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Financial Services VAT Alert
Tracking EU VAT Developments
November 2012 Edition 2012/9
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Editorial
Dear readers,
Hereby we present the new edition of the FS VAT Alert. In this edition you will find the most important VAT developments for the Financial Sector that have occurred over the last three months.
Enjoy reading!
Frans Oomen
Contents
EUROPEAN UNION
1. ECJ confirms input tax deductibility for holding companies (Portugal Telecom, case C-496/11)
2. Developments in infringement procedures regarding VAT Grouping
3. ECJ has hearing in Wheels case C-424/11 (Wheels Common Investment Fund, case C-496/11)
4. Commission in favour of excluding branch income from pro rata (Société Le Crédit Lyonnais, case C-388/11)
5. ECJ rules that refund claims are valid if no supplies are made in Member State of refund (Daimler & Widex, cases C-318/11 & C-319/11)
6. AG ECJ: advisory services could constitute VAT exempt asset management (GfBk, case C-257/11)
7. ECJ rules on floor area pro rata VAT deduction (BLC Baumarkt GmbH&co, case C-511/10)
8. Green light for European Financial Transaction Tax
9. Commission considers recharged insurance premium VAT exempt
10. ECJ rules that VAT refunds cannot be delayed due to arithmetic checks (Mednis SIA, case C-525/11)
BELGIUM
11. Government approves indirect tax measures as part of recovery strategy
FINLAND
12. VAT rates subject to change in Finland as of 1 January 2013
GERMANY
13. German Federal Tax Court decided on the Deutsche Bank case
14. Urgent action required for filing VAT returns
15. New invoicing requirements effective 1 January 2013
16. Extension of VAT credit for non-EU insurance supplies
HUNGARY
17. Additional VAT declaration from 1 January 2013
ITALY
18. Proposed increase of VAT rate effective 1 July 2013
19. Supreme court rules VAT registration creates fixed establishment
20. Change in VAT treatment of the supply and lease of buildings
21. Change in the VAT treatment of the discretionary investment management services
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22. Possible new invoicing legislation as per 1 January 2013
LITHUANIA
23. Credit agreement termination fee regarded as VAT exempt income in Lithuania
LUXEMBOURG
24. Decree amending VAT rules for independent group of persons published
25. Extended scope of the VAT exemption applicable to the management of investment funds.
26. Mandatory e-filing from 1 January 2013
NETHERLANDS
27. Proposed increase of insurance premium tax as of 1 January 2013
28. Proposed Financial Transaction Tax
29. Questions to ECJ on VAT treatment of discount cards
POLAND
30. Amendment of the Polish VAT Act as of 1 January 2013
31. Separate telemarketing activity performed with respect to the sale of insurance cannot benefit from VAT exemption
32. Financing provided to the factorer by the bank within a non-genuine factoring stipulates a taxable service.
PORTUGAL
33. New invoicing rules effective 10 October 2012
ROMANIA
34. Possible infringement procedure against Romania
SLOVAKIA
35. Invoicing rules for the supply of insurance and financial services from 1 January 2013
SPAIN
36. Andorra to introduce VAT system from 1 January 2013
UNITED KINGDOM
37. Tax authority guidance on VAT cost sharing exemption
38. Judicial review denied for output VAT adjustment
EUROPEAN UNION
1. ECJ confirms input tax deductibility for holding companies (Portugal Telecom, case C-496/11)
The ECJ gave its decision in the case of Portugal Telecom SGPS, SA (C-496/11) concerning the pro rata deduction method for VAT inputs.
Background Portugal Telecom is a holding company that provides technical administrative and management services to companies in which it has a shareholding.
In the course of business, Portugal Telecom acquired, under the VAT regime, certain services from consultants. It invoiced its subsidiaries for those services at the same price as that for which it had acquired them, plus VAT.
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Portugal Telecom deducted all the VAT on the input services, taking the view that the taxed transactions, were in fact covered by the use of the corresponding services acquired.
Following a check carried out by the Portuguese tax administration, the latter took the view that Portugal Telecom could not deduct all the VAT on the input services, but that it should use the pro rata method of deduction. Accordingly, it issued Portugal Telecom with a notice of assessment setting the deductible percentage of input tax at approximately 25%.
In the following procedure, the Portuguese Court refers questions to the European Court of Justice about whether the Portuguese tax authorities could hold that the input VAT of Portugal Telecom is only pro rata deductible, on the basis of the fact that the main corporate purpose of that company is the management of shareholdings of other companies.
Decision The ECJ held that a holding company that acquires goods and services which it subsequently invoices to the subsidiary companies is authorised to deduct the amount of all input VAT, provided that the input services acquired have a direct and immediate link with the output economic transactions giving rise to a right to deduct.
The ECJ leaves it for the referring court to determine whether the services at issue have a direct and immediate link with the economic transactions giving rise to the right to deduct.
Companies in the financial sector who acquire goods and services should be aware that they have a full right to deduct the input VAT on those goods and services, if those goods and services have a direct and immediate link with the output of economic transactions giving rise to a right to deduct.
Mario Braz tel: +351 213599652 [email protected]
2. Developments in infringement procedures regarding VAT Grouping
The European Commission commenced infringement actions against Member States, including the United Kingdom, Republic of Ireland, Netherlands, Finland, Denmark, Czech Republic, which permit 'non-taxable persons' to join VAT groups. The Commission commenced infringement actions against Sweden because they only allowing VAT Grouping for businesses in the financial sector.
The European Commission considers that the national legislation is incompatible with the EU legislation and has referred the matter to the ECJ, requesting the ECJ to find that the Member States have failed to comply with their obligations under the VAT-Directive.
On 5 and 6 September, the ECJ has considered the European Commission's action against a number of Member States for allowing non-taxable companies to be part of a VAT group with a joint hearing.
On 27 November two conclusions from Advocate General Jääskinen were published, in the cases Commission v. Ireland ((c-85/11) and Commission v. Sweden (C-480/10). In the infringement procedure against Ireland the AG considered that the purpose of VAT Grouping within the VAT regime does not support the position according to which non-taxable persons cannot be included in a VAT Group under the VAT Directive. He concludes that Ireland has not infringed its obligations under the articles in the VAT Directive, by permitting non-taxable persons to be member in a VAT group.
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Furthermore, in the procedure against Sweden the AG considers that the Court should declare that, by restricting the availability of VAT grouping to the financial and insurance sectors, Sweden has failed to fulfil its obligations under the VAT Directive.
The outcome in these cases is going to be significant for businesses which include dormant companies and 'passive' holding companies in VAT groups so that VAT does not arise on intra-group supplies, and also for businesses in the financial sector operating in Sweden.
Frans Oomen tel: +31 88 792 51 56 [email protected]
3. ECJ has hearing in Wheels case C-424/11 (Wheels Common Investment Fund, case C-496/11)
In submissions made to the ECJ in this case, the European Commission drew a preliminary distinction between defined benefit pension and defined contribution schemes. None of the parties appear to have raised the issue that certain investment management fees are already treated as exempt from VAT when supplied to defined benefit schemes. Whilst the outcome of this case is awaited by many businesses, it may not resolve all of the issues relating to the VAT treatment of investment management fees charged to pension funds in the UK.
This case concerns the liability of investment management fees charged to pension funds and specifically defined benefit pensions schemes. The Appellants in this case are customers of an investment manager and are Trustees of defined benefit pension funds. Following the release of the JP Morgan Claverhouse ECJ judgment the Appellants' supplier
submitted a claim for overpaid VAT to HMRC on the basis that the investment management services were exempt under the same exemption for investment management services supplied to "special investment schemes". HMRC duly rejected that claim, the Appellants appealed to the claim and questions were referred to the ECJ.
This hearing is the stage of oral proceedings before the ECJ where the parties make submissions to the Court. Unlike many of the VAT cases which come before the ECJ, there do not appear to have been submissions at the hearing by other Member States.
The arguments of the Appellants are that in accordance with the Claverhouse judgment, occupational pension schemes fall within the definition of "special investment schemes". Further, the Appellants argue that occupational pension schemes are in competition with collective investment vehicles such as OEICS and Authorised Unit Trusts. HMRC takes the opposing position and in particular, that occupational pension schemes are not available to the public, do not spread risk for the beneficiaries, and that the pension benefits do not depend on the performance of the fund or the contributions paid in by the employee to that fund.
The Commission noted as a preliminary matter that the pension schemes being considered in this case were defined benefit schemes and are to be distinguished from defined contribution schemes. In the present case, the Commission considers that the defined benefit pension schemes in question are not collective investment schemes within the relevant UCITS Directive and cannot be regarded as comparable to investment funds covered by that Directive. The Commission therefore takes the view that the occupational pension schemes in question are not "special investment funds".
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It is not known at the time of writing whether the Court has sought the benefit of an advocate-General’s opinion. The judgment is awaited.
Christine O’Malley tel: +44 (0)161 245 2429 christine.o’[email protected]
4. Commission in favour of excluding branch income from pro rata (Société Le Crédit Lyonnais, case C-388/11)
This case concerns whether income of branches outside the Member State should be included in the partial exemption pro rata calculation. In submissions made to the hearing, the European Commission considered that the deductible proportion applicable to the headquarters of a company established in a Member State should not take into account the revenue of branches outside the host State.
Background The Taxpayer is a credit institution with its registered office in France and with both EU and non-EU branches. The issue concerns the pro rata partial exemption calculation for the period from 1988 to 1990.
Following an audit of the accounts of the company for the period 1 January 1988 to 31 December 1989, the French tax authority assessed the Taxpayer for VAT on the basis that it refused to permit amounts of interest earned on loans granted by the taxpayer’s headquarters to its branches abroad in the numerator and denominator of the deductible proportion of its input VAT.
In the course of subsequent appeals against the assessment, the Taxpayer sought to argue that, if the interest charged by the head office to branches must be excluded
because they were part of the same entity, the income generated by those branches from third parties must be its income and should be included.
The French court referred several questions to the ECJ for a preliminary ruling concerning the above.
Report of hearing The Commission considered that the deductible proportion applicable to the headquarters of a company established in a Member State should not take into account the revenue of branches established outside the host State and it was therefore unnecessary to answer the remaining questions.
Stéphane Henrion tel: +33 1 56 57 41 39 [email protected]
5. ECJ rules that refund claims are valid if no supplies are made in Member State of refund (Daimler & Widex, cases C-318/11 & C-319/11)
In a joint case involving claims for 8th Directive VAT refunds, the ECJ, giving judgment without the benefit of an Advocate-General’s opinion, has held that such claims are valid if, amongst other criteria, the claimant does not make taxable supplies in the Member State of refund.
Daimler AG Daimler is based in Germany and carries out winter testing of cars at testing installations in Northern Sweden. It has no staff permanently in Sweden, and staff and the necessary technical equipment are flown in for the test periods. Daimler also has a wholly-owned subsidiary in Sweden, which provides it with premises, test tracks and services connected with the test activities.
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Daimler does not make any taxable supplies from the installations in Sweden and the testing activities relate to the sale of cars in Germany.
In the course of testing the cars, Daimler incurred Swedish VAT and sought to reclaim this via the 8th Directive refund procedure. The Swedish tax authorities refused the refund claim on the basis that Daimler had a fixed establishment in Sweden.
Widex AS Widex is based in Denmark and manufactures hearing aids, it has a research centre in Sweden which carries out research into audiology. No sales, marketing or other services take place from the Swedish premises, and the centre is funded by income from the head office in Denmark, including remuneration for four employees. Widex also has a Swedish subsidiary, which sells and distributes its goods in Sweden. However, the research centre acts independently of the subsidiary company.
In the course of its Swedish operations, Widex incurred Swedish VAT and sought to reclaim this via the 8th Directive refund procedure. The Swedish tax authorities refused the claim on the basis that Widex had a fixed establishment in Sweden.
Widex AS and Daimler AG both appealed the decisions in their case, and the Swedish court referred questions to the ECJ for a preliminary ruling. The questions concerned whether the refund procedure could be refused on the basis that both companies had a fixed establishment in Sweden.
Decision The 8th Directive expressly makes a right to a refund of a VAT subject to the absence of supplies of goods or services in the Member Sate of refund. Therefore a refund claim will only be approved when a business does not have a ‘fixed establishment from which business transactions are affected’ in a Member State.
The ECJ rules in this respect that a taxable person for VAT established in one Member State and carrying out in another Member State only technical testing or research work, not including taxable transactions, cannot be regarded as having in that other Member State a ‘fixed establishment from which business transactions are effected’ within the meaning of the 8th Directive. According to the ECJ neither Daimler nor Widex could be regarded as having in Sweden a ‘fixed establishment from which business transactions are effected’’ and therefore could reclaim the VAT incurred with a 8th Directive refund procedure.
The interpretation given to the concept of ‘fixed establishment from which business transactions are effected’ is not called into question, in a situation such as that in the main proceedings, by the fact that the taxable person has a wholly-owned subsidiary in the Member State where it has applied for refund, and the purpose of which is almost exclusively to supply the person with various services in respect of its technical testing activity.
In our view this judgment is in line with other ECJ case law on fixed establishments.
Lars Henckel tel: +46 8 5553 3326 [email protected]
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6. AG ECJ: advisory services could constitute VAT exempt asset management (GfBk, case C-257/11)
The Advocate General’s opinion is released in the case Gesellschaft für Börsenkommunikation GmbH (C-275/11) concerning the scope of exemption for management of special investment funds. In his opinion the AG states that sub-delegated investment advisory services can qualify for VAT exemption on the basis that they fall within the meaning of ‘’fund management.’’
Background A German investment manager (GfBk) provided various services to its clients, being fund managers. This investment manager made buy and sell recommendations within certain parameters set by the manager. Whilst responsibility for reviewing and approving those recommendations was retained by the manager, it effectively approved these, only rejecting the recommendation if it breached agreed rules. In the fact pattern referred, the manager did not undertake a separate asset selection process and did not have capacity to do so.
The GfBk case should clarify the extent to which delegated fund management services can fall within the relevant exemption. The questions referred to the ECJ focus on whether an ‘’advisory’’ service can fall within the meaning of management, and, therefore, fall to be a VAT exempt fund management service.
Opinion AG The AG stated that GfBk’s services should fall to be VAT exempt. The AG raises a number of interesting points around the scope of the fund management exemption, the extent to which VAT interpretations ought to follow definitions drawn from other areas of law and regulation, as well as some potentially instructive notes on how
EU exemptions ought to be applied in practice. The AG concludes that advisory services provided by a third party, which relate to the management of a special investment fund and the purchase and sale of assets, fall within the meaning of ‘’management’’. In this respect it is not necessary to change legal and financial relationships. According to the AG the services of GfBk can qualify for exemption if they are provided autonomously and continuously.
If fund managers have incurred VAT on advisory services like these, they should consider to request that their suppliers submit a claim for over-charged VAT or, as required, submit themselves a claim for over-declared VAT where the supplier is outside the Member State. If fund managers have not incurred VAT on their advisory services, and the ECJ rules that VAT is due, they will be faced with additional and significant costs.
A full ECJ decision is expected within a few months.
Felix Becker tel: +49 69 9585 6665 [email protected]
7. ECJ rules on floor area pro rata VAT deduction (BLC Baumarkt GmbH&co, case C-511/10)
The ECJ has rules the Member States may derogate from a single turnover-based method of determining pro-rata VAT deduction in favour of other methods of use. However, such derogations must apply to specific transactions or operations, and must result in a more precise determination of the deductible proportion.
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Background In 2003 and 2004 the Taxpayer constructed a building which was partly residential and partly commercial. In 2004 it let the building, charging VAT on the commercial premises and exempting the residential apartments. In its 2004 VAT return it included partial deduction of the VAT incurred on the property, applying the deductible proportion calculated on the basis of the taxable turnover from the commercial letting and the turnover from the letting of the apartments (the turnover method).
Following a VAT inspection, the German tax office decided that the deductible amount should be determined on the basis of the respective floor areas of the commercial premises and the apartments (the floor area method). In this case, that meant a reduction of the deductible amount.
The taxpayer appealed against the consequent assessment of input VAT. Following this procedure, the German Court referred questions to the ECJ for a preliminary ruling about whether the partial deduction method of the German tax authorities is in accordance with European VAT law.
Decision The ECJ rules that for the purpose of calculating the proportion of input VAT deductible for a given operation, such as the construction of a mixed-use building, to an allocation key other than that based on turnover, is allowed, on condition that the method used guarantees a more precise determination of the said deductible proportion.
According to this decision businesses are allowed to use other methods of pro rata partial VAT deduction than the allocation based on turnover, if it guarantees a more precise determination of the deductible proportion.
Felix Becker tel: +49 69 9585 6665 [email protected]
8. Green light for European Financial Transaction Tax
A subset of EU Member States (11 at the moment, namely Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia) are moving rapidly towards agreement on the introduction of an FTT, probably to start in January 2014.
The ECOFIN meeting on 13 November 2012 (EU-27 Finance Ministers) took stock of developments regarding the introduction of a Financial Transaction Tax (FTT) in a number of EU Member States wishing to participate in 'Enhanced Cooperation' and discussed how to proceed with the dossier.
Although fiscal measures in the EU normally require unanimity of all member states, a new legal procedure called ‘Enhanced Cooperation’ is being used for the first time to introduce a fiscal measure. Instead of unanimity, this means that a smaller number of states can vote for taxation measures that will apply in these states only.
If adopted by the Council, Belgium, Germany, Greece, Spain, France, Italy, Austria, Portugal and Slovenia and Slovakia will be authorised to establish ‘Enhanced Cooperation’ among themselves in the area of the establishment of a common system of an FTT by applying the relevant provisions of the EU Treaties.
By the end of December we should have an idea of what the FTT will look like and importantly, who will be the recipient of the taxes raised. The entry date of the ‘’EU-wide’’ FTT will most probably be 1 January 2014.
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For the FS community this really is the time to make its voice heard to try to influence the eventual shape of the FTT. In the Netherlands, for example, Dutch pension funds have managed to get the Dutch government to indicate that although it is interested in the FTT, it should allow for an exemption for Dutch pension funds.
Frans Oomen tel: + 31 (0) 88- 792 5156 [email protected]
9. Commission considers recharged insurance premium VAT exempt
The ECJ has heard the Polish case of BGŻ Leasing (C-224/11) concerning whether a service of providing insurance for a leased item and the leasing service itself are to be treated as separate services or a single supply of leasing services. In submissions made to the hearing, the European Commission took the view that the recharge of an insurance premium by a lessor is a fee for a VAT exempt insurance service.
The Polish Court referred the following questions to the ECJ:
(a) Must the provisions in the VAT Directive be interpreted as meaning that the service providing insurance for a leased item and the leasing service are to be treated as separate services or as one single, comprehensive, composite leasing service?
(b) If the answer to the first question is that the service providing insurance for a leased item and the leasing service are to be treated as separate services, must the provisions in the VAT Directive be interpreted as meaning that the service providing insurance for a leased item is to be exempt in the case where the lessor insures that item and charges the costs of that insurance to the lessee?
In submissions made to the hearing, the Polish government was of the view that leasing and insurance form a single transaction liable to VAT. The taxpayer, supported by the European Commission, contended that insurance is separate from leasing and should benefit from VAT exemption.
Marcin Chomiuk tel: +48 22 523 4807 [email protected]
10. ECJ rules that VAT refunds cannot be delayed due to arithmetic checks (Mednis SIA, case C-525/11)
The ECJ has ruled that Member States may delay repayments of VAT, but only for a reasonable period in circumstances where there is some evidence of possible abuse or avoidance. An arithmetic check showing that input VAT claimed was greater than the value of input transactions multiplied by the standard VAT rate did not justify deferment of the VAT refund for over a year (Mednis SIA: C-525/11).
Background In Latvia, VAT returns have to be submitted each month and then, at the end of the tax year, a single VAT return has to be submitted for the entire tax year.
The Taxpayer in this case made mainly zero-rated supplies in one of its monthly VAT periods and therefore submitted the return seeking a refund of the excess of input VAT over output VAT. The tax authority calculated that the amount of input VAT claimed was in excess of the value of input transactions multiplied by the standard rate of VAT.
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It decided, on that basis and without conducting any further enquiry into the reasons behind the repayment return, to refuse to refund the amount due to the Taxpayer, in accordance with the Latvian domestic legislation, until the annual VAT return was submitted.
The Taxpayer appealed and the Latvian court referred questions to the ECJ if a Member State has the right, without carrying out any specific analysis and solely on the basis of an arithmetical calculation, not to refund that part of the excess tax that is over 18% (the standard rate of VAT) of the total value of the taxable transactions carried out in the corresponding monthly tax periods until the State tax authority has received the annual return of the person subject to value added tax.
Judgment Perhaps not surprisingly, the ECJ held that, except in cases where there was some evidence to suspect avoidance or abuse, the withholding of a VAT refund would be likely to cause financial detriment to taxpayers and would offend the fundamental principles of the right to deduct VAT and proportionality.
The ECJ therefore gave the following judgment:
Member States are not authorized to defer, without undertaking a specific analysis and solely on the basis of an arithmetical calculation, the refund of part of the excess VAT which has arisen during a one-month tax period, pending the examination by that authority of the taxable person’s annual tax return.
The ECJ was also asked by the Latvian government to limit the effect of its decision so that it had only prospective effect. However the ECJ pointed out the principle that its purpose was to set out how EU law is to be, and should always have been, interpreted, and ruled that the judgment should be given retrospective effect.
Ilze Rauza tel: +371 6 7094512 [email protected]
BELGIUM
11. Government approves indirect tax measures as part of recovery strategy
The Belgian Government has approved several important VAT and Customs & Excise measures as part of its recovery strategy.
The following development is the most relevant for the financial sector. The Belgian Government decided to commission the Tax Authorities to work out a proposal within the next 6 months for a 'single' tax procedure for both direct and indirect taxes.
The purpose of this proposal is to come to the equal treatment of tax procedures in the following areas: amendment procedure, rectification procedure, administrative and judicial litigation procedures and executive title. The calculation of late payment interest and moratorium interest will be set equal for all taxes.
Most of the other approved measures concern the rules on Customs & Excise duties. This proposal might changes the formal indirect tax procedures, therefore this could impact companies operating in the financial sector in Belgium.
Koenraad de Bie tel: +32 2 710 43 14 [email protected]
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FINLAND
12. VAT rates subject to change in Finland as of 1 January 2013
The Finnish Government has published a proposal to increase VAT rates in Finland.
According to the proposal, all the VAT rates in Finland will increase by one percentage point with effect from 1 January 2013. The standard VAT rate will increase from 23% to 24% and the reduced rates from 9% to 10% and from 13 % to 14 %.
The new 10% reduced rate is applicable to e.g. passenger transport, accommodation and several admission fees and 14% reduced rate is applicable to e.g. food and restaurant services.
The new VAT rates will apply to goods delivered and services performed on or after 1 January 2013.
The VAT rate change will increase costs of the companies operating in financial sector as the input VAT incurred relating to VAT exempt business is a cost for them.
Juha Laitinen tel: +358 9 2280 1409 [email protected]
GERMANY
13. German Federal Tax Court decided on the Deutsche Bank case
Following the ECJ decision "Deutsche Bank" (C-44/11, see also Financial Services VAT Alert Edition 2012/6-7) the German Federal Tax Court has now confirmed that discretionary portfolio management services are subject to VAT.
In the case at hand, Deutsche Bank provided discretionary portfolio management services to pivate investors established within and outside the EU.
The German Federal Tax Court confirmed the position taken by the ECJ and held that in this specific pattern of facts these services are subject to VAT as a single uniform service.
As regards the place of supply the German Federal Tax Court confirmed that the German VAT Act infringes upon the VAT Directive since it limits the place of supply rule applicable to services rendered to businesses established outside Germany and to private investors established outside the EU (as of 2010: only individual investors established outside the EU) to financial services mentioned in the VAT exemption rule of the German VAT Act.
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However, the ECJ had held that generally financial services fall under this provision. Consequently, taxpayers may directly refer to the VAT Directive as it prevails the national legislation.
Financial services providers which treated their services VAT exempt in the past should analyze which assessment periods are concerned by this decision taking the specific fact patterns of the case into account. In this respect the investor's residence should be taken into consideration. Further they should analyze whether input VAT deduction can be increased resulting from the now taxable services rendered.
If discretionary portfolio management services have already been treated as VAT exempt in the past, it needs to be determined whether a correction is possible as regards the place of supply. This is the case if services were provided to foreign businesses (until December 2009) and private investors established outside the EU to the extent they have been treated as VAT taxable in Germany. If invoices for cross border supplies of services were issued with German VAT they may need to be corrected in order to effectively reduce the output VAT paid on these services.
Businesses should identify if they have received EU cross border discretionary portfolio management services from German asset managers in the past (before Jan 1, 2010) charged with German VAT. In that case it might be possible to ask for a reimbursement based on existing contracts. A high level analysis of the contractual relationship and the tax situation is necessary.
Imke Murchner tel.: 0049 89 5790 6779 [email protected]
14. Urgent action required for filing VAT returns
The technical requirements for electronic filing of preliminary VAT returns and other declarations will change with effect from 1 January 2013. However, as the due date for filing returns has already been stipulated, the new procedure is already applicable to November 2102 VAT returns (in case of a permanent time extension) and preliminary VAT returns and/or wage tax returns for December 2012
The technical requirements for electronic filing of preliminary VAT returns, applications for permanent extension of the deadline for preliminary VAT returns will change with effect from 1 January 2013. However, as the due date for filing returns has already been stipulated, the new procedure is already applicable to November 2012 VAT returns (in case of a permanent time extension) and preliminary VAT return for December 2012.
Starting from 1 January 2013, it will be compulsory to use the web portal ElsterOnline-Portal (EOP) for all of the above-mentioned reporting and return procedures. This means that when other means of transmission have been used in the past urgent action is required. To be able to use EOP, the individuals filing those tax returns electronically have to register at ElsterOnline. Please note that it may take up to two weeks for the registration process to be completed. It is therefore strongly recommended to start the process as soon as possible, to ensure that the returns due in January 2013 can be filed on time. The German tax authorities have already announced that late submission will be subject to penalties, irrespective of the new requirements.
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15. New invoicing requirements effective 1 January 2013
The German VAT Act will shortly be subject to further extensive changes as the invoicing requirements necessary for input VAT deduction have been amended and in a number of instances the precise form of wording to be shown on an invoice has been stip
Where an invoice is issued by the recipient of the supply ('self-billing procedure') the invoice needs to show the German word “Gutschrift” (self-billing invoice). Unfortunately, the exact wording “Gutschrift’’ is prescribed, which means that, if taken literally, neither a translation of that term nor symbols etc. meet this particular requirement. It is possible that the tax authorities will refrain from applying such a strict interpretation in the VAT application guidelines, but currently this cannot be taken for granted.
Taxable persons with their place of business (or a fixed establishment from where the supply is made) in the EU, but outside Germany, who provide services in Germany for which the VAT liability is shifted to the recipient of the supply, will have to apply the invoicing requirements of their home country. Please note that, although not specifically mentioned, in Germany this does not apply in respect of intra-Community triangulation supplies of goods. Conversely, a taxable person established in Germany (via his place of business or a relevant fixed establishment) who supplies and is subject to the reverse charge in another EU Member State, is obliged to issue an invoice with the exact wording “Steuerschuldnerschaft des Leistungsempfängers” (VAT liability of the recipient of the supply). The VAT ID numbers of both the supplier and the recipient also have to be shown on the invoice. In addition, the invoice must be issued by the fifteenth day of the month following that in which the supply was
made. Please note that there may also be detrimental consequences in other Member States if businesses fail to fulfil these conditions.
Felix Becker tel: +49 69 9585 6665 [email protected]
16. Extension of VAT credit for non-EU insurance supplies
The VAT Act will shortly be subject to further extensive changes as a result of the Annual Tax Act 2013. Amongst the changes, the special rule allowing input VAT credit for specified financial supplies taking place outside the EU will be extended to all exempt insurance transactions and to the activities carried out by, for example, insurance brokers. The revised treatment is due to take effect from 1 January 2013.
Under normal circumstances, input VAT deduction is excluded if input supplies are used for VAT exempt output supplies. However, this is not applicable in respect of certain financial and insurance services that either relate to goods exported to a third country, or where the recipient is established outside the EU. In future, the scope of this special rule is extended to cover all exempt insurance services and to the activities carried out by, for example, insurance brokers. Please note that the legislative procedure for the Annual Tax Act 2013 has not yet been finalised, therefore amendments may still occur.
Felix Becker tel: +49 69 9585 6665 [email protected]
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HUNGARY
17. Additional VAT declaration from 1 January 2013
Under a new law effective 1 January 2013, taxpayers will have to submit a domestic recapitulative statement together with their VAT returns in respect of transactions where the VAT amount is equal to or greater than HUF 2,000,000.
On 4 June 2012, the Hungarian Parliament passed this into law. The new law amends certain provisions of the Hungarian VAT Act and the Act on the Rules of Taxation, and introduces changes to the filing of VAT returns and invoicing.
It stipulates that, from 1 January 2013, taxpayers subject to VAT will have to submit a domestic recapitulative statement together with their VAT returns in respect of transactions where the VAT amount is equal to or greater than HUF 2,000,000.
The new Act also stipulates that invoices for transactions involving an output VAT liability equal to or greater than HUF 2,000,000 must include the buyer’s tax number, provided that the supplier of the goods or services is established in Hungary for business purposes, or has a permanent residence or place of stay in Hungary.
Tamas Locsei tel: +36 14 619 358 [email protected]
ITALY
18. Proposed increase of VAT rate effective 1 July 2013
Under the draft annual finance law ('legge di stabilità') approved by the Government on 10 October 2012, the standard VAT rate is set to increase from 21% to 22% effective 1 July 2013. The previous proposed increase was from 21% to 23%.
In addition to the increase in the standard rate, the 10% reduced rate is set to rise to 11% (it was originally due to increase to 12%). The 4% reduced rate is expected to remain unchanged.
The proposed changes, which have still to be approved by Parliament, amend the original rate rise proposals made under the so called 'spending review' law (Law Decree no. 95/2012).
It should be noted that it is by no means certain that the proposed increases will go ahead as planned, and they could be shelved if certain tax law provisions, which should enter into force before 30 June 2013, have a positive effect in terms of keeping Italy's net debt below Euro 6,560 million on an annual basis.
Alessia Angela Zanatto tel: +39 02 91605728 [email protected]
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19. Supreme court rules VAT registration creates fixed establishment
In a case involving a VAT refund claim by a non-resident company registered for VAT in Italy via a tax representative, the Supreme Court has held that the registration constitutes proper evidence of the existence of an Italian permanent establishment of the company for VAT purposes, thereby preventing the company from claiming a refund of VAT under the non-resident refund procedure.
The Supreme Court accepted the appeal submitted by the Tax Authorities according to which the VAT refund claim for a non resident company, registered for VAT purposes in Italy through a tax representative, was rejected, arguing that the Italian VAT registration constitutes a proper evidence of the existence in Italy of a permanent establishment for VAT purposes of the company. The judge confirmed that a foreign taxpayer registered for VAT purposes in Italy is deemed to have a permanent establishment for VAT purposes in the territory of the State. The Italian supreme court based the denial of the refund claim on the fact that the foreign company has not given any evidence to prove neither the inexistence nor the inapplicability of the presumption to the case at hand and therefore the refund claim could not be valid because the existence of an Italian fixed establishment was a preclusive condition of the VAT refund carried out through the procedure set forth for non- established taxable persons.
The Italian Supreme Court’s decision has to be evaluated in the framework of the definition of a permanent establishment for VAT purposes.
In this respects, it does not seem in line with the European case law that the possession of an Italian VAT number presumes the presence of a permanent establishment for VAT purposes.
Alessia Angela Zanatto tel: +39 02 91605728 [email protected]
20. Change in VAT treatment of the supply and lease of buildings
A new Italian Act, dated June 22 2012, has amended the VAT Law with regard to the VAT treatment of sales/leasing of immovable property and particular buildings.
According to the amended provision, the VAT treatment is as follows.
In general,
1. Leases of immovable property for residential use and business purposes are exempt from VAT with no right to deduction. However, the lessor can opt to tax in the lease agreement under the specific conditions:
- in case of immovable property for residential purposes, the option to tax is allowed only for construction companies or those companies who carry out, on the concerned buildings, even via procurement agreement, certain services (restoration and preservation, building renovation and urban renovation) in case of immovable property for business purposes which cannot be used for other purposes unless massive works are made on them.
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2. The sales of immovable property for residential purposes are generally exempt from VAT with no right to deduction, however they are taxed:
- in case they are carried by constructions companies or those companies who carry out, on the concerned buildings, even via procurement agreement, certain services (restoration and preservation, building renovation and urban renovation according to article 3 (1), c, d, f, Presidential Decree, no. 380/2001), within five years from the completion of the buildings or the work done on them; or
- in case they are carried out by the above mentioned companies after five years in case the sellers has opted to tax in the agreement.
3. The sales of immovable property for business purposes are generally exempt from VAT with no right to deduction, however they are taxed:
- in case they are carried out by constructions companies or those companies who carried out, on the concerned buildings, even via procurement agreement, certain services (restoration and preservation, building renovation and urban renovation, within five years from the completion of the buildings or the work made on them.
In case of sales of immovable property for residential and business purposes, when the supplier has opted to tax in the agreement and in case the customers is a taxable person, the latter has to account for VAT under the reverse change mechanism.
In case of leasing, it might be worth contacting the lessor in order to ask him to apply for the VAT exemption or for the taxation, based on the specific case.
In case of sales, it might be worth discussing with the seller in order to discuss if whether to charge VAT or to choose for the VAT exemption.
There might be implications for companies operating in the financial sector, because before the change, for example, the lease agreements towards financial companies (as recipient of services) with input VAT deduction less than 25% were mandatorily taxable (VAT was a cost).
Now, instead, the "normal" regime is the exemption and, in case there is not an option to tax in the lease agreement, VAT would no be longer a cost.
The financial companies should check their agreements in order to try to see whether there is a room for a VAT exemption. It is still unclear how the agreements in place should be treated and guidance is waited.
Alessia Angela Zanatto tel: +39 02 91605728 [email protected]
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21. Change in the VAT treatment of the discretionary investment management services
According to the draft annual finance law approved by one Chamber of the Italian Parliament the VAT treatment of the discretionary investment management services is proposed to be changed (from exemption to be taxable).
According to the draft annual finance law approved by one Chamber of the Italian Parliament the discretionary investment management services carried out from 1 January 2013 would be no longer be exempt from VAT but taxable at the standard rate (i.e. 21%)
The above change comes from the ECJ Deutsche Bank-case (For this case we refer to the FS VAT Alert Edition 2012/6-7), stating that the discretionary investment management services is not VAT exempt.
According to the above draft finance law the companies carrying out both exempt from VAT and the discretionary investment management services (which will be taxable) could opt for the segregation of activities in order to determine the deductive input VAT for each activity.
The above draft provision will impact the companies carrying out such services and receiving intermediation services on the discretionary investment management services.
Alessia Angela Zanatto tel: +39 02 91605728 [email protected]
22. Possible new invoicing legislation as per 1 January 2013
The draft invoicing legislation has been included in an Italian Decree which is about to be approved by the italian Government and changes in particular the rules about electronic invoicing and simplified invoicing.
Please see below the possible changes that, as from 1 January 2013, may affect companies doing business in Italy:
· Invoice requirements - According to the draft legislation the VAT identification number of the customer would be an element to be quoted on the invoice. As per today, the VAT identification number of the customer is mandatory only where the customer is liable to pay the VAT or in case of intra-EU supplies or in case of services carried out to EU established taxable person falling under the B2B general rule.
· Exchange rate - According to the draft new provision, with reference to the transactions in foreign currency, the new Decree clearly states that it is possible to adopt the exchange rate published by the Central European Bank and related to the tax point of the transaction.
· Simplified invoice - According to the draft legislation, a new article would introduce the possibility to issue simplified invoice for certain transactions. Indeed, an invoice reporting the VAT identification number of the customer (instead of the complete data identifying the customer) could be issued with reference to transactions for a total amount lower than 100€. Moreover, a Ministerial Decree could extend the mentioned limit to 400€ .
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· Obligation to issue an invoice - According to the draft legislation, there is an obligation to issue an invoice for the supply of goods and provision of services even when the latter are outside the scope of Italian VAT. In detail:
a) in case of supply of goods or provision of services the customer is liable to pay VAT in another EU Member State, the invoice has to quote the wording "inversione contabile" (i.e. reverse charge) together with the reference to the domestic or EU law provision;
b) in case of supply of goods or provision of services carried out towards business customer established outside the EU, the invoice will have to quote the wording "operazione non soggetta" (i.e. transaction not subject to VAT) together with the reference of the domestic or EU law provision.
The law decree is about to be approved by the Italian Government.
Alessia Angela Zanatto tel: +39 02 91605728 [email protected]
LITHUANIA
23. Credit agreement termination fee regarded as VAT exempt income in Lithuania
The Lithuanian Tax Authorities supplemented the official Commentary on the Lithuanian VAT Law providing that credit agreement termination fee must be treated as a service fee.
The official Commentary states that in case a loan granted by a bank to a client is repaid before the end of the credit agreement and it is considered that such an agreement is completed, however, under the terms of the agreement the client is obliged to pay a certain agreement termination fee, such a fee is considered as remuneration for an agreement termination service. Thus, it falls within the scope of VAT in Lithuania.
The Lithuanian Tax Authorities explained that such a fee could not be considered a forfeit that is out of scope of VAT since it is received after the agreement obligations were fulfilled by the client, i.e. after the loan was repaid. Provision of agreement termination services is VAT exempt if it is related to exempt granting of loans.
Kristina Krisciunaite tel: +370 5 239 2365 [email protected]
LUXEMBOURG
24. Decree amending VAT rules for independent group of persons published
From now on, there is an additional condition for the exemption for an independent group of persons.
On 14 August 2012, a new Grand-Ducal Decree has been published. This new Grand-Ducal decree foresees an additional condition to the "cost sharing" exemption. As from now on, the VAT exemption does not apply to independent Groups of Persons whose services are used by one or several members of these groups to principally perform transactions that are subject to VAT and that do not benefit from a VAT exemption.
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Marie-Isabelle Richardin tel: +352 49 48 48 3009 [email protected]
25. Extended scope of the VAT exemption applicable to the management of investment funds.
Law proposal implementing the AIFM Directive (2011/61/EU) broadens the scope of investment funds, the management of which is VAT exempt.
A law proposal implementing the AIFM Directive has been presented to the Luxembourg House of Parliament for approval on 24 August 2012. In parallel to the implementation of the AIFM Directive, the draft law is also aimed at updating the scope of the current version of the article of the Luxembourg VAT Law dealing with the VAT exemption for the management of investment funds.
Based on this draft Law, the management of alternative investment funds (as defined in the AIF law proposal) would also benefit from the VAT exemption. In addition, the new version of the article of the Luxembourg VAT Law would also foresee explicitly that the management of undertakings, similar to those currently aimed by the exemption, of other EU Member States and that are subject to the supervision of a regulatory Authority of an EU Member State similar to the Luxembourg regulatory Authorities is VAT exempt.
Member States have to implement the AIFM Directive by 22 July 2013 at the latest. In Luxembourg, the law is expected to be voted before the end of this year and to enter into force in January 2013.
As soon as the law will be in force, sub-contracted services that qualify for the management exemption supplied to a Luxembourg provider servicing a fund in another EU country will also be VAT exempt. At the same time, the provision of services from a Luxembourg service provider to an EU fund will not allow input VAT recovery on related costs.
Marie-Isabelle Richardin tel: +352 49 48 48 3009 [email protected]
26. Mandatory e-filing from 1 January 2013
Effective 1 January 2013, electronic filing of VAT returns and European Sales Listings (ESLs) will become mandatory for all businesses. Filing has to be carried out via the eTVA platform of the Luxembourg VAT authorities.
The VAT authorities have gone for an automation of their processes in a bid to simplify and accelerate administrative processes.
Accordingly, the existing requirement (applicable since 1 January 2010) for certain taxpayers to file their VAT returns and European Sales Listings (ESLs) electronically, will be extended from 1 January 2013 to all VAT taxable persons liable to file periodic VAT returns. Filing has to be done via the eTVA platform of the Luxembourg VAT authorities.
Marie-Isabelle Richardin tel: +352 49 48 48 3009 [email protected]
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NETHERLANDS
27. Proposed increase of insurance premium tax as of 1 January 2013
The latest proposed changes in taxation include an increase of the insurance premium tax rate from 9,7% to 21% effective 1 January 2013. Because of the limited of time left before implementation it is of important for Dutch businesses to determine the impact on their business.
Recently announced proposals for the 2013 budget include an increase of the insurance premium tax from the current rate of 9,7% to 21% effective 1 January 2013. This would mean that the initial plans for a decrease of the rate to 9,5% is now off the table. Although the proposed rate increase to 21% still has to be approved by the Parliament, we expect that the increase will be implemented, because various political parties have publicly declared to be in favour of an increase.
At the moment it is not known how the proposed rate increase will work out in practice. No transitional arrangements have been published yet. What is certain is that the 21% rate of the insurance premium tax can be a substantial cost for companies. Therefore, it is relevant to examine whether it is possible to reduce this additional cost, temporarily or permanently.
Businesses should review their insurance policies in order to review whether some policies, or some parts thereof, may be outside the scope of insurance premium tax.
Frans Oomen tel: + 31 (0)88- 792 5156 [email protected]
28. Proposed Financial Transaction Tax
The Dutch Government is planning to introduce a financial transaction tax (FTT) in the Netherlands. This is mentioned in the published coalition agreement of the new government. The Dutch Government wants to join other European countries with ‘Enhanced Cooperation’ in order to establish a possible tax on the financial sector.
The Dutch Government indicated that it wants to join the European ‘Enhanced Cooperation’ provided that Dutch pension funds will be exempt from this tax, that no distortion of competition arises with the current bank levy and that tax revenues will go to the Member States.
The plans in the coalition agreement are not put in proposed legislation yet.
Frans Oomen tel: + 31 (0)88- 792 5156 [email protected]
29. Questions to ECJ on VAT treatment of discount cards
The Dutch Court of Appeal referred questions to the ECJ on whether a financial exemption applies to transactions involving cards which the public can purchase to obtain discounts from participating suppliers (restaurants, hotels etc).
A Dutch business sells discount cards vouchers (‘A-cards’) to the general public. It has specific agreements with other businesses, e.g. restaurants, spa’s, hotels and cinemas, under which it is agreed that those businesses will allow the holders of the cards a certain discount or other advantages when they make purchases from those businesses.
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No payments are made by the participating businesses to the vendor company that issues the cards or vice versa.
The vendor company is entitled to the entire proceeds from issuing the cards. In some cases, third party companies, usually retailers, are involved in the distribution of the cards, in which case they receive separate consideration for these services.
The referring Court is unsure whether the issuing and selling of specific discount vouchers qualifies as VAT exempt transactions in ‘’securities’’ and other ‘’negotiable instruments’’ as stated in the Dutch VAT law. It has therefore referred questions to the ECJ for a preliminary ruling.
The decision in this case could impact the VAT treatment of vouchers or discount cards, by explaining the scope of exempt transactions in ‘’securities’’ and other ‘’negotiable instruments’’ as stated in the Dutch VAT Act.
Frans Oomen tel: + 31 (0)88- 792 5156 [email protected]
POLAND
30. Amendment of the Polish VAT Act as of 1 January 2013
Possible amendment of the Polish VAT Act as of 1 January 2013 relating to e.g. invoicing, deducting input VAT and recovery of bad debts.
The draft amendment of the Polish VAT Act proposes a significant number of changes in the current regulations, including introducing simplifications with respect to invoicing process and recovery of bad debts.
Additionally, the proposal provides for the obligation to correct input VAT where the amount due to the supplier has not been paid in a certain timeframe.
Introducing the amendment of the Polish VAT Act will have an impact on the VAT settlement of the Polish taxpayers, irrespective of the business line.
Marcin Chomiuk tel: +48 22 523 4807 [email protected]
31. Separate telemarketing activity performed with respect to the sale of insurance cannot benefit from VAT exemption
A busisnes performing a separate telemarketing activity aiming at obtaining informal consent for insurance cannot benefit from VAT exemption appropriate for insurance services.
Provincial Administrative Court has analyzed whether telemarketing activity aiming at obtaining informal consent for insurances can benefit from VAT exemption.
In the court’s view, described telemarketing activity is neither required nor necessary in relation to the main insurance service and thus cannot be exempt from taxation.
The above arises from the fact that in the court’s opinion obtaining only such informal consent does not result with a visible effect. Obtaining informal consent means to obtain during the phonecall with the potential client an initial consent to acquire a selected insurance product.
VAT exemption of separate telemarketing activity aiming at obtaining informal consent for insurances may be questioned by tax authorities.
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Marcin Chomiuk +48 (22) 523 4760 [email protected]
32. Financing provided to the factorer by the bank within a non-genuine factoring stipulates a taxable service.
Where the bank provides a factorer with a financing within a non-genuine factoring, such financing stipulates a part of factoring service and is VAT taxable.
In a recent verdicts concerning VAT treatment of factoring services, Provincial Administrative Court has stated that financing provided by the bank to the factorer within a non-genuine factoring cannot benefit from VAT exemption.
In court’s view, dividing a uniform service to financial and factoring one is artificial, especially where it is done under one factoring contract.
Taking into consideration the above, financing provided by the bank within a factoring service should be treated for VAT purposes in the same manner as a main factoring service and cannot benefit from VAT exemption.
Using VAT exemption with respect to financing provided to the factorer by the bank within a non-genuine factoring may be questioned by tax authorities.
Where the debtor does not pay the debt being subject to factoring, the bank has a recourse to the factorer with respect to such unpaid debt. At this stage, if the factorer does not pay the debt, the bank calculates interest (so called extended funding). Thus, the financing relates to the period between the day where the factorer should have paid the debt to the bank (that is, the deadline for the payment specified on the invoice) and the day of the actual payment.
Such financing is considered by the Polish court as a part of factoring service, and not as a separate financial service.
Marcin Chomiuk +48 (22) 523 4760 [email protected]
PORTUGAL
33. New invoicing rules effective 10 October 2012
Under this new law, the concept of 'equivalent document' will be removed and replaced by mandatory issuing of invoices. Simplified invoicing and flexible e-invoicing rules will also be introduced. The new Decree also includes changes, from 1 January 2013, to the place of supply of long term hire of means of transport, and the chargeable event for intra-Community supplies.
The Decree comes into force on 1 January 2013, with the exception of the changes to invoicing, which take effect from 10 October 2012.
In respect of invoicing, the following will apply:
• Mandatory issuing of invoices (the concept of "equivalent document" disappears);
• Mandatory mention of “self-billing” where the customer receiving a supply issues the invoice instead of the supplier, and of “reverse charge” in all cases where the customer is liable for payment of the VAT;
• Introduction of a simplified regime for invoicing (in place of the current regime of invoicing exemption and mandatory issuing of sales receipts); and
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• Flexible e-invoicing rules, making it possible to choose means other than EDI and advanced electronic signature.
In addition, there are also new rules for control of the issuing of invoices and other fiscal documents, and for related procedural matters. As from 1 January 2013, taxable persons will have to notify the Portuguese Tax Authorities (PTA) of the data contained in invoices issued, via electronic data transfer, by the eighth day of the following month.
Mario Braz tel: +351 213599652 [email protected]
ROMANIA
34. Possible infringement procedure against Romania
Under the Romanian VAT legislation, leasing companies should self charge VAT for non repossessed goods after the leasing agreements termination.
Under the EU VAT Directive, for such situations, leasing companies should not self charge VAT in case of non-repossessed leased goods.
The approach taken by Romanian VAT authorities triggered a massive negative financial impact against local leasing market, already greatly affected by the current economic reality.
Due to the economic crises, numerous lessees fail paying the leasing rates to the lessors. According to the agreements concluded between the parties, payment failure for two months generates the early termination of the agreement.
However, in practice, there are frequent cases when the leasing companies are not able to repossess these vehicles, as the lessees refuse to give them back. Important to note that the specific legislation in Romania involves a long and difficult procedure in roder to recuperate these vehicles.
The VAT legislation in Romania imposes to the leasing companies to self charge VAT proportionally with the number of leasing rates that have not been cashed. This implies a financial VAT cost at the level of leasing companies.
In the above described circumstances, the Romanian Leasing Association, addressed a complaint to the European Commission regarding Romania’s failure to fulfil its obligations under the VAT Directive as regards the correct transposition of the provisions on self supply.
Following such complaint, the European Commission initiated the pre-infringement procedure against Romania.
As effect to this, Romanian VAT authorities amended the local VAT legislation, but there is still room for improvement.
It is recommendable to follow the changes within Romanian VAT legislation related to the non repossessed goods by the leasing companies, as the recent amendments are still not in line with the VAT Directive.
Valentina Radu tel: +40 21 225 3448 [email protected]
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SLOVAKIA
35. Invoicing rules for the supply of insurance and financial services from 1 January 2013
The invoicing of insurance and financial services according to Slovak VAT law is different from the wording in the Invoicing Directive.
Further to implementation of the Invoicing Directive into local VAT legislation, the Slovak VAT law states that the invoices will need to be issued from 1 January 2013 also in the case of the supply of services for which the person liable to pay the VAT is the recipient, even if the supply of the service is exempt from VAT. This means that under this provision also the companies that provide insurance and financial services to other Member States should issue an invoice for these supplies from 1 January 2013. However, this wording is not fully in compliance with the Invoicing Directive which allows Member States to require the invoice for supplies of insurance and financial services, only in cases where the supply is made in their territory (i.e. local delivery) or if the service is provided outside the EU. Based on the Invoicing Directive the Member States cannot require the issuance of an invoice for supply of insurance and financial services, where the place of supply is in another Member State.
According to the verbal information available to us, the Ministry of Finance is currently preparing an amendment of the VAT Act to eliminate this discrepancy. Based on the information, the Ministry of Finance suggests to exempt from the obligation to issue the invoices (in any case) the financial and insurance sector.
We will keep you informed on this subject once the draft of the amendment of the VAT Act is available.
Valeria Kadasova tel: +421 2 59 350 626 [email protected]
SPAIN
36. Andorra to introduce VAT system from 1 January 2013
Andorra is to introduce an EU style VAT system from 1 January 2013 with a likely standard VAT rate of 4.5%.
There will be no exemptions but some supplies will be 0% rated (exempt with credit) giving an entitlement to recover related input VAT.
The general rule will be that local taxpayers will account for VAT due on supplies made by non-resident suppliers via the reverse charge procedure, although non-residents will have the option to register for VAT.
There will also be a non-resident refund procedure for locally incurred VAT based on reciprocity.
Further details will follow in due course.
Miguel Blasco tel: +34 9 1568 4798 [email protected]
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UNITED KINGDOM
37. Tax authority guidance on VAT cost sharing exemption
The UK tax authority, HMRC, has published a Brief, which will be of interest to businesses which have been considering VAT cost sharing arrangements.
This Brief announces guidance on the Cost Sharing Exemption provision.
The exemption applies when two or more organisations (whether businesses or otherwise) with exempt and/or non-business activities join together on a co-operative basis to form a separate, independent entity, a cost sharing group, to supply themselves with certain services at cost and exempt from VAT.
The exemption applies to supplies of certain qualifying services that are made by the representative member of the Cost sharing group to other members of the cost sharing group. These supplies must be 'directly necessary' for the exempt and/or non-business supplies made by the individual qualifying member.
Jamie Randell tel: +44 207 213 8253 [email protected]
38. Judicial review denied for output VAT adjustment
Recently, an Upper Tribunal dismissed a taxpayer’s application to move his output VAT into another VAT period.
A taxpayer asked the UK tax authority, HMRC, to exercise its discretion to allow it to amend its VAT accounts to move output VAT declared in one VAT period to the next VAT period in which according to the invoices, the output VAT should have been declared.
HMRC has the discretion, under UK VAT law, to require the taxpayer to amend its VAT accounts. The request by the taxpayer for adjustment of the error has to be made within three years.
HMRC refused and the taxpayer sought judicial review of this decision.
On the particular facts of the case, The Upper Tribunal considered that there was no error in the later VAT period and therefore dismissed the taxpayer’s application.
Jamie Randell tel: +44 207 213 8253 [email protected]
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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: +43 1 501 88 36 41 [email protected]
Greece Mary Psylla tel: +30 210 687 4543 [email protected]
Poland Marcin Chomiuk tel: +48 22 523 4807 [email protected]
Belgium Koenraad de Bie tel: +32 2 710 43 14 [email protected]
Hungary Tamas Locsei tel: +36 14 619 358 [email protected]
Portugal Mario Braz tel: +351 213599652 [email protected]
Bulgaria Nevena Haygarova tel: +359 2 9355 162 [email protected]
Ireland John Fay tel: +353 1 792 8701 [email protected]
Romania Diana Coroaba tel: +40 21 202 8693 [email protected]
Cyprus Chrysilios Pelekanos tel: +357 22 555 280 [email protected]
Italy Alessia Angela Zanatto tel: +39 02 91605728 [email protected]
Slovakia Valeria Kadasova tel: +421 2 59 350 626 [email protected]
Czech Republic Martin Diviš tel: +420 25115 2574 [email protected]
Latvia Ilze Rauza tel: +371 6 7094512 [email protected]
Slovenia Marijana Ristevski tel: +386 1 583 6019 [email protected]
Denmark Jan Huusmann Christensen tel: +45 3945 9452 [email protected]
Lithuania / Belarus Kristina Krisciunaite tel: +370 5 239 2365 [email protected]
Spain Miguel Blasco tel: +34 9 1568 4798 [email protected]
Estonia Tanja Kriisa tel: +372 614 1977 [email protected]
Luxembourg Marie-Isabelle Richardin tel: +352 49 48 48 3009 [email protected]
Sweden Lars Henckel tel: +46 8 5553 3326 [email protected]
Finland Juha Laitinen tel: +358 9 2280 1409 [email protected]
Malta David A. Ferry tel: +356 2564 6712 [email protected]
Switzerland Tobias Meier Kern tel: +41 58 792 43 69 [email protected]
France Stéphane Henrion tel: +33 1 56 57 41 39 [email protected]
The Netherlands Frans Oomen tel: +31 88 792 51 56 [email protected]
United Kingdom Jamie Randell tel: +44 207 213 8253 [email protected]
Germany Felix Becker tel: +49 69 9585 6665 [email protected]
Norway Yngvar Engelstad Solheim tel: +47 95 26 06 57 [email protected]
United States Evelyn G Lam tel: +1646 204 1094 [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.
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