Olivier Hody, PartnerJohan Van Der Paal, PartnerBruno Roelands, Senior DirectorKaren Truyers, Senior ManagerSandeep Shinde, Manager

Pan European VAT updateDeloitte Global Tax Center (Europe)27 May 2019

2

• Introduction

• Global VAT developments

• EU VAT developments

− European Council & Commission

− CJEU

• VAT compliance 2.0

− MTD, SAF-T, real time reporting and split payment

• Pan EU VAT compliance update

− VAT rates

− Import VAT

− E-filing, upload file, XML schema, due dates

− Local reverse charge

− New obligations relating to e-commerce

− E-invoicing via government platform

• Brexit

• Conclusion

Agenda

3

GlobalVAT developments

4

2016 20192018

Gulf Cooperation Council states (GCC)

VAT implementation progress timeline

2017 20212020

*Sep 2019Oman

2021*Kuwait

Jan 2018UAE & KSAVAT implementation

Jan 2019BahrainVAT implementation

Nov 2017USA and KSA commit

to go-live by Jan 2018

June 2016GCC VAT Agreement signed by all six Member States

Jan 2020*Qatar

* Still to be officially confirmed

5

Global VAT developments

Other updates

o China

Reduction of the VAT rates on 1 April 2019:

o 16%/10% has been reduced to 13%/9%

o 6% rate remained unchanged

Angola

VAT introduction:

o Wave 1: large taxpayers, 1 July 2019

o Wave 2: remaining taxpayers, 1 January 2021

Russia and South Africa

• Change in the rules for VAT registration requirements for foreign taxpayers providing B2B electronic services to local companies

o Russia : Since January 2019

o South Africa : Since April 2019

6

EUVAT developments

European Council &

Commission

8

Study on domestic and cross border intra-EU VAT refunds

European Commission

8th Directive refund claim

• Average value / claim: EUR 4.700

• Longer delays in

Greece Romania Italy

• Additional queries percentage: 9% but significantly higher in

Greece Romania Malta

• Approval rate: 94% (97% with VAT agent) with the lowest approval rate Greece Croatia Malta

• Main reasons for rejection are:

1. Suppliers incorrectly charging VAT

2. Non-refundable VAT

3. Lack of correct supporting document

• In case of dispute, taxpayers win in 57% of the case and tax authorities 43%

Taxpayers

57%

Tax authorities

43%

9

Study on domestic and cross border intra-EU VAT refunds

European Commission

VAT reimbursements via VAT return

• Average value / claim: EUR 27.000

• Longer delays in

Greece Romania Italy

• Average delay before effective reimbursement: 16,4 weeks with Italy at 62,6 weeks

• Approval rate: 99,5%

• Main reasons for rejection are:

1. Invoice discrepancies

2. VAT incorrectly charged by the supplier

3. Lack of documentary evidence

4. Lack of business purpose of the expenditure

10

Study on domestic and cross border intra-EU VAT refundsEuropean Commission

Recommendations:

• Increasing adherence for late interest payments

• Improved follow-up processes within national tax administration

• Guidelines on VAT reimbursement claimsfrequency

• Improved additional information request procedures (including IT solutions)

• Awareness of Member State of refund rules and requirements (including IT solutions)

• Verification of pro-rata calculations (including guidelines)

• Recovery of incorrectly charged VAT

• Better targeted request for additional information

• Use of established business languages in the VAT refund process

8th Directive refund claims VAT reimbursements via VAT return

11

Simplification for transport allocation in chain supplies

Simplification proof of transport

Call of stock arrangements

EU VAT number requirement for Intracommunity

supplies

Quick fixes 2020

The Quick fixes

12

Harmonised call-off stock arrangements

Quick fixes

Physical flow of the goods

DE

IT

StockSupplier Customer

Single VAT exempt IC supply

VAT taxable

IC acquisition• Upon dispatch : record keeping

required, no tax reporting

• Upon sale : reporting in VAT

return and ESL

• Maximum 12 month period

13

Harmonised call-off stock arrangements - conditions

Quick fixes

In order to use this simplification for call-off stock arrangements, certain conditions have to be fulfilled:

• Both the supplier and the intended acquirer are taxable persons;

• The supplier has not established his business nor does he have a fixed establishment in the Member State to which the goods are dispatched or transported;

• The supplier records the dispatch/transport of the goods to the stock in a register held by him;

• The supplier mentions the identity and VAT identification number of the intended acquirer in his recapitulative statement (only that, not the value of the goods) submitted for the period of the transport of the goods;

• The intended acquirer is identified for VAT purposes in the Member State to which goods are transferred;

• The acquirer’s identity and VAT identification number are known by the supplier at the time when dispatch or transport begins;

• The goods are transported from one Member State to another, excluding imports, exports and supplies within a single Member State from the simplification;

• The goods are supplied after arrival at a later stage.

14

Simplification for chain transactions - situation

Quick fixes

Chain transactions are now defined in the VAT Directive as situation where :

• Goods are supplied successively. Therefore, it is necessary that at least three persons are involved in the chain transaction, but this can be more;

• Goods are dispatched or transported from one MS to another MS. As a result, chain transactions involving imports and exports, or involving only supplies within the territory of a Member State, are excluded from the provision;

• Goods are transported or dispatched directly from the first supplier to the last customer in the chain.

Issue for VAT: what is the supply to which the transport or dispatch of the goods is to be ascribed, that is to say, what supply is the intra-Community supply ?

15

Simplification for chain transactions - graphic

Quick fixes

Logic for attribution of cross border transport to single supply within a transaction chain if transport performed by intermediate supplier

DE

IT

FR

Supplier Customer Physical flow of the goods Invoice flow

Intra-Community

or local supply?

Intra-Community

or local supply?

Intermediate supplier

16

Simplification for chain transactions – default situation

Quick fixes

Default: IC transport is allocated to the supply made by the intermediate operator to his customer

DE

IT

FR

ICS

Local supply

Supplier Customer Physical flow of the goods Invoice flow

Intermediate supplier

17

Simplification for chain transactions - exception

Quick fixes

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 provides to the supplier his VAT identification umber in a MS other than the one in which the dispatch or transport of the goods begins

DE

IT

FR

ICS

Local supply

Supplier Customer Physical flow of the goods Invoice flow

Intermediate supplier

18

Simplification proof of transport

Quick fixes

Simplified proof of transport – Rebuttable presumption

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

o Transport documents

o Receipt acknowledgement

o Official documents issued by public authority

o Receipt confirming storage

o Certificate by professional body

o Contract

o Correspondence

o VAT return

EXW

FCA

Quick fix providing legal certainty on evidence requirements

19

VAT identification number as substantive condition for an exempt intra-Community supply

Quick fixes

Substantive conditions

• Evidence of cross border transportation of the goods

• Capacity of the buyer as a taxable person

• Taxed IC acquisition

Tax authorities controls

• Valid EU identification number of the buyer

• ESL reporting of the supplies towards that number

CJEU : If this condition is not met

• Fines or administrative sanctions can be imposed by MS

• But the application of the exemption cannot be refused

New legislation includes as substantive condition

• A valid VAT identification number of the acquirer in a MS other than that in which transport of the goods begins

And also as substantive condition :

• The correct filing of the European Sales Listing by the supplier

• Distinction will be made betweenexcusable and non-excusable errors

When a valid VAT number is not available

• Refusal of exemptions

• VAT of the Member State of departure of the goods should be charged

• This VAT can be recovered bypurchaser via refund procedure

20

E-commerce VAT changes

Current status of 2021 changes

Current status

• VAT E-commerce main legislation adopted in Dec 2017 – marketplace deemed reseller provisions added in Council negotiations

• Additional Directive change adopted in March 2019 to provide clarifications needed to implement deemed reseller provisions

• Implementing Regulation providing precise rules on marketplace obligations and different OSS regimes adopted in March 2019

Next steps

• Commission’s Explanatory Notes– for guidance only, not law – expected end of 2019

• IT system changes both on customs and VAT side – EU and national level – testing in 2020

• MS and industry consultations

• Implementation on 1 January 2021

Communication on the future of VAT

December 2011

Digital Single Market Strategy

May 2015

December 2016: e-Commerce

proposals

By end of 2019:

Explanatory Notes

VAT action planApril 2016

1 Jan 2021: E-Commerce

entry into force

December 2017: e-Commerce

proposals adopted

December 2018: Implementing Regulation & VAT Directive

proposals

March 2019: further VAT

Directive changes and IR

adopted

CJEU cases

22

C-647/17 – Srf Konsulterna – 13 March 2019

Place of supply

Facts

Decision of the CJEU

• The five-day course on accountancy is taxable where the event takes place (following article 53 of the VAT Directive)

• The fact that the courses were subject to advance registration and payment is irrelevant.

“admission to event or B2B service?

Upfront

registration

Upfront

payment

5 days educational course for taxpayers (B2B)

23

C 275/18 – Vinš - 28 March 2019

Export:

Facts

Decision of the CJEU

CJEU applies the substance over form principle

If it is clear that the goods actually leave the EU territory the exemption cannot be denied only because the export document is missing.

CZ Authorities denied the VAT exemption for export because there is no export document

Post documents as proof of export

No export document

24

C-691/17 – PORR Építési Kft. – 11 April 2019

VAT deduction and VAT refund:

Facts

Decision of the CJEU

• VAT authorities can refuse the right to deduct VAT on an invoice that incorrectly applies VAT instead of reverse charge.

• VAT authorities are not obliged to examine prior whether the supplier is able to correct the invoice and reimburse the VAT to the recipient.

• The VAT authorities are in principle also not obliged to reimburse the VAT to the recipient of the credit note unless the reimbursement of the VAT by the supplier is impossible or excessively difficult (f.e. suppliers’ insolvency)

(same conclusion in the Farkas case)

CustomerVWFS

The input VAT deduction is rejected by the VAT authorities

Invoice for construction work incorrectly with HU VAT

Credit note with HU VAT

25

VAT refund claim

in France

‘Sea Chefs’ Authorities asked additional information

(DE) ‘Sea Chefs’ failed to provide it

(within 1 month)

C-133/18 – Sea Chefs Cruise Services – 02 May 2019

VAT deduction and VAT refund:

Facts

Sea Chefs’ refund claim was rejected

Decision of the CJEU

• The time limit of one month to respond to a request for additional information is not an expiry due date

• A taxable person may regularize its VAT refund application by presenting additional evidence during an appeal procedure (pursuant to Article 23 of Directive 2008/9)

26

VAT Compliance 2.O(MTD, SAF-T, real time reporting

and split payment updates)

Making Tax Digital

(MTDfV)

28

Roadmap

Making Tax Digital (MTDfV)

Impact assessment and challenges in the VAT compliance process in terms of data quality, review efficiency and control and requirement to comply with Making Tax Digital for VAT

Jan

2019

July2019

Oct 2019 Apr

2020

Apr2019

Start of Digital Linking requirements

Start of digital submission requirement for non-deferred taxpayers

First Digital Submission period for taxpayers: M (April 2019) and Q (Apr-June 2019 quarter)

May2019

Start of Digital submission requirement for deferred taxpayers

2015 2018

MTD Pilot launched MTD Pilot extended MTD first announcement

SAF-T

30

SAF-T

Poland

JPK_VDEK SAF-T

Scope: All taxpayers registered for VAT in Poland

- Large taxpayers (Jan 2020)

- Remaining taxpayers (July 2020)

Abolition of the traditional returns:

VAT-7, VAT-7K, VAT-27, VAT-ZZ, VAT-ZT, VAT-ZD

ESPL return shall remain Other considerations:

- Frequency: monthly

- Data requirements: definitive data fields are not yet available

- Penalties: PLN 500 each for non-compliance, errors and irregularities

Introduction of the extended SAF-T obligation (JPK_VDEK)

31

JPK_VAT JPK_VDEK

SAF-T

Poland

Comparison reporting data: current JPK_VAT and VDEK SAF-T obligation

32

January 2020 (wave 1)Version 1: All postings, incl. G/L, customers, suppliers and VAT account; A/R (balances, customer master data, etc.); A/P (balances, customer master data, etc.)

TBC (Wave 3)Version 3: Movement during period of inventories and non-current assets, etc.

TBC (Wave 2)Version 2: Detailed invoice information and source documents, etc.

SAF-T

Norway

33

SAF-T

Hungary

• Proposal to introduce SAF-T obligation as from January 2020

• In addition to the current real time reporting obligation

• Further details are not yet available

Real time reporting

35

Real time reporting

Recent changes

Hungary

• Technical updates:

o New upload file XSD version 1.1 is applicable as from 4 June 2019 (previously: 2 May 2019)

o Version 2.0 is also expected from January 2020

Split Payment

37

Split Payment

Poland

Scope

Bank Account

In practice

Mandatory split payment

1 Sep 2019*

• Mandatory, for all VAT registered taxpayers (including non-established) where:

o B2B transactions above PLN 15 000 ando Transaction relates to *certain goods or

services - subject to reverse charge (as listed in appendix 15 of the Polish VAT law)

• “Special VAT bank account” to opened with Polish banks only

• Taxpayers would have limited rights to this bank account

• Bank charges would be reimbursed by the tax authorities - upon taxpayer request, on a quarterly basis

• Invoicing requirements: should include the wording 'split payment mechanism’

• Penalties: 100% of the VAT amount in question/per invoice and also criminal offence (personal liability) in certain circumstances foreseen

Abolition of the domestic

reverse charge

Cash-flow

impact?

* Still to be adopted by Parliament

38

Pan EU VAT compliance update

VAT rate updates

40

VAT rates

Expected changes

Croatia

• The standard VAT rate to be decreased from 25% to 24% from 1 January 2020 (subject to further approval from the Parliament)

Greece

• Special VAT status abolishment for the remaining 5 islands (Lesbos, Chios, Samos, Kos, and Leros) is further postponed from January 2019 to July 2019

Italy

• The VAT rates applicable in 2018 (i.e. standard rate 22%, reduced rate 10%) continues to apply in 2019, despite initial plans to increase the VAT rates end of 2018

• Subject to further approval from the Parliament:

o Reduced VAT rate may increase from 10% to 13% on 1 January 2020;

o Standard VAT rate: Increase from 22% to 25.2% on 1 January 2020 and to 26.5% on 1 January 2021

Lithuania

• Proposal to decrease the standard VAT rate from 21% to 18% from January 2020 has been rejected by the government on 5 May 2019

Likely to be postponed to 2020

General VAT compliance

updates

42

General VAT compliance updates

Import VAT

C79 SAD

United Kingdom and Ireland

Import VAT reverse charge

post-Brexit

43

General VAT compliance updates

E-filing / upload files / XML schema / due dates

EstoniaChange in the mandatory e-filing process: 1 May 2019

Czech RepublicVATR: April 2019 LSPL: Sep 2019

HungaryReal time reporting XSD schema version 1.1: 4 June 2019

Switzerland(Proposal) Introduction of mandatory e-filing: 1 January 2020

FinlandNew VAT return form: January 2020

Belgium, Demark, Norway, Sweden, SpainSummer extensions

44

Local reverse charge

General VAT compliance updates

United Kingdom

• Introduction of the local reverse charge on supplies in the construction industry

• Go-live date: Oct 2019

Lithuania

• Introduction of local reverse charge on IT equipments (tablets, laptops, smartphones,…)

• Go-live date: August 2019

Poland

• Abolition of the local reverse charge on certain goods and services

(as listed in the Appendix 15 of the Polish VAT Act)

• Approximately 150+ goods and services in scope:

(IT equipments such as tablets, laptops, smartphones; building and construction services,

steel and metal products,…)

• Cash flow impact, as these transactions would now be subject to the mandatory split

payment regime

45

General VAT compliance updates

New obligations related to e-commerce

Italy

• Scope: Online marketplaces who facilitate distance sales of goods in Italy

• Obligation : Provision of informative (non-VAT related) information

• Filing frequency : Quarterly, July 2019

• Contents of the obligation : data for each supplier:

o The name, address and email account

o The total number of units sold in Italy

o The total amount of sales prices or the average selling price of the units sold in Italy

Bulgaria

• Scope: Certain online retailers who perform distance sales of goods in Bulgaria

• Obligation : register in a specific public database maintained by the government

• Due date: 29 June 2019

46

General VAT compliance updates

E-invoicing

Link

47

General VAT compliance updates

E-invoicing - recent updates

SwedenB2G 1 April 2019

CroatiaB2G 1 July 2019

NorwayB2G 1 April 2019 (at least 100 000 NOK)

The NetherlandsB2G (Wave 1: 1 January 2017, Wave 2: 18 April 2019)

PolandB2G (Wave 1: 18 April 2019 – at least EUR 30 000, Wave 2: 1 August 2019)

Ireland:B2G (Wave 1: 18 April 2019, Wave 2: 1 August 2019)

Portugal:B2G (Wave 1: 18 April 2019, Wave 2: 1 August 2019)

Greece:B2G (Wave 1: 18 April 2019, Wave 2: 1 August 2019)

48

Brexit

49

Brexit timeline

Latest political developments

Conclusion

51

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