Steps against Spain regarding its rules to determine the taxable amount in case of barter transactions

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1 1 Newsletter No. 12/ April VAT Forum CV/SC. This newsletter contains recent information. Some information can be subject to sudden changes. VAT Forum CV/SC can not be held responsible for injudicious use of the information below. If you wish to take decisions based on the information below, please consult your indirect tax adviser. Index 1. European News Steps against Spain regarding its rules to determine the taxable amount in case of barter transactions The Commission launches a debate on the future evolution of Customs beyond 2013 Excise duty reductions and exemptions in Slovakia 2. Country News 2.1 Denmark 2.2 Italy 2.3 Norway Prepaid telecom services Exemptions for educational and teaching methodology supplies Purchase of pleasure boats Reverse charge- Supplies of services under a subcontracting agreement Concessions of public work and the reverse charge mechanism. Refunds of value added tax to foreign businesses 2.4 South Africa 2.5 Spain Application of VAT to the gambling industry Consignment stock 2.6 Switzerland VAT Publications The Netherlands

2 2 More flexibility towards fines for late payment of taxes 2.8 United Kingdom Reduced rate of VAT for residential property News 1. European News Steps against Spain regarding its rules to determine the taxable amount in case of barter transactions The European Commission has formally requested Spain to bring its administrative practice regarding the application of certain VAT rules for determining the taxable amount in case of barter transactions in line with the provisions of the VAT directive. The request takes the form of a reasoned opinion (second step of the infringement procedure). If the relevant administrative practice is not aligned with Community Law within two months, the Commission may decide to refer this matter to the European Court of Justice. &language=en&guilanguage=en The Commission launches a debate on the future evolution of Customs beyond 2013 The European Commission has adopted a Communication in order to develop a long term strategy for the evolution of the Customs Union.

3 3 The Communication enumerates the strategic objectives for Customs based on present developments, such as Electronic Customs and Modernised Customs Code, and proposes a coordinated approach for the customs working methods in order to meet theses objectives. &language=en&guilanguage=en Excise duty reductions and exemptions in Slovakia The European Commission has decided not to raise any objections to the excise duty reductions and exemptions introduced by Slovakia for the benefit of railway and inland waterways transport. &language=en&guilanguage=en 2. Country News 2.1 Denmark Prepaid telecom services In April 2007 a binding ruling was published concerning the treatment of prepaid telecom services, i.e. phone cards and accounts. The main question was the time of supply for VAT purposes, as the prepaid amounts could be used for more than one purpose, including both taxable services and transactions outside the scope of VAT (donations). According to the principles laid down by the ECJ (cf. BUPA and more), the tax tribunal issued a binding ruling stating that the time of supply for VAT purposes was the time of consumption rather than payment, as it could not be determined at the time of payment for which specific service payment was made. Furthermore - and surprisingly - it was stated that prepaid amounts not used within a certain time period and, according to the terms of the agreement, collected by the telecom company, were to be considered as a supply of a VAT-exempt financial service. The Danish VAT authorities recently published guidelines concerning the transition from one principle concerning the time of supply for VAT purposes to the other. In practice, this has apparently posed a challenge to the IT-solutions used by the telecom companies. According to the guidelines, it has been accepted that companies will apply the principles of the binding ruling as of 1 July Furthermore, the guidelines state that intermediaries used to distribute prepaid phone cards and similar items should as a general rule be considered as acting in the name and on behalf of the telecom company, thus supplying an independent VAT taxable mediation service.

4 4 2.2 Italy Exemptions for educational and teaching methodology supplies The Revenue Agency has provided some clarification of how to apply the VAT exemption on educational and teaching methodology supplies, with particular reference to institutions which do not meet the requirements for classification as a school according to the legislation in their sector, but nonetheless provide complete study courses according to the Educational Order and make educational and training supplies included in the educational systems for which the Ministry of Education is competent. Circular no. 22/e dated 18 March 2008 Purchase of pleasure boats The Revenue Agency has made it clear that the purchase of pleasure boats intended for commercial activities, as stipulated in a rental contract, is an operation which is not subject to VAT on the condition that the purchaser effectively uses the boats for rental. Resolution no. 95/e dated 14 March 2008 Reverse charge- Supplies of services under a subcontracting agreement The Revenue Agency has specified that the VAT due on supplies of services carried out by an operator in the construction sector on behalf of a real estate investment company, is to be paid according to the reverse charge mechanism if both operators belong to the construction sector and are linked by a subcontracting agreement. Resolution no. 97 dated 14th March 2008 Concessions of public work and the reverse charge mechanism. The Revenue Agency has confirmed that the reverse charge mechanism applies to subcontracting agreements made by third parties with other operators working in the construction sector. Resolution no. 101/e dated 18th March 2008

5 5 2.3 Norway Refunds of value added tax to foreign businesses Foreign businesses can on application obtain refunds of value added tax paid on purchases of goods and services in Norway or on imports of goods into Norway. The brochure hereon has been updated South Africa Application of VAT to the gambling industry Interpretation Note N. 41 (issue 2) provides clarity on the value-added tax (VAT) implications of specific transactions undertaken in the gambling industry. This interpretation note, unless otherwise specifically stated, does not constitute a binding general ruling as envisaged in section 76P of the Income Tax Act, 1962 as made applicable to the VAT Act by section 41A of the VAT Act. o%2041%20(issue%202).pdf 2.5 Spain Consignment stock Under certain conditions, transfers made by a company in another Member State to a warehouse located on the premises of its Spanish customer must be treated as intra- Community supplies and not as assimilated transfers. In a decision dated 20 December 2007 in answer to a tax consultation, the Spanish General Tax Directorate ruled that, under certain conditions, the transfer of goods from another Member State to the warehouse of a Spanish customer, although not involving the transfer of ownership, must nevertheless be treated as an intra-community supply of goods in the country of departure and as an intra-community acquisition in Spain. In confirmation of a previous decision on 25 May 2006, the General Tax Directorate refers to the interpretation that the Court of Justice of the European Community has made of the term supply of goods in its judgement of 17 May 1977 (confirmed in judgements on 4 October

6 6 2001, 15 December 2005 and 29 March 2007), considering that such a concept cannot be identified with the transfer of ownership of the goods according to the national civil legislation applicable. Instead, regardless of whether ownership of the goods is transferred or not, any transaction where the other party is effectively entitled to act as the owner of the goods must be treated as a supply of goods. This would be the case if, as happened in the specific instance referred to in the tax consultation, the customer is liable for the consignment stock from the moment of its reception and can dispose freely of these goods with the sole requisite of notifying the supplier in the other Member State, which subsequently invoices for the goods disposed of. The fact that the transfer of ownership is postponed until the moment of notification is considered irrelevant. This is why the General Tax Directorate considers that, under such conditions, the transfer of the goods constitutes an intra-community supply of goods for the supplier established in another Member State and a corresponding intra-community acquisition for its Spanish customer. From the Spanish point of view, the tax implications of this decision are as follows: a) The non-established supplier will not need to obtain a tax identification number (NIF) nor register in the Spanish Register of Intra-Community Operators (and hence no Spanish VAT will be charged). As a result there is no obligation to: - File monthly intrastat returns. - File quarterly recapitulative returns. b) The consequences for the local customer (in fact, the same would happen if the customer is another non-established person), would be the following: - These transfers will have to be included as intra-community acquisitions in the monthly intrastat returns and quarterly recapitulative returns. - The reverse charge mechanism would not apply when the final invoices are issued. Instead, the VAT would have to be self-assessed and declared as input and output VAT in the monthly/quarterly VAT returns when the transfers take place. 2.6 Switzerland VAT Publications 2008 From now on, new publications updated according to the prescriptions that are valid from 1 January 2008 onwards can be found on the Swiss tax authority's website: The Netherlands

7 7 More flexibility towards fines for late payment of taxes Companies that pay their monthly VAT too late will no longer get a fine automatically. The Dutch Secretary of State De Jager has made this decision because he has become aware of the frequent irritation in small and medium businesses with respect to the tax authority's fining policy. It is not yet known when a new fining policy will be introduced, but the Secretary of State is aiming to have it take effect in In theory, Mr De Jager would like to introduce a leniency period of seven days. A company that transfers its VAT or wage tax too late, but within seven working days, would not be fined. The condition would be that the business had paid on time on the previous occasion. If a company pays too late twice in a row, a fine would only be imposed on the second infringement. If a business systematically pays its taxes too late, a fine can be imposed up to the legal maximum United Kingdom Reduced rate of VAT for residential property How long must a residential property be empty prior to renovation or alteration in order to be eligible for the reduced rate of VAT at 5%? Standard rate VAT is normally charged on works carried out to an existing building. Under certain circumstances it is possible to charge VAT at the reduced rate 5%. The works carried out on the renovation or alteration of an eligible dwelling or premises intended for use solely for a relevant residential purpose which have not been lived in during the 2 years immediately before you start your work can be charged at the reduced rate, providing further detailed conditions are met. This time limit of 2 years has recently been reduced from 3 years.