vat quick fixes: are you ready for 2020?...(1) 0% vat (2) 23% vat 19% vat 0% vat a b c current...

VAT Quick Fixes: Are you ready for 2020? KPMG GLOBAL INDIRECT TAX SERVICES WEBINAR—

Tuesday, 26 November 2019 at 13.00 GMT

2© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

David Duffy Peter Schalk Mathijs HorsthuisPartner, KPMG in Ireland Partner, KPMG in Germany Director, KPMG in the [email protected] [email protected] Netherlands

[email protected]

With you today

mailto:[email protected]




The Quick Fixes on a Page1. Call off stock simplification

Currently: Patch work of domestic simplifications

Quick Fix: Uniform simplification for call off stocks

2. Chain transactions

Currently: No clear rule as to which supply in the chain the cross border transport should be ascribed toQuick Fix: Specific rule to determine the cross-border supply based on who transports the goods and where they are VAT registered

3. Additional conditions for exempting IC supply

Currently: Customer’s VAT ID number is a formal condition onlyQuick Fix: Recording and reporting customer’s VAT ID number will be a substantive requirement for exemption (zero-rating) of intra-Community supplies of goods

4. Harmonized proof of transport for IC supplies

Currently: Patch work of local policies on qualifying proof of transportQuick Fix: Defined list of documents for proof of transport (rebuttable presumption in favour of the taxpayer based on 2 independent pieces of evidence)

Status of implementation across the EU


59.1%

9.1%

22.7%

9.1%

What is the status of Domestic legislation implementing the Quick Fixes?

1

2

3

41. Draft bill has been published but not finalised/enacted

Bulgaria Czech Republic Denmark Finland

France Germany Netherlands Poland

Spain Sweden Luxembourg Estonia

Cyprus

2. Bill has been fully finalised/enacted

Belgium Hungary

3. Bill has not yet been published December 2019

but is expected to be published and enacted before 31

Austria Croatia Greece Ireland

4. Bill not yet published and not expected to be enacted before 31 December 2019 (i.e. late implementation expected or reliance will be placed on EU Directive/Regulations)

Italy Romania UK Portugal

*Based on a survey completed by KPMG Member Firms. Information correct as at 31 October 2019


21.7%

0%

39.1%

39.1%

What is the status of any domestic guidance notes regarding the Quick Fixes?

1

3

4

1. Draft domestic guidance notes published but not yet finalised

Austria Finland Netherlands Luxembourg

Estonia

2. Final domestic guidance notes published

3. Domestic guidance notes not yet published but expected to be published

Belgium Greece Ireland Spain

Sweden France Germany Hungary

Cyprus

4. Domestic guidance notes not currently expected

Bulgaria Croatia Czech Republic Denmark

Italy Poland Portugal Romania

UK



4.3%8.7%

87%

Are there differences between Domestic legislation/guidance and EU legislation/guidance?

5.9% 12

3

1. Significant differences identified to date

Germany

2. Minor differences identified to date

Austria Estonia

3. No/negligible differences identified to date

Belgium Bulgaria Czech Republic Denmark

Finland France Hungary Netherlands

Poland Romania Spain Sweden

Italy Portugal Luxembourg Cyprus

Croatia Greece Ireland UK


Call off stock simplification


Call-off stock - without simplification

Supplier Stock ownership NL supplier

Customer

NL VAT IDNL supplier

DE VAT ID#NL supplier

DE VAT IDDE customer

Deemed intra-Community

supply/Acquisition

Domestic supply


Call-off stock – with simplification

Supplier Stock ownership NL supplier

Customer

NL VAT IDNL supplier

DE VAT IDDE customer

Intra-Communitysupply

Intra-Communityacquisition


Call-off stock – Conditions for Simplification

New rulesArticle 17a VAT

Directive

The supplier must not be established or have a fixed establishment in the country of the call-off stock

Report twice in the EC Sales List

12-month deadline to transfer ownership

Consider 12-month deadline for each good/consignment

Customer must be known at time of movement

Both the supplier and the customer must keep detailed records

If conditions are not met at any point, a deemed ICS/ICA will take place

Not optional if all conditions are met


Call-off stock simplification - Examples

Supply from call-off stock to specified customer

Return of goods to Member State of origin

Supply from call-off stock to substitute customer

Exceed 12-month term

Destruction, loss or theft: small losses?

Supply or transport to another EU Member State

Export of goods outside the EU

VAT registration not required VAT registration required

Supply to customer other than specified or substitute


Some common questions and answers

Q1: Is the call-off simplification mandatory?

A1: If all conditions are met (including the “reporting condition”), it is mandatory. So in fact optional.

Q2: Can existing call-off stock simplifications continue to apply?

A2: No, the new call-off stock provision does not allow Member States to apply deviating national rules. Even if those national rules are broader and more flexible.

Q3: How do you apply and monitor the 12-month period in the case of bulk goods, e.g. FIFO, LIFO, other

A3: Period starts at arrival in the warehouse; In case of bulk goods the FIFO method would be most appropriate.

Chain Transactions


What’s the issue?

A-B B-C

(1) 0% VAT

(2) 23% VAT

19% VAT

0% VATA B C

Current problems:

— In the case of chain transactions, intra-Community goods transport can only be attributed to a single link— In practice, there is often discussion about the link to which the goods transport should be attributed if party B arranges the transport— No rules on the attribution of transport included in VAT Directive


Quick Fix for Chain Transactions

New rulesArticle 36a VAT

Directive

The intermediary operator must dispatch and ship the goods, or have them dispatched or shipped on his behalf

The intermediary operator can influence the attribution of goods transport in chain transactions

Intra-Community transport of goods is attributed to the first supply (A-B) if the intermediary operator provides a VAT ID number from an EU Member State other than the country of dispatch

The intra-Community transport of goods is attributed to the second supply (B-C) if the intermediary provides a VAT number from the EU Member State of dispatch


Potential issues

How does the “intermediary operator” communicate its VAT identification number to the seller?

How to determine which supplier in the chain transports the goods?

What evidence must be retained to show which party arranged the transport of the goods?


Interaction with triangulation simplification

A B

CD

Movement of goods

Contractual flow

Local supply

Simplified triangulation

— B arranges transport from NL to DK and is intermediary operator:

— Option 1 – B uses its DE VAT number:‒ Supply A-B: IC supply‒ Supply B-C: local DK supply‒ Supply C-D: local DK supply

Commission: triangulation simplification possible in the triangle A-B-C (despite four party chain)

— Option 2 – B uses its NL VAT number:‒ Supply A-B: local NL supply‒ Supply B-C: IC supply‒ Supply C-D: local DK supply

Commission: simplified triangulation possible in triangle B-C-D

Therefore, broad view on triangulation simplificationVAT Committee almost unanimously agrees: some Member Statesmay disagree

Exemption of intra-Community supplies of goods


Quick Fix for exemption (zero-rating) of intra-Community supplies

Conditions for zero-rating under

Article 138(1) VAT Directive

Existing Condition (Retained): Supply of goods transported/dispatched to another EU Member State for a taxable person or non-taxable legal person acting as such

Additional Condition 1: Customer is registered for VAT in a Member State other than that in which the transport of goods begins and has indicated this number to the Supplier

Additional Condition 2: Supplier correctly records the intra-Community supply of goods in its EC Sales List


Common Questions

What to do if customer is not yet VAT registered but is in the process of doing so?

Can the customer recover the VAT charged where substantive conditions are not met?

What if you make a clerical error in recording the transaction on your EC Sales List?

What about intra-Community movements of own goods?

Proof of Transport


Quick Fix for Proof of Transport

Who is transporting?

Condition for intra-Community transport of goods is presumed to be satisfied where the following conditions are met:

Supplier ora third party for the account of the supplier

Supplier has: (i) Two A documentsor(ii) One A document and

one B document

Customer or a third party for the account of the customer

Supplier is in possession of:

(i) Two A documents and written statement by the customer

Or

(ii) One A document andone B document andwritten statement by the

customer

A documents*• Signed CMR document• Bill of lading• Air freight invoice• Invoice from carrier• Other shipping documents

B documents*• Insurance contract or bank document• Official document issued by public body

(notary)• Receipt from warehouse keeper

Written statement from customer**Confirmation that the goods have been

dispatched or shipped by the customer, with: • Destination of the goods• Date of issue• Name and address of the customer• Etc.

* Non-contradictory proof by two different parties independent of each other, from the supplier and from the customer

** No later than the 10th day of the month following supply


Common questions

Can the Tax Authorities rebut the presumption where the conditions are met?

Is this Quick Fix a “safe harbour” or a minimum requirement for proving the intra-Community transport?

What does it mean that the two documents must be from “independent” parties?

What will happen to existing national rules regarding the proof of transport from 1 January 2020?

Impact on end to end process


VAT end-to-end processMaster data

Customer Master Data

Product Data

SupplierMaster Data

Tax determinationlogic

Validate VAT ID#s during master data

setup & maintenance

AR VAT Logic

Consider AR tax code determination

logic

AP VAT Logic

Consider AP tax code

determination logic (chain

transactions)

rytnr Ee

rdO

Consider use of

VAT ID#

rytnr Ee

rdO

Transaction processing

Audit trail transport

arrangements

SalesProcessing

Consider validation VAT ID# during

sales order process

PurchaseProcessing

Post-transactionaladjustments

Review collection and retention processes of

proof of transport

Credit notesBad debts

call-off stock movements, monitoring conditions and

exception handling

Credit notesAccruals

General Ledger

Output VATG/L Account

VAT ControlG/L Account

Input VATG/L Account

Reporting

VAT returnprocess

Validate VAT ID#s during VAT

reporting process

Reporting call-off stock movements

27© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 27

What to do now?Review existing supply chains and contracts to identify what changes may be requiredWhich foreign VAT registrations are still needed?

Work with your IT and Finance teams on systems and processes changes that may be required

Review existing client master data for accuracy (VAT ID number, proof of transport, etc.) and evaluate process for new client set-up and master data management

Contact your KPMG Indirect Tax contact in your country to discuss how the Quick Fixes mayaffect your business

Questions & Answers

Thank you

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independentfirms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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vat quick fixes: are you ready for 2020?...(1) 0% vat (2) 23% vat 19% vat 0% vat a b c current...

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