Table of Contents. Part One Introduction. Part Two VAT/GST Double (Non-)Taxation and Possible Remedies. Chapter 2: VAT/GST Double (Non-)Taxation 27

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1 Table of Contents Foreword List of Abbreviations vii xvii VAT/GST Model Tax Convention 1 Part One Introduction Chapter 1: Introduction 21 Part Two VAT/GST Double (Non-)Taxation and Possible Remedies Chapter 2: VAT/GST Double (Non-)Taxation The rise of a problem Defining double taxation Causes of double (non-)taxation Intra-Community double (non-)taxation outside scope of book 46 Chapter 3: Strategies Against VAT Double (Non-)Taxation Categorizing strategies to prevent VAT double (non-) taxation Non-coordinated unilateral measures Coordinated unilateral measures The way of the OECD Bilateral measures Multilateral measures that only limit taxing rights Multilateral measures that lead to harmonization 69 Chapter 4: Best-Suited Strategy Against VAT Double Taxation: A Mix of Instruments 73 Chapter 5: Extension of Existing Income Tax Treaties to VAT/GST? The problem of person, resident and liable to tax 79 ix

2 5.2. The problem with distributive rules OECD Model provisions already applicable to VAT Conclusion: A case for a separate independent VAT treaty 84 Part Three International VAT/GST Principles Criteria for the Design and Evaluation of VAT/GST Treaty Rules Chapter 6: The Need to Identify Principles 89 Chapter 7: VATs/GSTs Covered in this Book 93 Chapter 8: Basic Principles Tax on consumption expenditure Neutrality Benefit principle and economic allegiance Transaction tax Substantially no tax on the value added Efficiency, simplicity, certainty and other practical arguments Substantive jurisdiction and enforcement jurisdiction Intermediary conclusion 120 Chapter 9: Tax Sovereignty and Its Limits 123 Chapter 10: The International Practice: Place of Consumption as Rule for Allocation of Taxing Rights International practice: Territoriality principle Territoriality principle not contradictory to ability to pay Only one place of consumption 129 Chapter 11: Place of Taxation Place of actual consumption and the need for proxies The need for proxies Place of effective use and enjoyment: Not an option 135 x

3 11.2. The need to distinguish between supplies of tangible goods and other supplies Proxies for supplies and imports of tangible property Proxies for other supplies Distinction between supplies of services to business (B2B) and non-business customers (B2C) Rationale for a distinction Treatment of input taxed business customers and non-business customers registered for VAT Verification of customer status and jurisdiction Fixed establishments The role of fixed establishments Fixed establishment vs OECD permanent establishment Treatment of internal dealings irrelevant for distributive rules of a VAT treaty Supplies involving more than two persons Group taxation 168 Chapter 12: Criteria for the Design and Evaluation of VAT/ GST Treaty Rules EU place of taxation rules as starting point for analysis Criteria for design and evaluation of distributive rules 173 Part Four A Separate, Independent VAT/GST Treaty Chapter 13: Income Tax Treaties as Starting Point for Development of a VAT/GST Treaty Use of concept and structure of income tax treaties Private international law not an alternative 178 Chapter 14: Scope of the Treaty Personal scope Limitation of scope to cases where a contracting state maintains right to tax Substantive scope Territorial scope Temporal scope 196 xi

4 Chapter 15: The Problem of Unintentional Double Non Taxation 199 Chapter 16: Definitions The purpose of definitions Definitions in the VAT treaty Supply Supplies of tangible goods Supplies of services Mixed supplies Person Business Non-business Business-to-business (B2B) and business-toconsumer (B2C) supplies Supplier Customer State where a person is located Competent authority and national Fixed establishment Terms defined elsewhere in this book Further terms that could be defined if considered necessary Terms that need not be defined because they should generally be clear 242 Chapter 17: Distributive Rules The function and system of distributive rules Rules for supplies of tangible goods VAT treaty distributive rule General considerations EC VAT Directive Substantive jurisdiction Neutrality Compliance burden Compliance supervision and enforcement jurisdiction Simplicity and certainty Other considerations 259 xii

5 17.3. Rules for supplies of services and intangible goods to non-taxable persons (B2C) General considerations The basic rule (B2C) VAT treaty distributive rule Role and relation to special rules EC VAT Directive Substantive jurisdiction Neutrality Compliance burden Compliance supervision and enforcement jurisdiction Simplicity and certainty Fixed establishment Other considerations (international passenger transport) Conclusion Special rules (B2C) Justifications for special rules Services that can be performed from a remote location General considerations Substantive jurisdiction Neutrality Compliance burden Compliance supervision and enforcement jurisdiction Simplicity and certainty Fixed establishment Conclusion Services that are performed at or connected with a place that is easily determinable General considerations Substantive jurisdiction Neutrality Compliance burden Compliance supervision and enforcement jurisdiction Simplicity and certainty Fixed establishment Other considerations 302 xiii

6 Conclusion Services connected with the importation of tangible goods Services by intermediaries General considerations Substantive jurisdiction Neutrality Compliance burden Compliance supervision and enforcement jurisdiction Simplicity and certainty Fixed establishment Conclusion Special rules in the conceptualized VAT treaty (B2C) Services connected with the importation of tangible goods EC VAT Directive VAT treaty distributive rule Further comments Services physically connected with immovable property EC VAT Directive VAT treaty distributive rule Further comments Transport EC VAT Directive VAT treaty distributive rule Further comments Hiring of means of transport EC VAT Directive VAT treaty distributive rule Services for which the place of performance can easily be determined EC VAT Directive VAT treaty distributive rule Further comments Cultural, artistic, sporting, scientific, educational, entertainment and similar activities EC VAT Directive VAT treaty distributive rule 327 xiv

7 Further comments Services that can be provided from a remote location EC VAT Directive VAT treaty distributive rule Further comments Services by intermediaries EC VAT Directive VAT treaty distributive rule Rules for supplies of services and intangible goods to taxable persons (B2B) The basic rule (B2B) VAT treaty distributive rule General considerations EC VAT Directive Substantive jurisdiction Neutrality Compliance burden Compliance supervision and enforcement jurisdiction Simplicity and certainty Fixed establishment Conclusion Special rules (B2B) Justification for special rules Services connected with the importation of tangible goods General considerations Substantive jurisdiction Neutrality Compliance burden Compliance supervision and enforcement jurisdiction Simplicity and certainty Fixed establishment Other considerations Conclusion Services where distinction between B2B and B2C would risk abuse and cause disproportional compliance burden for the supplier 369 xv

8 17.5. Supplies of tangible goods and services on board ships, aircraft or trains VAT treaty distributive rules Arguments for a special rule Undisclosed agents VAT treaty distributive rule Arguments for a special rule 378 Chapter 18: Associated Businesses 383 Chapter 19: Methods to Avoid Double Taxation 389 Chapter 20: Non-Discrimination and Administrative Cooperation Non-Discrimination (article 24 of the OECD Model) General applicability Discrimination based on nationality Discrimination in the taxation of permanent establishments Other paragraphs of article 24 of the OECD Model Conclusion: A separate non-discrimination provision in a VAT treaty Mutual Agreement Procedure (article 25 of the OECD Model) Exchange of Information (article 26 of the OECD Model) Assistance in the Collection of Taxes (article 27 of the OECD Model) 420 Part Five Conclusion Chapter 21: Conclusion 429 References 433 Other Titles in the IBFD Doctoral Series 471 xvi