ireland 552 2.1.11. Latvia 552 2.1.12. Netherlands 553 2.1.13. Slovak Republic 553 2.1.14. Sweden 554 2.1.15. United Kingdom 554 2.2. Joint VAT registration 555 2.2.1. France 555 2.2.2. Italy 555 2.2.3. Romania 556 2.2.4. Spain 556 2.3. Supply of new immovable property 557 2.3.1. New buildings 557 2.3.2. Occasional supplies 559 2.4. Registration threshold 559 3. Taxable Events 567 3.1. Transfer of businesses 567 3.2. Intra-Community acquisitions of goods 569 3.3. Consignment goods and call-off stocks 569 3.3.1. Consignment goods 569 3.3.2. Call-off stocks 570 3.3.3. Simplification measure 570 4. Place and Time of Taxation 575 4.1. Distance selling thresholds 575 4.2. Place-of-supply rules for services 575 4.2.1. Place of supply from 2010, 2011 and 2013 576 4.2.2. Place of supply prior to 2010 578 4.3. Effective-use-and-enjoyment criterion 580 4.3.1. Effective use and enjoyment in a Member State 582 537 2014 IBFD
VAT Options Exercised by the Member States (situation on 1 January 2014) 4.3.2. Effective use and enjoyment outside European Union 586 4.4. Time of supply 589 4.4.1. Issue of invoices 589 4.4.2. Cash accounting 591 5. Taxable Amount 593 5.1. Open-market value 593 5.2. Bad-debt relief 596 6. Reduced Rates 599 7. Exemptions 633 7.1. Letting of immovable property 633 7.1.1. Letting of residential property 634 7.1.2. Letting of commercial property 635 7.2. Options for taxation 635 7.2.1. Letting of immovable property 635 7.2.2. Financial services Supplies of immovable property 636 7.3. Standstill exemptions 639 7.3.1. Admission to sporting events 640 7.3.2. Artists and liberal professionals 640 7.3.3. Supply of new buildings 641 7.3.4. Passenger transport 641 8. Zero Rating 645 8.1. Provisioning of sea vessels, etc. 645 8.2. Goods under customs control 646 8.3. Goods and services supplied to exporters 647 8.4. VAT warehousing 647 9. Deduction of Input Tax 649 9.1. Immediate deduction 649 9.2. Exclusions 651 9.3. Excess input tax 658 9.4. Pro rata 662 9.5. Adjustments of input tax deductions 663 9.5.1. Non-payment and stolen goods 663 9.5.2. Capital goods Adjustment period 663 9.5.3. Capital goods Services 664 9.6. Refunds to non-resident businesses 666 9.6.1. Refund procedure 666 9.6.2. Refund thresholds 667 9.6.3. Reciprocity principle 669 9.6.4. Refund offices 670 10. Liability To Pay VAT 679 10.1. Reverse charge mechanism 679 10.1.1. Optional reverse charge mechanism Non-resident suppliers 680 2014 IBFD 538
Table of Contents 10.1.2. Optional permanent reverse charge mechanism Specific transactions 682 10.1.3. Optional temporary reverse charge mechanism Specific transactions 685 10.2. Simplified intra-community triangulation 687 10.3. VAT representatives 688 10.4. Third party s joint and several liability 690 10.4.1. Cross-border relationships 690 10.4.2. Specific transactions 693 10.5. VAT on importation postponed accounting 698 10.6. Assessment and refund application periods 700 11. Administrative Obligations 707 11.1. Registration 707 11.2. VAT invoices 707 11.2.1. VAT invoices relating to exempt supplies 707 11.2.2. Time limits 708 11.2.3. Invoices drawn up by the customer 709 11.2.4. Customer s identification number 710 11.2.5. Clauses on VAT invoices 710 11.2.6. Storage of invoices 716 11.3. VAT returns 717 11.3.1. Tax periods 717 11.3.2. Electronic VAT returns 721 11.3.3. Filing of VAT returns and payment of VAT 722 11.4. Recapitulative statements 725 11.4.1. Additional details 725 11.4.2. Filing frequency 725 11.4.2.1. Quarterly filing 725 11.4.2.2. Annual filing 726 11.4.3. Filing format 727 11.4.4. Intra-Community acquisitions of goods 729 11.4.5. Receipt of cross-border services 729 12. Special Schemes 731 12.1. Flat-rate farmers 731 12.2. Margin scheme 732 13. Information Offices 735 14. Thresholds and Tax Rates 743 539 2014 IBFD
Deduction of Input Tax 9.5. Adjustments of input tax deductions Input tax that has initially been deducted must be adjusted if it appears that the initial deduction was higher or lower than that to which the taxable person was entitled or where, after the return was made, some change occurs in the factors used to determine the amount to be deducted, in particular where purchases were cancelled or price reductions were obtained 96. In principle, no adjustments must be made in the event of transactions remaining totally or partially unpaid and of destruction, loss or theft of property duly proved or confirmed, nor in the case of application of goods for the purpose of making low-value gifts and giving samples. However, Member States may require adjustment of the input tax that has been deducted where transactions remain totally or partially unpaid, and in the case of theft. 9.5.1. Non-payment and stolen goods Where taxable persons do not pay the price, in full or in part, for goods or services received from third parties, Austria, Belgium, Germany, Ireland 1, Latvia 2, Luxembourg, Malta, the Netherlands, Portugal, Romania and the United Kingdom 3 require adjustment of the initially deducted input tax. However, in France and Finland, the adjustment is not required in respect of certain unpaid debts. In Italy (under certain conditions) and in Portugal, the adjustment is made at the supplier s discretion. In Romania, a final administrative or court decision is necessary to make the adjustment. 1. In Ireland, taxable persons who have not paid their supplier within six months of the tax period in which the related invoice was issued must in principle reverse the initial input tax deduction. 2. In Latvia, the customer must repay the initially deducted tax to the tax authorities before 31 July of the year in which the supplier informed him, before 1 March, that he will treat the debt as being irrecoverable (see 5.2.). 3. In the United Kingdom, the customer is required to repay the tax that he has initially deducted in respect of inputs where he has not paid the supplier after 6 months (except where the customer is formally insolvent), even if the supplier has not claimed bad-debt relief (see 5.2.) on the unpaid supplies. Input tax relating to stolen goods must only be repaid in the Slovak Republic and, in specific circumstances, in Bulgaria, France and Romania. In Latvia, VAT on stolen goods does not have to be repaid if the theft is duly proven. 9.5.2. Capital goods Adjustment period Another type of adjustment of input tax concerns the fluctuating use of capital goods for taxed and non-taxed purposes over a number of years, the so-called adjustment period, following their acquisition or first use. The length of the 96. Articles 184 and 185 of the VAT Directive. 663 2014 IBFD
VAT Options Exercised by the Member States (situation on 1 January 2014) adjustment period 97 depends in almost all Member States on whether the capital goods are movable or immovable. In respect of movable capital goods, the adjustment period is 5 years in all Member States, with the exception of Finland and Ireland. In the latter two Member States, rules for the adjustment of VAT on movable capital goods have never been introduced. Instead, those assets are subject to self-supply rules, whose application is limited in Finland to the general assessment period of 3 years following the end of the financial year during which the adjustment took place. There is no time limit to the application of the self-supply rules in Ireland. In respect of immovable capital goods, the adjustment period is: 5 years in Greece 1 ; 10 years in Austria 2, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, Germany, Greece 3, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Spain, Sweden and the United Kingdom; 15 years in Belgium 4 ; and the maximum of 20 years in Austria 5, Bulgaria, France, Hungary, Ireland, Malta, Portugal, Romania, the Slovak Republic 6 and Slovenia. 1. In Greece, the adjustment period is 5 years, unless, from 1 January 2007, the option for taxation (see 7.2.) is taken up. In the latter case, the adjustment period is 10 years. 2. In Austria, the adjustment period of 10 years applies to immovable property (including capitalized expenses and major repairs) taken into use prior to 1 April 2012 or, in the case of the letting of residential property, the lease contract was concluded prior to that date. 3. In Greece, from 1 January 2007, the adjustment period is 10 years, where the option for taxation (see 7.2.) is taken up. 4. In Belgium, the adjustment period of 15 years begins on 1 January of the year in which the capital goods were taken into use. 5. In Austria, the adjustment period of 20 years applies to immovable property (including capitalized expenses and major repairs) taken into use on or after 1 April 2012 or, in the case of the letting of residential property, the lease contract was concluded on or after that date. 6. In the Slovak Republic, the adjustment period remains 10 years in respect of immovable property purchased before 1 January 2011, if at least the first adjustment was made before that date. 9.5.3. Capital goods Services Until May 2001, it was generally assumed that adjustment of initial deduction of input tax relating to capital goods was limited to situations in which the goods had been supplied to the taxable person. However, in Fischer/Brandenstein 98, the ECJ declared that also VAT relating to specific services may be subject to adjustment under the capital goods scheme. Several years later, Article 20(4) of the 97. Article 187(1) of the VAT Directive. 98. ECJ judgment of 17 May 2001 in Hans-Georg Fischer v. Finanzamt Burgsdorf and Klaus Brandenstein v. Finanzamt Düsseldorf-Mettmann, Cases C-322/99 and C-323/99, [2001] ECR I-4049. 2014 IBFD 664
Deduction of Input Tax former Sixth Directive was amended 99 to the effect that the Member States were authorized to apply the capital-goods scheme to services which have characteristics similar to those normally attributed to capital goods 100. In the Netherlands, a proposal to treat capital services, i.e. services that must be depreciated for income tax, on the same footing with capital goods was presented to the parliament on 1 April 2005; that proposal is still pending. In Austria, Bulgaria, Denmark, Hungary, Italy, Latvia, Lithuania, Malta, Portugal, Slovenia and Spain, VAT on services is not subject to adjustment on the ground of variation of their use for taxed and exempt purposes in the years of the adjustment period or their disposal during that period. The following Member States apply the capital-goods scheme to the following services: Capital goods include services BE Services to be written off for income tax purposes over a minimum period of 5 years CY Copyrights, patents, licences, trademarks and similar rights, including goodwill, provided that they are used for more than one accounting period and their value is not less than EUR 17,086.01 each. CZ Long-term intangible assets (including services) whose acquisition price exceeds CZK 60,000 (EUR 2,180). DE Services which are not consumed when received, which are performed on and for a tangible asset and are appropriate to serve the use and the maintenance of this asset. In relation to immovable fixed assets, these are particularly refurbishment, painting and construction services. EE Letting of immovable property. EL The right to use copyrights, patents, licences, trademarks and similar rights, provided that they are used for more than 1 fiscal year. FI Construction of new buildings and construction of immovable property that must be capitalized. FR The national legislation refers to the term assets, which includes both tangible and intangible assets (services). GB Construction and refurbishment services with a value of more than GPB 250,000 (EUR 301,860) 1. HR Construction and refurbishment services relating to immovable property which are normally capitalized. IE Construction and refurbishment services relating to immovable property (including certain professional services) that are normally capitalized. LU The capital-goods scheme applies to business assets subject to depreciation, regardless of whether they are goods or services. 99. Council Directive 2006/69/EC of 14 February 2006 amending Directive 77/388/EEC as regards certain measures to simplify the procedure for charging value added tax and to assist in countering tax evasion or avoidance, and repealing certain Decisions granting derogations, OJ L 221 of 12 August 2006. 100. See Article 190 of the VAT Directive. 665 2014 IBFD
VAT Options Exercised by the Member States (situation on 1 January 2014) PL RO SE SK Capital goods include services Services that, for income tax purposes, are covered by the concept of fixed assets and other intangible assets, provided that their initial value exceeds PLZ 15,000 (EUR 3,600). Construction services and refurbishment of immovable property that are capitalized. Construction services and refurbishment of immovable property that normally are capitalized. Construction services for which a building permit is required. 1. In the United Kingdom, both goods and services are within the capital-goods scheme if the standard-rates cost is, in the case of movable goods (computer equipment, ships and aircraft) more than GBP 50,000 (EUR 61,400)or, in the base of immovable goods (land and buildings) more than GBP 250,000 (EUR 307,100). 9.6. Refunds to non-resident businesses Under the procedures laid down by Directive 2008/9 101 and the Thirteenth Directive 102, Member States must refund VAT to non-resident businesses, which are not and must not be registered for VAT in the Member State of refund. Directive 2008/9 is the successor to the Eighth Directive 103. For a comparison of the procedure applicable to refund applications made before 1 January 2010 or after 31 December 2009 by businesses established in another Member State, see 9.6.1. Refund applications must be made before expiry of the application deadline (see 10.6.) and are refused if they do not exceed certain thresholds (see 9.6.2.). The refunds are made by refund offices (see 9.6.4.). 9.6.1. Refund procedure With effect from 1 January 2010, the procedure for refunds of VAT to businesses established in another Member State, who are not and must not be registered in the Member State of refund, is laid down by Directive 2008/9. The new procedure applies to refund applications submitted after 31 December 2009, which means that it also applies to refund applications relating to, for example, the fourth quarter of 2009 or the entire year 2009. 101. Council Directive 2008/9/EC of 12 February 2008 laying down detailed rules for the refund of value added tax, provided for in Directive 2006/112/EC, to taxable persons not established in the Member State of refund but established in another Member State, OJ L 44 of 20 February 2008. 102. Thirteenth Council Directive 86/560/EEC of 17 November 1986 on the harmonization of the laws of the Member States relating to turnover taxes Arrangements for the refund of value added tax to taxable persons not established in Community territory, OJ L 326 of 21 November 1986. 103. Eighth Council Directive 79/1072/EEC of 6 December 1979 on the harmonization of the laws of the Member States relating to turnover taxes Arrangements for the refund of value added tax to taxable persons not established in the territory of the country, OJ L 331 of 27 December 1979. 2014 IBFD 666