EY VAT News - Week to 7 March 2016

Transcription

1 Click here to view online EY VAT News - Week to 7 March 2016 Welcome to the latest edition of EY VAT News. Headlines include the following: Our March Tax Focus web seminar will take place the day after Budget 2016 at 3:00 pm on Thursday, 17 March 2016 to consider the implications of the announcements made in the Budget speech and its related documents. Please contact Sarah Chong for further information. In light of the debate around the upcoming referendum on the UK's membership of the EU, our tax services alert summarises some of the key potential tax implications. Please contact Ian Dawes or Charles Brayne for further information. In the case of Societe Air France, the First Tier Tribunal held that the taxpayer s premium economy passengers were not travelling in the lowest class available on the aircraft and that the relevant seats did not, therefore, attract a reduced rate of air passenger duty (APD). Please contact Kal Siddique for further information. Hungary has recently referred the case of MVM to the Court of Justice of the European Union (CJEU). This case concerns the entitlement of a holding company that is actively involved in the management of its subsidiaries to deduct input tax. Please contact Tony Bullock for further information. The EY China Indirect Tax Roadshow will be taking place in London on Thursday, 17 March This event will provide an overview of the complex Chinese VAT system and its implications. Please contact Andrew Bradford for further information. India is planning to introduce an equalisation levy (more commonly known globally as a Google tax ) on services relating to online advertising. Please contact Rosie Higgins for further information. If you would like to discuss any of the articles in this week's edition of EY VAT News in more detail, please speak with your usual EY indirect tax contact or one of the people below. In this edition: EY Tax Focus Web Seminar : Web seminar on Budget 2016 on Thursday, 17 March 2016 Brexit : Tax considerations in the run up to the EU referendum First Tier Tribunal : Decision : APD : Whether premium economy was lowest class of travel First Tier Tribunal : Decision : Whether sale of converted dwellings qualified for VAT zero-rating First Tier Tribunal : Decision : Membership subscriptions : Whether aims of a political nature Court of Appeal : Judgment : Supplies of education services and printed matter : Barring order Court of Appeal : Judgment : Production of TV & radio programmes : Whether exempt education Court of Appeal : Structure to avoid irrecoverable VAT on advertising costs : Whether abusive Court of Appeal : Recovery of customs debts resulting from criminal acts : Time limit CJEU : Opinion : Information required on a VAT invoice : Nature and extent of services supplied

2 CJEU : Opinion : VAT treatment of capital items on hand at deregistration : Adjustment period CJEU : New referrals CJEU : Calendar update : Aspiro judgment release date postponed? Australia : Changes to GST treatment of cross-border supplies of digital products and services China : Final stage of VAT reform : Invitation to attend event in London on 17 March 2016 India : Taxation of the digital economy : Introduction of equalisation levy on online advertising EY Tax Focus Web Seminar Web seminar on Budget 2016 on Thursday, 17 March 2016 Our March Tax Focus web seminar will take place the day after Budget 2016 at 3:00 pm on Thursday, 17 March 2016 to consider the implications of the announcements made in the Budget speech and its related documents. Despite the large number of new legislative proposals already included in the draft Finance Bill clauses published last December, announcements are still expected in the Budget in many key areas. We may also see publication of the Business Tax Roadmap (although the Government has only committed to releasing it before the end of April 2016). Register now to hear Claire Hooper, Chris Sanger, David Kilshaw and the EY ITEM Club's Martin Beck as they discuss the key tax measures. Please contact Sarah Chong for further information. Brexit Tax considerations in the run up to the EU referendum In light of the debate around the upcoming (23 June 2016) referendum on the UK's membership of the EU, our tax services alert summarises some of the key potential tax implications. It also looks at the alternative trade models the UK might look to negotiate in the event of leaving the EU. The Government has since published a paper looking at a number of possible alternatives for the UK's relationship with the EU, if there were to be a vote to leave. This follows the Government's recent paper setting out the process that would follow a vote to leave the EU, and the prospects for negotiations. A further paper providing information about the rights and obligations of the UK's membership of the EU will be published at a later date. The debate around a potential Brexit is complex. The lack of real precedent adds to the difficulties groups face in assessing their exposure and opportunities, depending both on the result of the referendum and any subsequent developments. Groups may wish to assess their supply chain and how it might evolve, taking account of changes that could arise from a vote to leave, including: The impact of tariffs and non-tariff barriers (with possible exposures and opportunities in negotiations). The introduction of withholding taxes. Restrictions on movement of people (together with any changes in social security arrangements). Whether current EU passporting rights would be lost, and, if so, what rights might replace them. The additional flexibility the Government will have to determine tax policy as it may no longer need to comply with EU laws such as those on State Aid and the four freedoms (depending upon the terms agreed for the UK's exit).

3 Please contact Ian Dawes or Charles Brayne for further information. First Tier Tribunal Decision : Air passenger duty : Whether premium economy was the lowest class of travel TC04901 Societe Air France The Tribunal held that the taxpayer airline's premium economy passengers were not travelling in the lowest class available on the aircraft and that the relevant seats did not, therefore, attract a reduced rate of APD. The taxpayer, a French company which carried on business in the UK, ran the commercial airline Air France. This appeal concerned the taxpayer's liability to APD, which is payable by commercial aircraft operators in respect of each passenger travelling from a UK airport. The duty varies according to the class of travel. The reduced rate of duty applies to the lowest class of travel available on the aircraft and the particular issue in this appeal was whether those customers travelling on short/medium haul flights in Air France's premium economy seating were travelling in the lowest class in circumstances where travel in economy was also available on the aircraft. The taxpayer argued that, when viewed objectively, the minimal differences between travelling in premium economy and economy were immaterial and that a person travelling in premium economy was travelling in the lowest class. HMRC's position was that premium economy was not the lowest class and that the relevant seats did not, therefore, attract a reduced rate of duty. The taxpayer appealed against an assessment for underpaid APD in relation to premium economy seating on the ground that it had paid the correct amount of APD and, in the alternative, that the assessment was out of time. The taxpayer also appealed against an assessment for underpaid APD in relation to passengers travelling in Premium Voyageur seating on longer haul flights. The taxpayer subsequently accepted that Premium Voyageur was not the lowest class, but argued that this assessment was similarly out of time. On the substantive issue, the Tribunal considered it was quite clear, having considered all the relevant factors, that the taxpayer's premium economy customers were travelling in a different and higher class of travel than those travelling in economy. The taxpayer's premium economy product was not the lowest class of travel available on the aircraft. In the Tribunal's view, this conclusion was readily sustainable on the basis of the positioning of the premium economy seating behind the business section and in front of the economy seats, with a curtain separating the premium economy and economy sections, and the improved snack made available to premium economy customers. The taxpayer was therefore liable in respect of chargeable passengers who travelled in premium economy class at the higher standard class rate of APD, rather than the reduced rate of APD for passengers travelling in the lowest class. The Tribunal further held that both assessments were made within the relevant time limits. Appeal dismissed. Please contact Kal Siddique for further information. Decision : Whether sale of newly converted dwellings qualified for VAT zero-rating TC04917 Languard New Homes Ltd The Tribunal held that the sale of two newly converted dwellings, each of which contained a part which was previously the commercial ground floor of a public house and a part which was previously the public house manager's accommodation, qualified for VAT zero-rating. The taxpayer purchased a public house and sought planning permission to convert it into four self-contained dwellings. Before conversion works started, the public house consisted of three floors - a ground floor, which was entirely commercial (and therefore non-residential), and a first and second floor, both of which were used entirely as accommodation by the public house manager (and so were residential). Following the grant of planning permission, the taxpayer carried out conversion works to the public house. As a result of those works, the ground and first floors of the public house were converted vertically into two maisonettes (the lower maisonettes). Each of the lower maisonettes contained a part which was previously the commercial ground floor of the public house, and a part which was previously the manager's accommodation. As part of the conversion, the taxpayer added a third floor to the public house. The second and (newly created) third floors of the public house were converted vertically to form another two maisonettes (the upper maisonettes). Each of the upper maisonettes contained a part which was previously the manager's accommodation, and a part which was the newly created third floor. Therefore, when looked at as a whole, the building which was originally partly public house and partly manager's accommodation, was converted into a building which, with the addition of the third floor, comprised four maisonettes.

4 The taxpayer subsequently sold its interests in each of the lower and upper maisonettes to third parties. Each of those sales by the taxpayer constituted the first grant of a major interest in the respective maisonette. The taxpayer originally treated the grant of the major interest in each of the maisonettes as a zero-rated supply. On the basis that each grant was a taxable supply, the taxpayer reclaimed input tax in relation to the conversion of the whole of the public house. HMRC disagreed that each grant was a taxable supply, contending instead that each grant was exempt from VAT. HMRC therefore raised an assessment to recover input tax paid to the taxpayer. It was subsequently agreed that the major interest grant in each of the upper maisonettes was exempt from VAT, and so the taxpayer could not recover input tax in relation to this aspect of the conversion of the public house. However, the position in relation to the lower maisonettes remained in dispute. The taxpayer submitted that the conversion of the commercial ground floor of the public house constituted the conversion of a nonresidential part of a building into a number of dwellings, within Item 1(b) of Group 5 of Schedule 8 to the VAT Act Therefore, the grant of the first major interest in each of the two lower maisonettes was zero-rated. HMRC contended that the grant of the major interest in each of the lower maisonettes was exempt rather than zero-rated, as the conversion did not fulfil the criteria in Group 5. Looking at Item 1(b) in the light of Note 9 to Group 5, the Tribunal concluded that converting a non-residential part of a building into a building designed as a number of dwellings should be construed as meaning that the non-residential part of a building has changed its character and now forms part of a building designed as a number of dwellings. Applying the Tribunal's interpretation of Item 1(b) to the facts found, the non-residential part of the public house had been converted into (i.e. changed its character into) a building designed as four dwellings (the lower maisonettes and the upper maisonettes). In considering Note 9, the Tribunal had regard to the number of dwellings which existed in the public house before the conversion, and the number of dwellings which existed as a result of the conversion of the non-residential part. There was one dwelling in the public house prior to conversion. As a result of the non-residential part of the public house becoming part of a building designed as a number of dwellings, four dwellings existed. The Tribunal therefore concluded that the major interest grant in each of the lower maisonettes did fall within Item 1(b), and was not excluded by Note 9. Appeal allowed. Please contact Ali Anderson for further information. Decision : Exemption for membership subscriptions : Whether aims of a political nature TC04923 Shanklin Conservative and Unionist Club The Tribunal held that the taxpayer's membership subscriptions comprised a single supply which did not have a predominant element that was referable to political aims and, consequently, they did not qualify for VAT exemption. The taxpayer submitted a claim for repayment of (alleged) overpaid output tax on the basis that it was a non-profit making body with objects in the public domain and of a political nature, whose membership fees were properly exempt from VAT. The taxpayer's case was that its fundamental aim or reason for its existence was to promote the Conservative Party and its principles, and that it provided its members with the opportunity to become involved in political activity. HMRC rejected the claim on the basis that the taxpayer did not qualify for the exemption. HMRC's case was that the taxpayer was disqualified from the exemption because, in practice, its main focus was social and leisure activities rather than political activity. The taxpayer sought, in the alternative, to rely on the extra-statutory concession (ESC) under which HMRC had already agreed about 30% of its subscription income was not subject to VAT as reflecting exempt sports supplies and zero-rated supplies of publications. The taxpayer considered that a further 30% of its subscription income reflected services which were referable to its political aims. HMRC's position was that the taxpayer could not rely on the ESC and that, in any event, concessions could not be relied on retrospectively. This was a lead case with the appeals of four other conservative clubs stayed behind it. The Tribunal found that the emphasis of the taxpayer was on the social rather than political side. The non-political benefits were extensive and the political benefits appeared to be of significantly less importance to the members. While the taxpayer would not have come into existence were it not for its political aims, its social benefits were at least as much the reason as its political aims for its continued existence. It was not possible to say during the claim period that the membership subscription was for services mainly referable to the taxpayer's political aims, rather it seemed to the Tribunal that it was paid more for the social services provided. The effect of this finding was that the supply made in return for the membership subscriptions was not within Article 132(1)(l) of the VAT Directive, or the UK equivalent of Item 1(e) of Group 9 of Schedule 9 to the VAT Act It comprised a single supply which did not have a predominant element that was referable to political aims, albeit a part of the supply was referable to the taxpayer's political aims. The Tribunal held that the conclusion might be different for other political clubs, but only if the facts were significantly different. The Tribunal therefore dismissed the appeal on the basis that the taxpayer did not meet the legal criteria for exemption of the whole or any part of its supply in return for its membership subscriptions. The Tribunal also dismissed the taxpayer's claim that it was entitled to exemption for a part of its supply under the ESC, on the grounds that the Tribunal did not have jurisdiction to consider that aspect of its claim. Nevertheless, the Tribunal expressed the non-binding view that a proportion of the taxpayer's

5 subscription would be entitled to exemption under the ESC, but expressed no view on whether the retrospective nature of its claim meant that it could not rely on the ESC. The taxpayer's options, if it wished to pursue the question of the ESC, were to lodge an action for judicial review and/or lodge a complaint with the Adjudicator. Appeal dismissed. Court of Appeal Judgment : Connected supplies of education services and printed matter : Barring order BPP Holdings Ltd The Court of Appeal restored an order barring HMRC from taking any further part in this test case concerning connected supplies of printed matter and education services, and the issue of whether amendments to VAT legislation in 2011 precluded zero-rating for the former. On 1 March 2016, the Court of Appeal delivered its judgment in the taxpayer's appeal from the Upper Tribunal in the case of BPP Holdings Ltd. The substantive issue in this test case concerns connected supplies of printed matter and education services, and whether amendments to VAT legislation in 2011 precluded zero-rating for the former. However, the present case management appeal concerned whether HMRC should be barred from further participation in the substantive proceedings. The taxpayer applied for a barring order by reason of HMRC's failure to comply with the Tribunal's directions. The First Tier Tribunal had concluded that barring was the appropriate sanction and that HMRC should be barred from arguing its case. However, the Upper Tribunal decided that the First Tier Tribunal had made an error of law in that determination and that HMRC should not be barred. Whilst HMRC's conduct of the appeal was unsatisfactory and deserved criticism, its failings were not so grave as to warrant a barring order. The Court of Appeal held it was appropriate that compliance with the Tribunal's rules and directions was given the weight accorded to it by the First Tier Tribunal in this case. HMRC had no good reason, indeed no stated reason at all, for its noncompliance. The First Tier Tribunal did not make an error of law, with the consequence that the Upper Tribunal should not have intervened. The Court of Appeal therefore allowed the taxpayer's appeal and restored the barring order made by the First Tier Tribunal. Comment: This decision highlights the importance of complying with Tribunal rules, practice directions, orders and associated time limits. Please contact Damian Shirley for further information. Judgment : Production and broadcasting of TV & radio programmes : Whether exempt education The Open University The Court of Appeal held that supplies of television and radio production and broadcasting services made by the British Broadcasting Corporation (the BBC) to the Open University (the OU) were exempt from VAT under EU law. On 2 March 2016, the Court of Appeal delivered its judgment in HMRC's appeal from the Upper Tribunal in the case of the Open University. This case concerns a claim for the repayment of VAT charged on supplies of services made by the BBC to the OU during the period January 1978 to July During the claim period, the BBC charged and accounted for VAT on supplies of services to the OU. The services consisted of the production and broadcasting of television and radio programmes relating to OU courses. With effect from August 1994, HMRC accepted that the services supplied by the BBC to the OU were exempt under UK law as services closely related to the provision of education by a university. In 2009, the BBC made a Fleming claim for repayment of the VAT that it had charged and accounted for on supplies made prior to August HMRC rejected the claim. The appeal was brought by the OU as the recipient of the supplies made by the BBC. The BBC agreed to pay the OU any amount it received by way of repayment from HMRC. The VAT repayment claim was based on the contention that the supplies of services made by the BBC during the relevant period were exempt from VAT under Article 13A(1)(i) of the Sixth VAT Directive. Among other supplies, Article 13A(1)(i) exempted services closely related to university education provided by bodies governed by public law having an educational aim or by other organisations defined by the Member State concerned as having similar objects. HMRC accepted

6 that, during the claim period, UK law did not exempt the BBC's services and that Article 13A(1)(i) had direct effect. HMRC maintained, however, that the BBC's services did not fall within Article 13A(1)(i). The parties agreed that whether the services supplied by the BBC to the OU were exempt under Article 13A(1)(i) turned on three issues, namely (i) was the BBC a body governed by public law for the purposes of Article 13A(1)(i), (ii) if so, did the BBC also have the educational aim required by Article 13A(1)(i), and (iii) alternatively, if the BBC was not a body governed by public law with the requisite educational aim, was it another organisation defined by the UK as having similar educational objects? The supplies in question would be exempt if the OU succeeded on both of the first two issues, or on the third issue. The First Tier Tribunal decided the first two issues against the OU, but decided the third issue in its favour (i.e. the BBC had objects similar to the requisite educational aim). The OU's appeal and the BBC's repayment claim therefore succeeded, albeit only on the alternative basis. The Upper Tribunal upheld the First Tier Tribunal's decision on the first and third issues, but reversed its decision on the second issue (i.e. the BBC did at all material times have the requisite educational aim). Accordingly, the Upper Tribunal dismissed HMRC's appeal. The Court of Appeal similarly dismissed HMRC's appeal, holding that the OU was entitled to rely directly on Article 13A(1)(i) in the present case. Please contact Damian Shirley for further information. Ocean Finance : Structure to avoid irrecoverable VAT on advertising costs : Whether abusive The Court of Appeal will hear HMRC's appeal against the Upper Tribunal's decision in favour of Paul Newey t/a Ocean Finance on March This case concerns whether a structure to avoid irrecoverable VAT on supplies of advertising services to a loan broking business constituted an abusive practice liable to redefinition under the Halifax doctrine (which addresses the scope of the EU principle of abuse of rights in the context of VAT). The Upper Tribunal held that it did not. Please contact Mitchell Moss for further information. FMX Food Merchants : Recovery of customs debts resulting from criminal acts : Time limit FMX Food Merchants Import Export Co. Ltd has applied for permission to appeal the Upper Tribunal's decision in favour of HMRC to the Court of Appeal. This case concerns the time limit for the recovery of customs debts resulting from criminal acts (in the present case, forged documents). The Upper Tribunal held that the Community Customs Code disapplied the normal three year time limit in the factual circumstances of this case. HMRC's demand for unpaid customs duty was therefore valid, despite the fact that it was issued outside the normal three year time limit. Please contact Arjen Odems for further information. Court of Justice of the European Union (CJEU) Opinion : Information required on a VAT invoice : Nature and extent of services supplied C-516/14 Barlis 06 - Investimentos Imobiliários e Turísticos SA The Advocate General considered the extent to which a VAT invoice must contain details concerning the nature and extent of the services supplied, including the date(s) on which they were supplied. On 18 February 2016, Advocate General Kokott delivered her opinion in this Portuguese referral asking whether a specific description on an invoice as to the extent of legal services rendered complies with the EU law requirements of a valid VAT invoice. The opinion is not currently available in English. The Advocate General held that, for an invoice to satisfy EU law requirements, it must contain sufficient details concerning the nature and extent of the services supplied to enable the tax authorities to check that the supplier has accounted for the VAT correctly, and the customer has made a valid deduction of VAT. In the present case, the Advocate General considered that a description such as legal services would usually be sufficient unless different VAT rates could be applicable to the supply in question, in which case a more detailed description would be required to allow the tax authorities to ensure that the correct VAT rate has been applied. In relation to the date of delivery of the service, the Advocate General held that this must be included on the invoice so that the tax authorities can check that the supplier has accounted for VAT in the correct period. Specifically, the Advocate General considered this meant that an invoice must provide the date or dates on which the services were supplied for one-off services. For continuous supplies of services, the Advocate General held that the invoice must state

7 both the start date and the end date of the billing period. Consequently, invoices that state, for example, legal services supplied to 31 March 201X would not satisfy the requirements under EU law. We await to see if the CJEU follows the Advocate General's opinion. Comment: If the CJEU follows the Advocate General's opinion, there is a risk that customers may be denied a VAT deduction where invoices do not satisfy these requirements, and suppliers may be faced with significant systems and process implications across a number of jurisdictions. Affected businesses may wish to consider the implications of this case ahead of the CJEU judgment. Please contact Rosie Higgins for further information. Opinion : VAT treatment of capital items on hand at deregistration : Adjustment period C-229/15 Jan Mateusiak The Advocate General held that a taxable person, who previously deducted input tax on the acquisition of a capital item falling within the capital goods scheme (CGS), should be treated as making a deemed supply for VAT purposes at the time he ceases his economic activity, even if the CGS adjustment period for that capital item has already expired. On 3 March 2016, Advocate General Kokott delivered her opinion in this Polish referral concerning the VAT treatment of goods which are business assets on hand at deregistration (or, in EU terminology, on cessation of the taxable economic activity). Specifically, the referral asks whether a taxable person, who previously deducted input tax on the acquisition of a capital item falling within the CGS, should be treated as making a deemed supply for VAT purposes (insofar as the goods still have a residual value) at the time he ceases his economic activity if the CGS adjustment period for that capital item has already expired. In the present case, the taxpayer took the view that there should be no such taxation (deemed supply) once the CGS adjustment period had expired. The Polish tax authorities disagreed. The Advocate General found in favour of the tax authorities, holding that the expiry of the CGS adjustment period for goods under Article 187(1) of the VAT Directive had no effect on their taxation (deemed supply) under Article 18(c). The wording of Article 18(c) contained neither any time limit for taxation nor any reference to Article 187. While both provisions pursued similar aims (in terms of ensuring that taxable persons do not obtain an unjustified tax advantage over final consumers), they had to be applied independently of each other, provided this did not give rise to double taxation. However, there was no indication that double taxation was involved in the present case. Consequently, a deemed supply was not limited to the time frame of the CGS adjustment period. We await to see if the CJEU follows the Advocate General's opinion. New referrals The following VAT cases have recently been referred to the CJEU. C-699/15 Brockenhurst College - UK referral from the Court of Appeal asking whether supplies of restaurant and entertainment services made by an educational establishment to paying members of the public are closely related to the provision of education and, therefore, exempt from VAT under EU law, in circumstances where the making of those supplies is facilitated by the students in the course of their education and as an essential part of their education. Please contact Damian Shirley for further information. C-28/16 MVM - while details of the questions referred have yet to appear on the CJEU website, we understand that this Hungarian referral concerns the entitlement of a holding company that is actively involved in the management of its subsidiaries (within an energy group) to deduct input tax. Specifically, the referral is understood to address a situation where the holding company actively carries on a taxable business in its own right, but does not make a charge for the management of its subsidiaries. Please contact Tony Bullock for further information. Calendar update : Aspiro judgment release date postponed? Thursday 10 March Opinion C-543/14 Ordre des barreaux francophones and germanophone and Others - Belgian referral concerning an attempt by the domestic legal profession to argue that by making services supplied by lawyers subject to VAT, irrespective of whether the client is registered for VAT or qualifies for legal aid, EU VAT law is incompatible with various European conventions which seek to ensure effective access to justice. The referral also asks whether services

8 provided by lawyers under a legal aid scheme qualify for exemption under any provision of EU VAT law. The background here is that, until 31 December 2013, legal services were exempt from VAT in Belgium. Belgium withdrew this exemption (the last Member State to do so) with effect from 1 January 2014, whereupon services supplied by Belgian lawyers became subject to the standard rate of VAT. However, the Belgian legal profession has decided not to go quietly, and is challenging the decision through the domestic courts, and now the CJEU. Wednesday 6 April Opinion C-24/15 Josef Plöckl - German referral concerning the requirement to obtain the customer's VAT registration number in order to zero-rate an intra-community supply of goods. This referral appears to raise similar issues to those raised in the case of VSTR (C-587/10). Wednesday 13 April Hearing C-340/15 Christine Nigl and Others - Austrian referral asking whether three associated persons with independent operations but trading through a limited company, of which they are all shareholders, should be treated as a single taxable person and whether, the flat rate scheme for farmers is available to them. Thursday 14 April Hearing C-378/15 Mercedes Benz Italia SpA - Italian referral concerning the compatibility with EU law of national provisions and the practice of the national tax authorities relating to the partial exemption pro-rata calculation. The following two entries, which had previously appeared on the CJEU calendar, have now been removed. It is looking increasingly likely that this is intentional (i.e. these events have been postponed), rather than an oversight. Thursday 17 March Opinion C-11/15 Český Rozhlas - Czech referral asking whether public sector radio broadcasting, financed by statutory radio licence fees, constitutes an exempt supply made in the course of business, or a non-business activity falling outside the scope of VAT. Thursday 17 March Judgment C-40/15 Aspiro SA - Polish referral concerning the scope of the exemption for insurance transactions and related services performed by insurance brokers and insurance agents contained within Article 135(1)(a) of the VAT Directive. Specifically, the referral asks whether that exemption covers claims handling services which are supplied in the name and on behalf of an insurer by a third party who has no legal relationship with the insured person. The Advocate General answered this in the negative (note the Advocate General's opinion is now available in English). Our tax alert provides further details on the opinion and its implications. Please contact David Bearman for further information. Australia Changes to the GST treatment of cross-border supplies of digital products and services The Australian GST landscape for cross-border transactions is due for a radical change with the introduction of the Tax and Superannuation Laws Amendment Bill 2016 into Parliament. In this regard, Australia is joining many other countries in addressing the integrity of their tax systems, in an endeavour to tax private consumption of digital products and services purchased from non-resident suppliers. The Bill contains measures which seek to extend GST to business-to-consumer (B2C) supplies of digital products, services and other intangibles into Australia from 1 July These supplies largely escape GST under current law. In some instances, principally with regard to digital products, the GST compliance burden could fall on an intermediary operating an electronic platform through which those digital products are distributed to end consumers in Australia. Separately, the Bill also contains measures designed to remove certain business-to-business (B2B) supplies made by nonresident businesses from the Australian GST system, many of which are caught under the current law (which treats such supplies as occurring within Australia). Subject to the date of Royal Assent, these B2B changes could apply from as early as 1 October Our global tax alert outlines how these measures together represent a significant shift in how goods and services are taxed in Australia.

9 China Completion of final stage of VAT reform : Invitation to attend event in London on 17 March 2016 On 5 March 2016, China's Premier Li Keqiang announced at the National People's Congress that the final stage of the VAT pilot reform will start from 1 May The scope of the VAT pilot reform will be expanded to cover the construction, real estate, financial services and lifestyle industries. Policy makers and regulators had been exploring the possibility of a later start date (1 July 2016 or 1 October 2016) for the financial services industry. However, as 1 May 2016 was the only date mentioned in Premier Li's announcement, this now appears uncertain. Discussions on transitional rules (e.g. for long term contracts) are ongoing. The Chinese tax authorities are still working on the detailed implementation rules for the method of taxation applicable to each of the new VAT pilot industries. However, we understand that the rules should be ready within the next week or so. Our recent report China VAT reform: Are you ready for the last run? outlines some of the highly anticipated upcoming reforms in the aforementioned industries in China and considers how to transition to VAT successfully. The report addresses the challenges that will be posed by the next steps of the VAT reform and offers suggestions for adapting to the new rules. In conjunction with our report, the EY China Indirect Tax Roadshow will be taking place in London (at our More London Place office) on the morning of Thursday, 17 March This event will provide an overview of the complex Chinese VAT system and its implications, as well as the latest key developments in Chinese VAT and consumption tax reforms. There will also be an opportunity for a limited number of one-to-one meetings with our Chinese indirect tax specialists to discuss your specific issues or concerns. To register for this event, please click here. Please contact Andrew Bradford for further information. India Taxation of digital economy transactions : Introduction of equalisation levy on online advertising As part of the Indian budget proposals announced on 29 February 2016, India is planning to introduce an equalisation levy (more commonly known globally as a Google tax ). The tax will be levied at 6% of the gross consideration payable for services relating to online advertising (e.g. the provision of digital advertising space), where such services are provided by a non-resident business to either an Indian resident business or a non-resident business with a permanent establishment in India (i.e. B2B transactions). Recipients of online advertising services in these circumstances will be required to withhold the equalisation levy (i.e. deduct 6%) when making payment to a non-resident service provider. The equalisation levy will, therefore, be similar to a withholding tax. The legislation specifying the scope of the equalisation levy has been worded in such a way that it may be expanded to cover other digital goods and services at a later date. Our global tax alert provides further details. Please contact Rosie Higgins for further information. Further information: EY has a global indirect tax practice which is experienced in providing support in relation to technical VAT issues. If you would like to discuss any case generally or in relation to your own circumstances, please speak with your usual EY indirect tax contact.

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