EU VAT Reform proposals 2017 A view from business perspective Johan Van der Paal, Deloitte Belgium VLEVA seminar 21 November 2017
Agenda Business involvement on the Definitive VAT regime The four quick fixes Cornerstones of the definitive VAT regime One Stop Shop mechanism as future of VAT reporting? Concluding remarks 2017 Deloitte Belgium 2
Business involvement in EU VAT policy Definitive VAT regime experience VAT Expert Group EU VAT Forum EU Commission Impact Assessment & Stakeholder Consultation 2017 Deloitte Belgium 3
The EU VAT regime Current transitional regime for cross border goods VAT taxable IC acquisition VAT exempt IC supply IT DE 0 DE VAT + / - IT VAT Supplier Customer Physical flow of the goods Competent VAT authority to collect VAT 2017 Deloitte Belgium 4
The four quick fixes Overview 1 2 3 4 EU VAT number requirement Simplification proof of transport Simplification for chain transactions Call-off stock arrangements 2017 Deloitte Belgium 5
The four quick fixes Simplification for chain transactions between CTPs Default: IC transport is allocated to the supply made by the intermediate operator to his customer IC transport is allocated to the supply made by the provider to the intermediary operator The intermediary operator communicates the name of the MS of arrival to the provider; The intermediary operator is identified for VAT purposes in a MS other than the one in which the dispatch or transport of the goods begins IT Intra-Community Supply FR Local supply DE CTP supplier CTP customer Non-CTP supplier Non-CTP customer Physical flow of the goods 2017 Deloitte Belgium 6 Invoice flow
The four quick fixes Simplification for proof of transport between CTPs Quick fix provides legal certainty on evidence requirements, but limited to CTPs Simplified proof of transport Rebuttable presumption EXW FCA Transport or dispatch by or on behalf of the CTP supplier Transport or dispatch by or on behalf of the CTP customer 2 non-contradictory documents attesting to the transport Supplier s possession : Written statement by the acquirer 2 non-contradictory documents attesting the transport Transport documents; receipt acknowledgement; official documents issued by public authority; receipt confirming storage; certificate by professional body; contract; correspondence; VAT return 2017 Deloitte Belgium 7
The cornerstones of the Definitive VAT Regime Overview Definitive VAT regime OSS CTP QF QF QF QF 2017 Deloitte Belgium 8
The cornerstones of the Definitive VAT regime Certified Taxable Person (CTP) 1. Any taxable person Scope 2. Place of business / fixed establishment / permanent address or usual residence within EU 3. In course of economic activity carry out, or intends to carry out, intra-union trade Exclusions 1. Non-EU established without fixed establishment in EU 2. Subject to small business exemption regime or flat farmers regime 3. Fully exempt taxable persons Criteria 1. The absence of prior infringements on taxation and customs rules and serious criminal offences; 2. Demonstration of a high level of control; and 3. Evidence of financial solvency (or production of financial guarantees) 2017 Deloitte Belgium 9
The cornerstones of the Definitive VAT regime Certified Taxable Person - Benefits 1 st phase 2 nd phase Before the implementation of the definitive VAT regime Simplified proof of intra-community transport by a CTP Fixed rules on allocation of transport in chain transactions for supplies between CTPs Possibility to operate simplified cross border call off stock arrangements between CTPs Definitive regime Taxation at destination principle VAT is payable by the supplier carrying out a cross border supply of goods the supplier would charge VAT towards its customer, entailing pre-financing of VAT by one of the parties CTP customer could apply VAT in the country of destination through reverse charge, eliminating the cash flow impact 2017 Deloitte Belgium 10
The cornerstones of the Definitive VAT Regime Definitive VAT regime standard approach with taxation at destination Rate? Intra-Union supply + IT VAT on invoice IT DE Collection IT VAT Payment via OSS Supplier CTP customer Non-CTP customer Physical flow of the goods Competent VAT authority to collect VAT VAT collection financial flow 2017 Deloitte Belgium 11
The cornerstones of the Definitive VAT Regime Definitive VAT regime CTP flow with reverse charge VAT Intra-Union supply No VAT on invoice IT DE Rate? No VAT Simplified reporting + / - IT VAT Supplier CTP customer Non-CTP customer Physical flow of the goods Competent VAT authority to collect VAT VAT collection financial flow 2017 Deloitte Belgium 12
The cornerstones of the Definitive VAT Regime Definitive VAT regime building new concepts into broader supply chain Communicates country of destination IT Intra-Union supply Local supply FR DE + / - IT VAT OSS reporting in/out No DE VAT Simplified reporting + / - IT VAT Domestic RC Supplier CTP customer Non-CTP customer Physical flow of the goods Competent VAT authority to collect VAT VAT collection financial flow Invoicing flow 2017 Deloitte Belgium 13
The cornerstones of the Definitive VAT Regime One Stop Shop Scheme 3.0 transforming VAT reporting in EU? Single registration scheme for declaration, payment and deduction of tax No detailed discussion 2018 detailed technical proposals Scope of the OSS as described in working papers: 1 2 3 4 All cross border supplies of goods to non-ctps and non-taxable legal persons Cross border purchases made by CTPs not established in the Member State where tax is due, meaning that the reverse charge VAT would be declared under the OSS Potentially, cross border purchases made by non-ctps not established in the Member State of destination Transfer of own goods located in the EU carried out by a supplier not established in the Member State of destination 2017 Deloitte Belgium 14
Concluding remarks In the short term Clear and reliable set of rules for the proof of cross border transport And for the allocation of such transport in a chain of supplies Valid VIES number and ESL as substantive condition requires master data & process check Definitive VAT regime Transactions with non CTP Different VAT regime for same transaction process change Rate checks Uncertainty and local interpretations remain Signficant cash flow impacts Most favoured treatment for transactions with CTPs For businesses sourcing significant volumes of goods from abroad As it allows them to eliminate the VAT cash flow effect OSS reporting as step towards single VAT return? 2017 Deloitte Belgium 15
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