EU VAT FORUM IMPROVING COOPERATION BETWEEN BUSINESSES AND TAX ADMINISTRATION FOR EU VAT REFUNDS (Electronic Portal and 13th Directive)
Status / Current situation VAT refund efficiency is an important topic and a vital instrument for the whole VAT system The system must ensure both neutrality and fight against fraud Digitization has simplified the process not the substance Work during last VAT FORUM session showed that there was room for improvement of the system through better communication between MSRs and Businesses. Harmonization of processes did not trigger harmonization of administrations technical views as regards their expectations. Perception by businesses of hardening tax administrations is largely motivated by communication issues. Wrong perception leads many businesses not to claim back VAT (especially SMEs).
TARGET : SHARING GOOD PRACTICES IN A VOLUNTARY PROCESS 1. The purpose is not: To challenge the way any Member States manage their VAT refunds To stress wrongdoings by Businesses To discuss the legitimacy of refund claims and of Member States requests To point out any would-be wrong application of the VAT deduction rules 2. The purpose is: To listen to Member States administrations to explain what they see as good practices by Businesses To listen to businesses to explain what they see as good practices by tax administrations To share the good practices so that the whole system provides a better overall performance by aligning Member States and Businesses expectations and perceptions. 25/03/2017 3
POSSIBLE FIELDS OF WORK 1. TECHNICAL REQUIREMENTS 2. LEGAL AND PRACTICAL REQUIREMENTS 3. MEANS AND FORMAT OF COMMUNICATION 4. RIGHT TO APPEAL 5. CORRECTIONS 6. OTHERS The suggested items hereafter are only to sample possible ideas for discussion.
TECHNICAL REQUIREMENTS PROOF OF PAYMENT 1. BACKGROUND 1. Follow-up of previous EU VAT FORUM work 2. Some MSR ( Member State of Refund ) may ask proofs of payment because 1. Tax point takes place when the payment occurs 2. Payment is a proof of the reality of a transaction 2. QUESTIONS: 1. Which MSR is susceptible to ask proofs of payments, for what type of transactions? I.e. should businesses prepare to such questions? 2. Payment by netting: For MSR requiring proofs of payment, in case of payment by netting of debts, what kind of proof may be required/offered?
TECHNICAL REQUIREMENTS NUMBER OF CLAIMS PER YEAR 1. THE PRACTICE IS NOT THE SAME IN ALL MSR 2. WHEN COMMUNICATING, MANY MSR STRESS THAT BUSINESSES SHOULD NOT WAIT UNTIL THE LAST MINUTE TO FILE THEIR CLAIMS 3. HOWEVER WHAT IF A BUSINESS HAS FILED EARLY ITS MAXIMUM NUMBER OF CLAIMS AND LATER DISCOVERS REMAINING INVOICES?
LEGAL AND PRACTICAL REQUIREMENTS FORCE MAJEURE 1. The legal value of the 30th September deadline may be different from one MSR to the other. 2. The delay may be absolute or exceptional conditions may justify a late filing. This is based on local laws. 3. Example: 1. For a late filing (5 days late) on a Tax administration portal due to a mix of computer and organisational issues (which could be evidenced), a refund has been accepted in a MB A and refused in another MS exactly the same situation.
LEGAL AND PRACTICAL REQUIREMENTS CASE LAW / LEGISLATION / GUIDANCE MSR do not always advertize changes of process further to internal regulation modifications Example: Further to a local case law, VAT will no longer be considered as deductible if it does not appear in EUR but such decision is not published. It makes no difference whether the changes are legal or not: it is a fact to be taken into consideration by businesses when reclaiming. Changes triggering new grounds for rejection, or vice-versa, could be published.
MEANS AND FORMAT OF COMMUNICATION EMAILS between MSR and Businesses 1. ISSUE: LOST EMAILS BOTH WAYS 1. Consequences: Businesses are deemed not to have answered the questions, MSR rejects the VAT refund. 2. Business or MSR cannot provide a negative proof that it did not receive an email 2. QUESTIONS 1. Is the MSR log list that emails have not been rejected by the destination server sufficient as a proof of reception by a business? 2. Should the protection for electronic communication be lower than for standard registered paper mails? 3. DISCUSSION 1. What is usually acceptable in the various MSR? Compare the processes in place in such situations. What is expected from Businesses? 4. POSSIBLE IDEAS TO DEVELOP 1. Should all mails be automatically sent twice? 2. Should electronic registered emails be used?
MEANS AND FORMAT OF COMMUNICATION QUESTIONS & ANSWERS (1) 1. Beyond the language issue, MSR raise questions according to their own legal, fiscal, environment and training background. 2. Similarly businesses tend to interpret the questions based on their local usual way of communicating with their own administration. 3. This sometimes leads to misunderstandings.
MEANS AND FORMAT OF COMMUNICATION QUESTIONS & ANSWERS (2) 1. Should MSR explain how they want their answers to be responded? 2. Examples: 1. Should all questions be formally answered even if the same answer is made twice? Ie would a formal absence of answer trigger a rejection? MSR raises a question regarding a contractual arrangement. For instance the Business does not answer the question because it considers having responded in another question. The refund is rejected. 2. How many times will MSR ask questions and clarifications? Will Businesses be given only one chance to provide an answer or will the MSR ask again if not satisfied? 3. Would an answer deemed to be unclear be considered as not having been responded? 4. Request for a proof of the reality of the transaction (ex hotel bills). What is expected? 5. Etc.
MEANS AND FORMAT OF COMMUNICATION QUESTIONS & ANSWERS (3) 1. Should MSR explain in a few words why they raise a specific question? 2. Examples: 1. MSR raises asks a proof of payment. Because proofs of payment are not required in its own country the Business provides a vague print of a bank screen. The refund is rejected because the Business did not get the importance of the question. 2. Full questions, half answers. For instance: 1. Question: «Please explain the transaction flow and who is responsible for transport» (hidden question is whether it is a chain transaction) 2. Answer : «A sells to B and the transport cost is included in the price». The answer is correct from the business perspective but does not answer the concern of the MSR
RIGHT TO APPEAL ADMINISTRATIVE RECOURSE 1. ADMINISTRATIVE RECOURSE 1. Member States have very different ways to manage a claim. Administrative appeal is not always an option. 2. There are very practical questions on this despite significant efforts of communication by many Member States 2. MEDIATION 1. Can the Business turn to an administrative Mediator/Conciliator? It may not be a real appeal strictly speaking, ie his/her decision may not be susceptible of any recourse.
RIGHT TO APPEAL JUDICIAL 1. Having the right to appeal a negative decision is granted by VAT law 2. Rejections notices usually mention that the Business can appeal the decision within a certain deadline and to a certain Court. 3. Certain mistakes or absence of information can be regularized at the Courts level, others not. 1. What can be regularized is different from one country to the other. Example: Is it possible to provide an additional explanation or additional means of proof to the Court if the question by the authorities has not been answered at all? 2. Sometimes Businesses appeal without any chance of success for procedural reasons 4. More information about the local appeal processes could be very positive: it could both stimulate Businesses in strengthening their Q&A process and avoid unnecessary litigations.
CORRECTIONS 1. When a refund claim is rejected 1. Example 1: Wrong application of VAT 1. In case of a wrong application of local VAT (eg Article 44 should have been applied), can the client oblige the supplier to correct the invoice, during what delay (statute of limitation), using which procedure? 2. The answer to this question varies a lot from one country to the other triggering wrong expectations from businesses and often serious disputes between clients and suppliers. 2. Example 2: Business claiming VAT back should have been VAT identified 1. The VAT identification triggers the obligation to correct sales invoices and pay local VAT 2. What is the process to make sure that the client will be able to recover the VAT? That no statute of limitation will apply?
OTHERS THANK YOU