WELCOME TO OUR WEBINAR VAT: PLACE OF SERVICE …files.dlapiper.com/files/upload/EU_VAT_Nov09.pdf · EU VAT Directives require implementation in local VAT ... Where the immovable property

This webinar recording is offered for informational purposes only, and the content should not be construed as legal advice on any matter.

VAT: PLACE OF SERVICE VS. PLACE OF CONSUMPTION

November 4, 2009 | 9:00 – 11:00 a.m. PST

WELCOME TO OUR WEBINAR

November 4, 2009VAT: Place of Service vs. Place of Consumption 2

CURRENTLY SPEAKING

Introduction of Panelists

Daan ArendsInternational VAT GroupSenior AssociateCorporateDLA Piper Amsterdam

Moderator

Eric D. RyanPartnerTax GroupDLA Piper USEast Palo Alto

Richard WoolichPartner and Chairman International VAT GroupCorporate DLA Piper UK London

Dominika CabajDirector, DLA Piper PolandSenior AssociateCorporate DLA Piper Poland


CURRENTLY SPEAKING

EU VAT Package

Introduction to EU VAT

What is changing?

Daan ArendsInternational VAT GroupSenior AssociateCorporateDLA Piper Amsterdam


CURRENTLY SPEAKING


Recent Netherlands research under international tax managers reveals that irrecoverable VAT is the biggest tax burden ahead of all other taxes!

Non-compliance with VAT rules leads to VAT assessments, interest charges and penalties

VAT exposure often "hidden" in organization

VAT is often not recoverable from customers –incorrectly invoiced VAT remains due

29 out of 20 OECD countries have VAT/GST – US"not soon"

EU VAT rates ranging from 15% to 25%

Daan ArendsInternational VAT GroupSenior Associate Corporate DLA Piper Amsterdam


CURRENTLY SPEAKING


EU VAT Directives require implementation in local VAT rules but leaves EU Member States some discretionary authority resulting in different rules throughout the EU

Different set of rules apply to supply of goods and provision of services

VAT regime supply of goods:Main rule of taxation: taxed with VAT where goods are at the moment of the supply

In case of transportation of goods: taxed with VAT where transport starts

In case of installation of goods: taxed with VAT where installation takes place



CURRENTLY SPEAKING

Introduction to EU VAT: Supply of Goods

Domestic supplies –within EU country– reverse charge

(Fictitious) intra-community transactions– cross-border EUIC supplies – zero rated

IC acquisitions – standard rated

Export supplies – outbound EU – zero rated



CURRENTLY SPEAKING

Introduction to EU VAT: Supply of Goods

Local VAT registration is generally required for:(Fictitious) IC supplies involving shipment/transport from one EU country to another

(Fictitious) IC acquisitions involving shipment/transport from one EU country to another

Domestic supply (i.e., supply of products within an EU country) or installation supply (unless a reverse charge mechanism applies or the turnover is below the local VAT registration threshold).

Note that the importation of goods into EU is considereda separate taxable event – VAT deferment arrangements available – NL deferment license – UK deferment account



CURRENTLY SPEAKING

Supply of Goods: Case Study – Global Contract –Intra-Community Transactions


USSupplier

US Customer (parent)

Global Contract

Customer SubVendor

UK

Delivery of product

NL

US

Sale

Sale Sale

Which sale is intra-community transaction?Which sale is domestic sale?Reverse charge mechanism applicable VAT registration requirement for US based Supplieror Customer


CURRENTLY SPEAKING

Supply of Goods: Case Study – Global Contract –Importation into EU


USSupplier


Global Contract

Customer SubVendor

NL

Delivery of product

US

Sale

Sale Sale

Import of product

Who imports the products into the EU?Which sales are considered domestic NL sales?Reverse charge mechanism applicable?


CURRENTLY SPEAKING

Introduction to VAT: the Place of Supply of Services – Current Rules

Supply of Services = any transaction that does not constitute a supply of goodsPlace of supply of services = the place where a service is treated as being supplied and where it is liable to VAT (if any):

Current general rule: VAT due in country of the service providing company ( management, administration, intercompany cost recharges)Many exceptions:

Services relating to real estate place where property is situatedEducational, entertainment place where services are physically carried outTransfer of IP, advertising services, services of accountants and lawyers, supply of staff country of taxable customer

Simplification: reverse charge mechanism



CURRENTLY SPEAKING

Introduction to VAT: the Place of Supply of Services as of 2010

New general rule place of supply of cross-border B2B services the place where the customer is established (subject to certain exceptions). The B2B customer must self-assess the VAT due relating to the service under the reverse charge rule

General rule place of supply of cross-border B2C services remains unchanged the place where the service provider is established (subject to certain exceptions)

Aim: modernize and simplify

Result: increased administrative costs



CURRENTLY SPEAKING

Introduction to VAT: the Place of Supply of Services as of 2010

UK Provider

NLUK

NLB2B Customer

Services

Payment


What service is being supplied?

Does the customer have a VAT number?

Is self-assessed VAT recoverable?


CURRENTLY SPEAKING

New Place of Supply Rules

Place of supply B2B as from 1 January 2010

Place where the activities are physically carried out

Services and ancillary services relating to cultural, educational events, including servicesof organizers

Where the transport takesplace, proportionate to the distances covered

Passenger transport

Where the immovable propertyis located

Services connected with immovable property, including services of estate agents and "holiday accommodation"

Where customer is establishedNew general rule



CURRENTLY SPEAKING



Where physically carried outOther restaurant andcatering services

Place of departure of the passenger transport operation

Restaurant and catering services physically supplied on board ships, aircraft or trains during partof an intra-Communitypassenger transport

Where it is put actually at the disposal of the customer

Short-term hiring of a meansof transport



CURRENTLY SPEAKING


Place of supply B2C as from 1 January 2010

Place of departure


IC transport of goods

Other transport of goods


Passenger transport

Where the immovable propertyis located

Immovable property

Where the supplier is establishedGeneral rule



CURRENTLY SPEAKING



Where the customer is residentIntangible services tonon-EU customers

Where the services are physically carried out

Services ancillary to transport –Valuations of and work on movable tangible property

Where the underlying transaction is supplied

Intermediaries

Where it is put actually at the disposal of the customer

Short-term hiring of a meansof transport

Place where the activities are physically carried out

Services and ancillary services relating to cultural, educational events, including servicesof organizers



CURRENTLY SPEAKING



Where the services are physically carried out

Other restaurant andcatering services

Place of departure of the passenger transport operation

Restaurant and catering services physically supplied on boardships, aircraft or trains duringpart of an intra-Community passenger transport



CURRENTLY SPEAKING




Default ruleEvents – organizationWhere event takes placeEvents – admission

Where event takes placeEvents – organizationWhere event takes placeEvents – admission



CURRENTLY SPEAKING




Where customer is residentLong-term rental of vehicles –other vehicles

Place of disposal

Where customer is resident

Long-term rental of vehicles –yachts

Disposal at the supplier's place of business

Disposal elsewhere

Remains default ruleLong-term rental of vehicles



CURRENTLY SPEAKING




Where the customer is residentTelecoms, broadcasting and electronic services

Remains default ruleTelecoms, broadcasting and electronic services



CURRENTLY SPEAKING

Status of Customer: B2B or B2C?

"B2B" – Business to BusinessCustomer = "taxable person"

Includes businesses performing taxable and non-taxable activities (e.g. local governments, "active" holding & financing companies)

Includes businesses trading below registration threshold

Includes wholly non-taxable legal person "identified" for VAT in its jurisdiction – VAT planning opportunities!

Includes non-EU established businesses



CURRENTLY SPEAKING

Status of Customer: B2B or B2C?

"B2C" – Business to non-taxable CustomerIndividual not registered for VAT, nor making any business supplies (e.g. holding company)

Business, where supply is received for personal purposes, including for staff – supplier needs to check the reason for the supply! – Dutch guidance: generally received for business purposes



CURRENTLY SPEAKING

Evidencing Status of Customer

Status of customer as "Business" Obtain VAT number of customer before supplyis made

Some EU countries require VAT number of customer otherwise local VAT must be charged

If customer is trading below registration threshold or is established outside EU, obtain alternative evidence of customer being in business

Most authorities will supply business customers with "certificate of status"

Check customer VAT status at Commission website

If in doubt, treat customer as "Consumer" and charge VAT as appropriate



CURRENTLY SPEAKING

Where Are the Supplier and Customer Established?

Which establishment of supplier and recipient is most directly connected with the supply? Current:

For suppliers, from which establishment are the services actually provided

For recipients, at which establishment are the services actuallyconsumed, effectively used or enjoyed

Which establishment appears on contracts and invoices

Where are directors or others who entered into contracts based

At which establishment decisions are taken and controls are exercised

Normally, it is the establishment actually supplying or receiving the supply of services which is most connected (even if contract is different)



CURRENTLY SPEAKING

Abolition of "Force of Attraction"

Current rule: reverse charge mechanism is applicable when the service provider is ‘not established in the customer's Member State’

Some EU countries have strict interpretation and have implemented "force of attraction" rule: non-resident service providers are established in their customer's Member State if they merely have a fixed establishment (even without involvement of that fixed establishment)

Reverse charge rule does not apply

VAT is due by the non-resident service provider'sfixed establishment



CURRENTLY SPEAKING

Abolition of "Force of Attraction"

As of 2010 abolition of force of attraction rule:

"taxable persons, who have a fixed establishment within the territory of the Member State where the tax is due, must be regarded as taxable persons who are not established within that Member State, when they make a supply of goods or of services within the territory of that Member State and any establishment, which they have within the territory of that Member State, does not intervene in that supply"

New interpretation questions arise: what does "intervene" mean within the context of this provision?

Guidance of the VAT committee is expected



CURRENTLY SPEAKING

UKSupplier

UK Customer Global Contract

US Supplier Sub

NL

UK

CS FESU FE

GER

Case Study 1: Global Contract

Which establishment is providing the service?

Does the local fixed establishment intervene?

Reverse charge mechanism applicable?



CURRENTLY SPEAKING

"Use and Enjoyment" Override

Changes place of supply to where service is used and enjoyed (consumption principle)

Overrides fallback rule for B2B and B2C

Potentially also overrides hire of means of transport and EU to non-EU B2B and B2C services

Netherlands – no extension of current "use and enjoyment" rules expected

Check other jurisdiction's rules as potential conflict and double tax



CURRENTLY SPEAKING

New Recapitulative Statements

Current position: taxable persons must declare their zero-rated intra-Community supplies of goods only into the periodic recapitulative statement

From 1 January 2010: in addition businesses must declare details of supplies of services subject to VAT in another Member State under the reversecharge mechanism

Service providers and customers involved in cross-border services must have a VAT identification number, or VAT may have to be charged!



CURRENTLY SPEAKING


New time of supply! instead of the payment/invoice date, the time of supply will be the earlier of when the service is completed or when payment is made. IMPACT ON INVOICING SYSTEMS

Continuous supplies of services: the time of supply linked to the payment periods: if no payment is made than deemed completion at the end of the calendar year



CURRENTLY SPEAKING


Form captures country code of customer, customer's local VAT number, value of supplies and type of serviceOmit from form supplies exempt in customer's Member State (note: financial services exemption differs widely across EU) – so VAT status of supplies in customer's Member State will need to be checked toprevent mismatchExtra administrative burden – no de minimis limitMonthly filings or quarterly depending on threshold for intra-community supplies of goods (or optionfor services) Same form as goods – adapted for servicesPenalties – for inaccuracies are severe!



CURRENTLY SPEAKING

Council Directive 2008/9/EC – Mutual Recovery –Replacing Eighth Directive – from 1 January 2010

Claims for refunds of input VAT incurred in Member States where trader not established

New electronic portal

Expenses are coded

No requirement for certificate of taxable status or submission of original invoices

Claim made to Member State of establishment withfull details

Claim passed to Member State of refund



CURRENTLY SPEAKING

Council Directive 2008/9/EC – Mutual Recovery –Replacing Eighth Directive – from 1 January 2010

30 September deadline for previous calendar year

Payment to be made within four months – and 10 days of approval – otherwise interest (unless more information needed)

Conditions for deduction (e.g. entertainment) are the rules for the Member State of refund

Apply partial exemption status of claimant

13th Directive reclaim procedure is unchanged



CURRENTLY SPEAKING

Advantages of New Regime

Vast majority of cross border B2B services may be invoiced without VATVAT no longer needs to be charged on management, administrative services, record keeping, payroll,and repair and installation services, orintercompany chargesNo longer cash flow cost for business customers No longer need for multiple VAT registrations e.g. for repair and installation of goods2015 extension of One-Stop-Scheme for EU suppliers of telecommunication services will cut down onmultiple registrationsAbolition of force of attraction principle – causesmany disputes



CURRENTLY SPEAKING

Disadvantages of New Regime

Exempt/partially exempt businesses will now suffer VAT on services outsourced to non-EU businesses

Increased administration – new recapitulative statements – amendments to ERP systems necessary

Increased compliance costs – accounting systems

Risk of double taxation where services received incur local tax/GST

Suppliers and recipients under global contracts should assess the new rules in respect of "establishment"

Disputes likely if EU countries do not agree consistent guidelines on "use and enjoyment" override



CURRENTLY SPEAKING

Preparations – Accounting Systems Etc

Review and amend ERP systems – VAT numbers of customers crucial – new time of supply in ERP systems

Invoices must be drawn up in accordance with invoicing requirement in customers' EU country

Review and assess scope of exemptions in country of residence and customers' EU country

ERP Systems must make difference between –local supplies – non-EU supplies – and intra-community supplies

Supply VAT number to suppliers, to avoid incurring foreign VAT and time and expense correcting errors



CURRENTLY SPEAKING

EU VAT Package

Practical Impact for US Businesses

Richard WoolichPartner and Chairman International VAT GroupCorporate DLA Piper UK (London)


CURRENTLY SPEAKING

You Cannot Afford to Ignore VAT

Trend – Corporate taxes reducing (halted 2009)Average EU rate: 23.2%

Average Latin America rate: 26.9%

Urgent need for more revenues: governments raising indirect taxes – more resilient in downturn

VAT/GSTAverage EU rate: 19.5% => 19.8% (2009)

Average Latin America rate: 15.9 => 16.2% (2009)

Over 150 countries have indirect tax systems

No double tax relief for VAT

NOT JUST FLOW-THROUGH. CAN BE A REAL COST

Richard WoolichPartner and Chairman International VAT GroupCorporate DLA Piper UKLondon


CURRENTLY SPEAKING

EU VAT Package

1 January 2010 – new regime begins whether you are ready or not!

Place of supply of servicesWho pays VAT?

Where is VAT charged?Richard WoolichPartner and Chairman International VAT GroupCorporate DLA Piper UKLondon


CURRENTLY SPEAKING

Are You Affected?

US businesses providing services to EU customers

EU subsidiaries of US businesses acquiring services from EU/non-EU service providers

US businesses buying services from EUservice providers

Basically, anyone doing business with EU

US to introduce federal VAT?Follow Michigan and Texas – state forms of VAT

US budget deficit: aging population/recession/health care

Federal deficit estimated at $1 trillion annually overnext decade



CURRENTLY SPEAKING

Overview of Changes in VAT Package

Current main rule for taxation of cross-border servicesVAT is due in supplier's country

Specific exceptions

Introduction of new "general rules" for place of supplyof services

B2B (business to business): where customer is established, reverse charge mechanism applies

B2C (business to non-taxable consumer): where service provider is established

Range of exceptions apply to general rules in B2B and B2C situations



CURRENTLY SPEAKING

Overview of Changes in VAT Package


EUBusiness Customer

input VAT

output VAT

No VAT chargedin jurisdiction of

supplier

Real cost or just accounting entry?Depends on customer's business

Result: Some customers in EU (public sector, schools, universities, banks, insurance companies, hospitals, charities) hard hit by VAT for first time

Non-EUBusiness Customer

No EU VATlocal VAT/GST?

US SupplierEU Supplier


CURRENTLY SPEAKING

ACTION: You Have Less than 2 Months to Go…

Obtain VAT registration numbers of business customers in other EU jurisdictions and verify (website: ec.europa.eu/taxation_customs/vies)– or other acceptable business status evidence

Amend accounting software

Easy to extract information for ESL

Supply your EU VAT number(s) to your EU overseas suppliers, to avoid incurring foreign VAT and time and expense correcting errors



CURRENTLY SPEAKING

ACTION: You Have Less than 2 Months to Go…

Global contract issues - identify where VAT treatment may change after 1 January 2010

Does contract need amendment?

Agree VAT consequences with other party

Cross-border Intra Group transactions – identify where VAT treatment may change



CURRENTLY SPEAKING

Complicating Rules

Scope of "use and enjoyment" exception

Interpretation of intervening supplier

Customers with 2+ establishments. Where is service used and enjoyed?

No statutory definition of "provided to"

No case law/guidance

Richard WoolichPartner and ChairmanInternational VAT GroupCorporate DLA Piper UKLondon


CURRENTLY SPEAKING

Case Study 1: Supply of Outsourced Call Centre Services


Non-EU Call Centre

Back office services

Non-EUCall Centre

UK branch ofUS Bank(partially exempt

business)

UK branch ofUS Bank(partially exempt

business)

No VAT

Place of supply o/s UK

Place of supply UK

NOW

POST1/1/2010

REVERSE CHARGEIN UK

Also affects insurance companies, financial traders, property business, hospitals, universities and charities


CURRENTLY SPEAKING

Case Study 1: Supply of Outsourced Call Centre Services

Is UK branch contractually obliged to pay the VAT to the supplier? If yes, estimate extra cost

Bank should review VAT recovery method – ensure the input tax is expressly dealt with and a fair and reasonable recovery achieved

Beware VAT/GST imposed in supplier's jurisdiction –there is no double treaty relief for VAT

Impact on outsourcing decisions yet to be made

Richard WoolichPartner and Chairman International VAT Group Corporate DLA Piper UKLondon


CURRENTLY SPEAKING

Will This Work?

FCE Bank – no supply of management, consultancy, data from London headquarters to Italian branchWhich entity is the recipient of the supply?Use and enjoyment override?Note: outside EU, branch to branch is a supply e.g. Canada, Australia, Singapore

Richard WoolichPartner and Chairman International VAT GroupCorporate DLA Piper UKLondon Indian

Call Centre

Indianentity of customer

UK Branch of customer entity

recharge of costsservices


CURRENTLY SPEAKING

Case Study 2: Management Services: UK to US


Management Services

UK Subsidiary

US Parent

CurrentUK VAT

Post 1 January 2010• outside scope of VAT• no VAT implications for US Co• same principles for

outsourcing/advisory

$


CURRENTLY SPEAKING

Case Study 3: Management Services: US to EU


UK Subsidiary

US Co

CurrentNo VAT

Post 1 January 2010• reverse charge in UK - self assess• is this a real cost? depends on whether

UK Subsidiary makes taxable supplies

Management Services

$


CURRENTLY SPEAKING

Case Study 4: Management Services to a Pure Holding Company


Post 1 January 2010• BV must register and

reverse charge in NL• BV cannot recover VAT• Charge on to group

companies?

Netherlands Holding BV

US Parent

CurrentNo VAT

Management Services

$


CURRENTLY SPEAKING

Case Study 5: Services to Customer Based in More than One Jurisdiction

Where are services provided and enjoyed?Where is VAT charged?Economic consumption?


Washington DC Customer XYZ

US Supplier NY

German BranchXYZ

French BranchXYZ

servicesservicesreverse charge?

$

servicesreverse charge?

$


CURRENTLY SPEAKING

Case Study 6: Global Contracts


USparent US CustomerFramework

Agreement

Supplier Sub France

CustomerSub France

French VATServices

Supplier Sub Germany

CustomerSub Germany

German VATServices


CURRENTLY SPEAKING

Local VATRegistrations?

Local VAT

USSupplier


InternetServices

Supplier EU group entities providing

local support services

Local EU branches of customer

Fee: Cost-Plus

sub-contract

reverse charge VAT?

on-charge

Case Study 7: Global Contracts

Use and enjoyment rules?Review contractsLink to transfer pricing



CURRENTLY SPEAKING

Case Study 8: One Supply or Two?

One supply to customer or two?

Contracts can be critical


US Parent Payment Services

Internet Services

UK Branch:

Netherlands BusinessCustomer

Exempt Financial Service

Internet Services:Reverse Charge?


CURRENTLY SPEAKING

US Parent (US server andestablishment)

Germany

France

UK

Belgium

Non-Business Customers

DIGITAL SERVICES

Case Study 9: Supply of Digital Services B2C

Non-business customers: place of supply is in customer jurisdictions

Business customer: reverse charge


(e.g. music downloads, gaming, gambling, internet-dependent services)


CURRENTLY SPEAKING

Case Study 9: Supply of Digital Services B2C

Option 1: Register for VAT in each relevant jurisdiction – where exceed threshold – account for VAT locally

Option 2: Register electronically in jurisdiction of choice (One Stop Scheme). VAT is charged at local rates and paid over to each local jurisdiction

Option 3: Set up establishment in e.g. Luxembourg –charge VAT at 15%. Needs substance. Only works until 2015

DON'T IGNORE!

KEY COMMERCIAL DECISION: Should charges vary depending on where customer is established?



CURRENTLY SPEAKING

New Rules for Digital Services "B2C" toSwiss Customers

VAT Registration obligation where services exceed CHF 100,000

7.6% VAT (2010 8%)

Appointment of Swiss fiscal representative and bank guarantee required


US Business "B"

Swiss"C"

Digital Services


CURRENTLY SPEAKING

Disputes

Double taxation

Note provision in Article 398 of EC VAT Directive for VAT Committee to consider how EC legislative provisions should be applied and differences in approach taken by Member States resolved. Committee charged by EU Commissioner with delegates from each Member State. Effective??



CURRENTLY SPEAKING

Main Messages – Less Than Two Months to Go!

Review supply and customer contracts – how will new rules impact? Who bears the risk?

Conduct full economic compact assessment –exempt/partially exempt businesses

Systems/ESL

Training – how to pick up issues – responsible officer?

Obtain and check EU customers' VAT numbers. Give your number to suppliers



CURRENTLY SPEAKING

Main Messages – Less Than Two Months to Go!

Review impact on overseas VAT registrations and 8th/13th directive refunds

Monitor closely all new regulations, policy developments and guidance

What are you doing about digital services?

DLA Piper VAT Team can help!



CURRENTLY SPEAKING

Top VAT Tips

Make use of import VAT deferment regime

13th Directive refunds – establishment and time limits

Cash flow – timing of VAT periods, invoicing

VAT grouping – within same jurisdiction

Do not forget bad debt relief when customer does not pay in full

Do not forget other taxes e.g. transfer pricing, corporation tax permanent establishment. Reduced prices – reduces tax and customs duties

Transfer of business (TOGC) – please take care. Different rules in different jurisdictions

DO NOT IGNORE VAT – it will not go away!



CURRENTLY SPEAKING

VAT Briefing

Central and Eastern Europe



CURRENTLY SPEAKING

CEE – Background

EU Accession

12 new member states since May 2004:

Poland, Czech Republic, Slovakia, Slovenia, Hungary, Lithuania, Latvia, Estonia, Cyprus, Malta, with Bulgaria and Rumania joining in January 2007

VAT and excise duty rules should be harmonized with EU Directivesupon accession



CURRENTLY SPEAKING

CEE – Background

Post EU accession Dramatic rise in foreign direct investment

Key drivers of FDILow labor costs*, qualified workforce, attractive location

Multinational manufacturers opening facilities in CEEGE, GM, Ford, Procter & Gamble, Dell, International Paper, 3M, Phillip Morris

R&D and shared service centers of large global corporations in CEE

Delphi, IBM, Philips, Accenture, Johnson & Johnson

* Average monthly salary in Poland in 2008 (gross) was approximately USD 1200. In EU lower employment costs are only in Ireland, Greece, Italy, Romania



CURRENTLY SPEAKING

VAT in CEE


DLA PIPER: Based on research from CEE EU Members

Taxpayers’ limited experience

with EU VAT

Unpredictable tax authorities

VAT risksVAT risks

Limited introduction of different VAT simplifications

e.g. import VAT relief, call-off stock

Exchange rate risks

Constantly evolvingVAT rules, gaps in

implementation


CURRENTLY SPEAKING

Case Study 1: Exchange Risk inVAT Settlements

In 2007-2008, American company builds factory in PolandCompany pays USD100m in VAT on its investment

VAT is paid in local currency

Company receives VAT refund in July 2008

USD 24m loss due to exchange rate fluctuationDominika CabajDirector, DLA Piper PolandSenior AssociateCorporate DLA Piper Poland

Exchange rate USD/PLN

0,00000,50001,00001,50002,00002,50003,00003,5000

January 2007 July 2007 January 2008 July 2008 January 2009 July 2009

Data

USD

/PLN


CURRENTLY SPEAKING

Main VAT Issues in CEE Today

Setting up a businessVAT on pre-registration costs, determination of VAT consequences of sale and purchase transactions, conditions to claim refunds of VAT on investment purchases

Restructuring into the most popular schemesTolling agreement and commissionaire structure: determination of place of taxation of production services, decision on VAT registration of principal and taxation of exist fee with VAT

Sale of business, sale of on-going concern, in-kind contribution, split-off – VATable or not?



CURRENTLY SPEAKING

Main VAT Issues in CEE Today

Sale of immovable property – different conditions to apply option to tax

Services of R&D and shared service centers provided abroad – Subject to VAT or not?

…but most cases before European Court of Justice from CEE countries relate to passenger cars



CURRENTLY SPEAKING

Changes in VAT LawCase Study 2: Work on Goods

CurrentUS business registers for Czech VAT and Czech VAT applies to both contracts

Post 1 January 2010US business deregisters for Czech VAT.

No VAT on Subcontract.

VAT accounted for on main contract by Czech customer under reverse charge

BUT … Impact of use and enjoyment rules?


US Business

Subcontract Goods in Czech Republic

Maincontract for

works

Czech subsidiary Czech business customer


CURRENTLY SPEAKING

Changes in VAT LawCase Study 3: Scientific Services

CurrentSome tax authorities claim that Polish VAT should be due on services of clinical trials as they qualify as “scientific services“

Post 1 January 2011No VAT should be due irrespective of classification

BUT … Impact of use and enjoyment rules?

Note: the same problems with R&D services


US BusinessPharma company

Contract for performingClinical trials

POLISH subsidiary Polish hospital

Clinical trials


CURRENTLY SPEAKING

VAT in Russia

VAT law based on EU principles

Standard rate 18%, reduced rates 10% and 0%

No VAT refund for non-registered VAT-payers

To register for VAT, need permanent establishment and carry out VAT-able activity

In practice – register before making purchases in order to recover VAT on costs



CURRENTLY SPEAKING

VAT in Russia

Based on VAT principles, some differences in place of supply rules and VAT administration/reporting

Foreign companies are subject to the same VAT rules as Russian taxpayers

VAT rules strict and formalistic. The tax authorities take "form over substance" approach

Currently no changes for 2010 proposed



CURRENTLY SPEAKING

Questions

Moderator

Eric D. RyanPartnerTax GroupDLA Piper USEast Palo [email protected]

Richard WoolichPartner and Chairman International VAT GroupCorporate DLA Piper UK [email protected]

Dominika CabajDirector, DLA Piper PolandSenior AssociateCorporate DLA Piper [email protected]

Daan ArendsInternational VAT GroupSenior AssociateCorporateDLA Piper [email protected]

Documents

WELCOME TO OUR WEBINAR VAT: PLACE OF SERVICE …files.dlapiper.com/files/upload/EU_VAT_Nov09.pdf · EU VAT Directives require implementation in local VAT ... Where the immovable property