Value Added Tax (VAT) - The Ever Changing Legisla8on and How Planning and Recovery can Impact Your Organiza8on's Savings

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1 Value Added Tax (VAT) - The Ever Changing Legisla8on and How Planning and Recovery can Impact Your Organiza8on's Savings Melissa Brod Vice President, Na8onal Accounts Manager MERIDIAN GLOBAL SERVICES

2 OUTLINE What is VAT? Complexi8es and Scope of VAT Recovery? What have been the major changes in legisla8on? What is the VAT Package? How can AP Departments iden8fy VAT exposure? How can a US company maximize VAT savings? What are best prac8ces in today s environment?

3 WHAT IS VAT? Value Added Tax (VAT) is an indirect (consump8on) tax on consumer expenditure VAT is chargeable on supplies of goods and services made by a taxable person in EU countries and beyond VAT should not be a cost to fully taxable persons. As a consump8on tax, VAT is borne by the final consumer All countries in EU are required to levy VAT; in addi8on there are approximately 120 more countries with a VAT system

4 CARDINAL RULE OF VAT Only the legal recipient of a supply can recover VAT incurred in the course or futherance of that legal en88es taxable business when supported by a valid original invoice correctly made out in compliance with na8onal legisla8on.

5 DEFINITIONS Output Tax VAT charged on all taxable supplies of goods and services by a taxable person Input Tax VAT that a taxable person incurs on its business purchases and expenses

6 HOW DOES VAT WORK? In general, the supplier of the good or services is liable to charge and account for the VAT on all the supplies The local supplier charges VAT on the supply The foreign customer pays the VAT on the supply The local supplier accounts for the VAT on their local return The foreign customer can recover the VAT through the Refund or 13 th Direc8ve

7 13 th DIRECTIVE As of January 1, 1988, all EU Countries were required to adopt the 13 th Direc8ve The objec8ve of the legisla8on was to provide a level playing field and boost trade within the EU Each EU Member State was free to determine country specific eligibility and reciprocity principles

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10 VAT RECLAIM COMPLEXITIES Items eligible for VAT reclaim vary by country Invoices must be processed according to country specific rules and requirements Separate claims must be filed in each country in the local language of the country Countries have various filing deadlines and document requirements Original VAT compliant invoices are required for VAT refunds

11 WHY RECOVER VAT? Legisla8on permits recovery Realloca8on of refund to business units for future expenses Results in $ignificant cost savings to your company

12 WHAT INFORMATION MUST BE ON A VAT INVOICE? Supplier s details including VAT registra8on number Tax point Date Invoice Number Descrip8on of Services Provided VAT rate charged Company s name and address Currency conversion if billed in USD

13 THE VAT PACKAGE A package of measures aimed at modernizing and simplifying the rules rela8ng to cross border supplies and recovery of input tax Changes the place of supply rules for services for business to business (B2B) and business to consumer (B2C) transac8ons New requirements such as EC sales lists Changes to the 8 th Direc8ve Intended enhanced administra8ve coopera8on between Member States A new set of rules to determine where supplies of goods and services are deemed taxable The changes only relate to the place of supply for services. The place of supply for goods remains unchanged.

14 NEW RULES B2C Supplies Will con8nue to be subject to VAT where the supplier is based B2B Supplies Will become subject to VAT where the customer has its established business What does this mean to your business???

15 IMPACT OF LEGISLATIVE CHANGE While the VAT Package may reduce the VAT exposure of your organiza8on, the number of excep8ons and administra8ve burdens s8ll require detailed and skilled exper8se in all areas of VAT compliance.

16 WHY SHOULD THE CHANGES ASSOCIATED WITH THE VAT PACKAGE BE A CONCERN? Incorrect coding and payments Direct impact on cash flow Impact on nego8a8ons for interna8onal contracts

17 WHERE WILL WE CONTINUE TO SEE VAT COSTS WITHOUT ISSUES? Employee T&E Costs Mee8ng/Event Costs Industry Symposiums Tooling Delivery of Goods

18 HOW DO YOU QUANTIFY VAT EXPOSURE AND POTENTIAL RECOVERY? Review Travel and Expense Costs Review Global Travel Trends Run SAP/AP reports Review all interna8onal PO and contracts

19 BEST PRACTICES Consul8ng and Compliance Reviews Contract Reviews AP Staff educa8on and training Direc8ve Claims as well as Supplier Credits Educa8on of Employees Upda8ng Travel Policy Communica8ons dedicated to VAT compliance

20 RESULTS Increased cash flow Greater VAT savings Beger nego8a8ng plahorms for interna8onal contracts

21 QUESTIONS