VAT and e- Publishing Update on current issues. Abi Briggs, David Latief and Vivien Pereira 9 September 2014

Transcription

1 VAT and e- Publishing Update on current issues Abi Briggs, David Latief and Vivien Pereira 9 September 2014

2 Agenda Introductions VAT on e-publishing Overview The issue Current market activity and what next? VAT treatment of bundled supplies The issue HMRC approach and guidance What next? 2015 changes The issue Who will be affected? Options for VAT accounting What now? Key concerns Questions Contacts 2

3 VAT on e-publishing

4 VAT on e-publishing Overview A number of countries in the EU have been considering the VAT rates applicable to e- publishing and the overall approach is inconsistent France and Luxembourg allow application of reduced VAT rates to e-books and e- newspapers Germany is in discussions with the EU Commission regarding the potential to apply reduced rates to e-books in Germany Deloitte UK has engaged in discussions with HM Treasury, publishers, universities and other institutions regarding the UK VAT treatment of e-publishing Deloitte LLP. Private and confidential.

5 VAT on e-publishing The issue The following items are eligible for zero-rating in the UK: Books, booklets, brochures, pamphlets and leaflets Newspapers, journals and periodicals Children s picture books and painting books Music (printed, duplicated or manuscript) Maps, charts and topographical plans Covers, cases and other articles supplied along with the items above (not separately) Electronic publishing is considered to be an electronically supplied service, which is excluded from reduced rating under current EU VAT legislation Deloitte LLP. Private and confidential.

6 VAT on e-publishing The issue Discrepancy in the VAT treatment of different forms of publishing is highly topical and is subject to on-going litigation. In particular: K Oy: Finnish reference to the CJEU regarding the treatment of books on physical means of support e.g. CD ROMS, USB keys etc. EU infraction proceedings against France and Luxembourg for applying the lower rate to e-books A UK taxpayer has submitted an appeal against HMRC s decision to disallow zerorating on e-books, to the First-tier Tribunal A Tribunal hearing, regarding direct reference to the CJEU, is scheduled for November 2014 Opportunity for interested parties to i. contribute towards questions that are referred; and/or ii. stand over any appeals against claims for overpaid VAT on e-books and other forms of e-publishing, that HMRC may reject Deloitte LLP. Private and confidential.

7 VAT on e-publishing Current market activity Activity that we are seeing on this issue in the market Businesses are considering financially supporting the UK proceedings Consumers of electronic publications (particularly those that are exempt/partly exempt or otherwise unable to reclaim all of their input tax) are looking to suppliers to protect their position in the event of a successful outcome Suppliers are ensuring their position is protected by submitting protective claims on the back of the above Deloitte LLP. Private and confidential.

8 VAT on e-publishing What next? Consider appetite for challenging the status quo Lobbying through bodies such as the Professional Publishers Association Appeals/litigation if/when protective claims for overpaid VAT are rejected by HMRC Other issues to consider: Time limits for submitting claims/ top-up claims if submitted before 2010 Reasonableness of protective claims/penalties Commercial considerations e.g. copyright laws and marketing Financial considerations e.g. pricing, especially in light of the 2015 changes Deloitte LLP. Private and confidential.

9 VAT treatment of bundled supplies

10 VAT treatment of bundled supplies %? %? One subscription entitles the subscriber to: A physical copy of the book; and Access to the electronic version, which the subscriber can access via any (or several) digital device(s) 10 Zero rated VAT Issue Is this a single or multiple supply? Standard rated

11 VAT treatment of bundled supplies The issue VAT treatment of single and multiple/bundled supplies has been subject to litigation in the EU Printed magazines, newspapers etc. are eligible for reduced-rating whereas electronic versions/content is generally subject to VAT at the standard rates (15% - 27%) subject to exceptions e.g. France and Luxembourg For example: Magazine subscriptions can provide access to electronic content (i.e. e- magazine or apps) Subscription to print/electronic journals may also grant access to archive content with search functionality Books may be sold in print/hardcopy and include a voucher to redeem online for access to the electronic version 11

12 VAT treatment of bundled supplies What VAT rate should apply? First step is to determine whether there is a single or multiple (i.e. bundled) supply How is the subscription held out in advertising and promotional material? Is the web content simply a way to better enjoy the paper? Can you buy the items in the bundle separately? What do customers think? If there is a multiple/bundled supply, to determine the amount of VAT which should be charged and accounted for and where Determine whether an apportionment method is/should be in place Consider place of supply rules (i.e. distance selling) for goods and services Art 9A of the Principal VAT Directive 12

13 VAT treatment of bundled supplies Apportionment methods HMRC guidance allows the use of apportionment methods, examples include methods based on: Cost of producing individual elements of bundled supplies Market value (i.e. sale price) of individual elements of bundled supplies There are no prescribed methods and no requirement to seek HMRC approval In fact, HMRC do not tend to formally agree apportionment methods Onus on taxpayer to ensure the method used is/remains fair and reasonable 'There are varying degrees of irregularity/inconsistency in the publishing industry, where publishers are either': not apportioning at all; or applying apportionment methods that are not fair & reasonable HMRC can assess back four years 13

14 VAT treatment of bundled supplies Current market activity HMRC are approaching businesses that supply printed media with electronic content to enquire about how bundled supplies are treated for VAT purposes Objective of HMRC enquiries Assessments/penalties Other suppliers are taking a proactive approach Feasibility studies 14

15 VAT treatment of bundled supplies What next? Businesses that supply zero-rated items along with standard rated material should consider: Implementing apportionment methodologies Reviewing/updating agreed methodologies Impact of on-going litigation Submitting claims for any over-paid VAT over the last four years Disclosing under-declared VAT over the last four years Commercial considerations Financial considerations 15

16 2015 changes

17 2015 changes The issue Current system (EU establishment or remote non-eu registration options) continues until 31 December 2014 Current basic rule: Supplies of telecoms, broadcasting and electronically supplied services by an EU business to non-business customers (e.g. private individuals, certain charities and government bodies) in other EU Member States are subject to VAT in the country where the supplier belongs From 1 January 2015, these services will be subject to VAT in country where the customers belongs (i.e. usually resides) The reduced rates shall not apply to electronically supplied services 17

18 2015 changes who will be affected? EU suppliers Current practice: B2C supplies French Customer Supplier accounts for UK VAT on all sales to individuals within the EU, irrespective of where the customer resides Publisher/Retailer Based in the UK UK VAT at 20% German Customer Dutch Customer As of January 2015: 18 Supplier accounts for VAT based on where the individual is established, has his permanent residence or usually resides Publisher/Retailer Based in the UK FR, DE and NL VAT at the respective rates B2C supplies OR Individual VAT registrations in the Member State of consumption French Customer Account for French VAT German Customer Account for German VAT Dutch Customer Account for Dutch VAT

19 2015 changes Who will be affected? Non-EU suppliers B2C supplies French Customer Current practice: Non-EU suppliers can account for VAT through VAT on E-Services (VoES) Scheme, Or Set up a fixed establishment in one member state and account for VAT at the rate applicable in that Member State (to all customers) As of 1 January 2015, non-eu suppliers can account for VAT on supplies: under separate VAT registrations; or via Mini One-Stop Shop Non EU Supplier No EU Fixed Establishment Centrally account for EU VAT through VoES Non EU Supplier FE: Luxembourg Luxembourg VAT authorities FR, DE and NL VAT at the respective rates B2C supplies LUX VAT (17%) German Customer Dutch Customer French Customer German Customer Dutch Customer 19

20 2015 Changes options for VAT accounting Mini One Stop Shop Non-EU Scheme Local VAT registrations Must have an EU fixed establishment Member State of Identification must be where Business Establishment is Cannot have an EU establishment within the EU nor an EU VAT number Can choose Member State of registration Local registration rules apply Filing of multiple returns Output tax only Output tax only Both output tax & input tax Cannot be used for supplies where there is in-country presence i.e. fixed establishment Cannot opt out of using MOSS Mixture of MOSS regulated rules and then local country rules i.e. invoicing driven by MSC If business does not qualify for MOSS or the Non-EU Scheme local registrations must be used in every country Non-EU Scheme replaces VoES. So, this scheme now subject to penalties etc. in same way as MOSS No central co-ordination from Member State of Identification i.e. audits at any time Local compliance rules

21 2015 Changes MOSS returns and payments Businesses (including VAT groups) will complete an electronic MOSS registration form and submit it to the relevant tax authority can be done from October 2014 Returns must be made electronically within 20 days of the end of each calendar quarter payment must be made within the same time period The return must detail sales made in each Member State by the taxable person & use the VAT rate applicable in that Member State

22 2015 Changes UK implementation of MOSS HMRC has confirmed that its MOSS portal will be effective on 1 January 2015 and that businesses may register from October Note that non-euro countries may require payment in their national currency and the UK has confirmed it will require returns to be made in GBP Taxpayers must use an ECB rate published on the last day of the return period This could result in more VAT being paid to the tax authority than has been collected from customers

23 2015 changes What now? Businesses will need to give consideration to a number of areas in advance of the changes: Business status of new and existing customers Residency status of new and existing customers VAT registration and compliance obligations VAT liability of bundled supplies Impact of different VAT rates on price plans Impact of different VAT rates on profit margins Updating enterprise resource planning (ERP) systems to capture data correctly Invoicing requirements Customer contracts 23

24 2015 changes Key concerns Businesses that will be affected by 2015 are concerned about: Administrative burden and costs of determining customer type/location Overseas VAT compliance: keeping up with rules and language requirements Bundled supplies: high volume, low cost transactions could create further administrative burdens in setting up and monitoring supplies 24

25 2015 changes Key concerns Businesses that will be affected by 2015 are concerned about: Different countries take a different approach to: How individual products are treated e.g. supplies of electronic books in France would be subject to the reduced rate of VAT (subject to the outcome of EU infraction proceedings) How bundled supplies should be treated and whether any apportionment methods could apply/need to be approved by the tax authorities HMRC rulings are unlikely to apply outside the UK. Local VAT rulings may need to be obtained e.g. where over 20% of the business supplies are made to individuals based in the relevant EU Member State(s) In respect of bundled supplies, interaction of MOSS with local VAT registrations where distance selling thresholds (re: goods) have been exceeded

26 Questions?

27 Contacts

28 Contacts Abi Briggs Director Tel: David Latief Director Tel: Vivien Pereira Manager Tel:

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