Pan European VAT update Deloitte Global Tax Center (Europe) - 27 May 2019
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Pan European VAT update Deloitte Global Tax Center (Europe) 27 May 2019 Olivier Hody, Partner Johan Van Der Paal, Partner Bruno Roelands, Senior Director Karen Truyers, Senior Manager Sandeep Shinde, Manager
Agenda
• 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
2
Global
VAT developments
3
Gulf Cooperation Council states (GCC)
VAT implementation progress timeline
June 2016
GCC VAT Agreement
signed by all six
Member States
2016
2017 2018
2019 2020 2021
Nov 2017 Jan
USA and KSA commit 2020* 2021*
to go-live by Jan 2018 Jan 2019 Qatar Kuwait
Bahrain
Jan 2018 VAT implementation
UAE & KSA
VAT implementation
*Sep 2019
Oman
* Still to be officially confirmed
4Global 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
5EU
VAT developments
6European Council & Commission
European Commission
Study on domestic and cross border intra-EU VAT refunds
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
Tax
3. Lack of correct supporting document authorities
43%
Taxpayers
• In case of dispute, taxpayers win in 57% of 57%
the case and tax authorities 43%
8European Commission
Study on domestic and cross border intra-EU VAT refunds
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
9European Commission
Study on domestic and cross border intra-EU VAT refunds
Recommendations:
8th Directive refund claims VAT reimbursements via VAT return
• Awareness of Member State of
refund rules and requirements
(including IT solutions)
• Increasing • Guidelines on VAT
• Verification of pro-rata adherence for reimbursement claims
calculations (including late interest frequency
guidelines) payments
• Improved additional
• Recovery of incorrectly • Improved information request procedures
charged VAT follow-up (including IT solutions)
processes
• Better targeted request within
for additional information national tax
administration
• Use of established business
languages in the VAT refund
process
10Quick fixes 2020
The Quick fixes
Call of stock Simplification
arrangements for transport
allocation in
chain supplies
Simplification
EU VAT number proof of
requirement for transport
Intracommunity
supplies
11Quick fixes
Harmonised call-off stock arrangements
Single VAT exempt IC supply
VAT taxable
IC acquisition
• Upon dispatch : record keeping
required, no tax reporting IT
• Upon sale : reporting in VAT
return and ESL
DE
• Maximum 12 month period
Supplier Customer Stock Physical flow of the goods
12Quick fixes
Harmonised call-off stock arrangements - conditions
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.
13Quick fixes
Simplification for chain transactions - situation
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 ?
14Quick fixes
Simplification for chain transactions - graphic
Logic for attribution of cross border transport to single supply within a transaction chain if
transport performed by intermediate supplier
Intra-Community IT
Intra-Community or local supply?
or local supply?
FR
DE
Supplier Customer Physical flow of the goods Invoice flow
Intermediate supplier
15Quick fixes
Simplification for chain transactions – default situation
Default: IC transport is allocated to the supply made by the intermediate operator
to his customer
IT
ICS
Local supply
FR
DE
Supplier Customer Physical flow of the goods Invoice flow
Intermediate supplier
16Quick fixes
Simplification for chain transactions - exception
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
IT
Local supply
ICS
FR
DE
Supplier Customer Physical flow of the goods Invoice flow
Intermediate supplier
17Quick fixes
Simplification proof of transport
Quick fix providing legal certainty on evidence requirements
Simplified proof of transport – Rebuttable
presumption
EXW
FCA
Transport or dispatch by or on Transport or dispatch by or on
behalf of the CTP supplier behalf of the CTP customer
Supplier’s possession :
2 non-contradictory • Written statement by
the acquirer
documents attesting to
• 2 non-contradictory
the transport
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 18Quick fixes
VAT identification number as substantive condition for
an exempt intra-Community supply
Substantive conditions New legislation includes as substantive
• Evidence of cross border transportation condition
of the goods • A valid VAT identification number
• Capacity of the buyer as a taxable of the acquirer in a MS other than
person that in which transport of the goods
• Taxed IC acquisition
begins
Tax authorities controls And also as substantive condition :
• Valid EU identification number of the • The correct filing of the European
buyer Sales Listing by the supplier
• ESL reporting of the supplies towards • Distinction will be made between
that number excusable and non-excusable errors
CJEU : If this condition is not met When a valid VAT number is not
available
• Fines or administrative sanctions can be
imposed by MS • Refusal of exemptions
• But the application of the exemption • VAT of the Member State of departure
cannot be refused of the goods should be charged
• This VAT can be recovered by
purchaser via refund procedure
19E-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 Communication on Digital Single
Council negotiations the future of VAT Market Strategy
VAT action plan
December 2011 May 2015
• Additional Directive change April 2016
adopted in March 2019 to
provide clarifications needed
to implement deemed reseller
provisions December 2017:
e-Commerce December 2016:
• Implementing Regulation proposals e-Commerce
providing precise rules on adopted proposals
marketplace obligations and
different OSS regimes adopted December 2018:
in March 2019 Implementing
Regulation &
Next steps VAT Directive
proposals
• Commission’s Explanatory
Notes– for guidance only, not 1 Jan 2021:
law – expected end of 2019 E-Commerce
March 2019: By end of
2019: entry into
• IT system changes both on further VAT
Explanatory force
customs and VAT side – EU Directive
and national level – testing in changes and IR Notes
2020 adopted
• MS and industry consultations
• Implementation on 1 January
2021 20CJEU cases
Place of supply
C-647/17 – Srf Konsulterna – 13 March 2019
Facts
“admission to event or B2B
service?
Upfront Upfront 5 days educational
registration payment course for taxpayers
(B2B)
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.
22Export:
C 275/18 – Vinš - 28 March 2019
Facts
Post documents as
proof of export
CZ Authorities denied the
No export document VAT exemption for export
because there is no
export document
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.
23VAT deduction and VAT refund:
C-691/17 – PORR Építési Kft. – 11 April 2019
Facts
Invoice for construction work incorrectly with HU VAT The input VAT deduction is
rejected by the VAT
Credit note with HU VAT authorities
VWFS Customer
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)
24VAT deduction and VAT refund:
C-133/18 – Sea Chefs Cruise Services – 02 May 2019
Facts
VAT refund claim Sea Chefs’ refund
in France claim was rejected
‘Sea Chefs’ Authorities asked additional information
(DE) ‘Sea Chefs’ failed to provide it
(within 1 month)
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)
25VAT Compliance 2.O
(MTD, SAF-T, real time reporting
and split payment updates)
26Making Tax Digital (MTDfV)
Making Tax Digital (MTDfV)
Roadmap
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
MTD first announcement MTD Pilot launched MTD Pilot extended
Jan
2015 2018 2019
First Digital Submission period for Start of digital submission
taxpayers: M (April 2019) and Q requirement for
(Apr-June 2019 quarter) non-deferred taxpayers
July May
2019 2019 Apr
2019
Oct
2019 Apr
2020
Start of Digital submission Start of Digital Linking
requirement for deferred requirements
taxpayers
28SAF-T
SAF-T
Poland
Introduction of the extended SAF-T obligation (JPK_VDEK)
Abolition of the
traditional returns:
VAT-7, VAT-7K, VAT-27,
VAT-ZZ, VAT-ZT, VAT-ZD
ESPL return shall remain
Scope: Other considerations:
All taxpayers registered - Frequency: monthly
for VAT in Poland
- Data requirements:
definitive data fields are not
- Large taxpayers yet available
(Jan 2020) - Penalties: PLN 500 each for
- Remaining taxpayers non-compliance, errors and
(July 2020) irregularities
JPK_VDEK
SAF-T
30SAF-T
Poland
Comparison reporting data:
current JPK_VAT and VDEK SAF-T obligation
JPK_VAT JPK_VDEK
31SAF-T
Norway
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 2)
Version 2: Detailed invoice information and source documents, etc.
TBC (Wave 3)
Version 3: Movement during period of inventories and non-current assets, etc.
32SAF-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
33Real time reporting
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
35Split Payment
Split Payment
Poland
Cash-flow
• Mandatory, for all VAT registered taxpayers
impact?
(including non-established) where:
Scope o B2B transactions above PLN 15 000 and
o 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
Mandatory • Taxpayers would have limited rights to this
Bank
split payment Account
bank account
• Bank charges would be reimbursed by the
1 Sep 2019* tax authorities - upon taxpayer request, on
a quarterly basis
• Invoicing requirements: should include the
In wording 'split payment mechanism’
practice • Penalties: 100% of the VAT amount in
Abolition of question/per invoice and also criminal offence
the domestic (personal liability) in certain circumstances
reverse foreseen
charge
* Still to be adopted by Parliament 37Pan EU VAT compliance
update
38VAT rate updates
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 Likely to be postponed to 2020
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
40General VAT compliance updates
General VAT compliance updates
Import VAT
United Kingdom and Ireland
Import VAT
C79 reverse charge SAD
post-Brexit
42General VAT compliance updates
E-filing / upload files / XML schema / due dates
Estonia
Change in the mandatory e-filing process: 1 May 2019
Czech Republic
VATR: April 2019
LSPL: Sep 2019
Hungary
Real time reporting
XSD schema version 1.1: 4 June 2019
Switzerland
(Proposal) Introduction of mandatory e-filing: 1 January 2020
Finland
New VAT return form: January 2020
Belgium, Demark, Norway, Sweden, Spain
Summer extensions
43General VAT compliance updates
Local reverse charge
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
44General 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
45General VAT compliance updates
E-invoicing
Link
46General VAT compliance updates E-invoicing - recent updates Sweden B2G 1 April 2019 Croatia B2G 1 July 2019 Norway B2G 1 April 2019 (at least 100 000 NOK) The Netherlands B2G (Wave 1: 1 January 2017, Wave 2: 18 April 2019) Poland B2G (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) 47
Brexit
48Brexit timeline
Latest political developments
49Conclusion
51
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