Presenting a live 110-minute teleconference with interactive Q&A European VAT for U.S. Companies: Cost Management and Advanced Strategies Optimizing Your VAT Position, Identifying Billing/Accounting Risks and Opportunities, and Evaluating Costs of Exemptions WEDNESDAY, OCTOBER 2, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Britta Eriksson, President and CEO, Euro VAT Refund , Culver City, Calif. Mark Houtzager, Principal, US VAT , New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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European VAT of U.S. Companies: Cost Management and Advanced Strategies October 2, 2013 Mark Houtzager, US VAT Inc. Daniela Treptow, Euro VAT Refund Inc. mark@us-vat.com daniela.treptow@eurovat.com www.theVATblog.com www.eurovat.com
Today ’ s Program Introduction Slide 8 – Slide 14 [Mark Houtzager] VAT and Online Services Slide 15 – Slide 18 [Daniela Treptow] Selling goods online: a VAT guide. Slide 19 – Slide 26 [Daniela Treptow] VAT on organizing events Slide 27 – Slide 32 [Daniela Treptow] Recovery and credit of VAT paid Slide 33 – Slide 36 [Mark Houtzager] Key VAT compliance issues Slide 37 – Slide 49 [Mark Houtzager]
Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS ’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
Mark Houtzager, US VAT, Inc. INTRODUCTION TO VALUE ADDED TAX
The basics of Value Added Tax VAT is a tax on the sales of goods or services, supplied by a • taxable person (business entity), and on imports of goods • Originally “ a simple tax ” , now much more complex Nevertheless, VAT is a favorite revenue tool for many • governments • In the EU: one single jurisdiction, but sometimes differences between EU and local legislation 9
Average VAT Rates (2013) Africa 16% Asia Pac 10% European Union 21% Europe (Non-EU) 18% Latin America 14% Sales taxes GST system Average Global Rate 17% Existing VAT systems Considering VAT system Highest Rate 27% EU VAT system No GST/VAT System or no consumption taxes Future VAT system Future GST system Lowest Rate 5% General consumption taxes 10 10
The basics of Value Added Tax • Principle - VAT at each stage of the sales / supply chain ( “ output tax ” ) Tax on almost all business transactions • • goods services • • inter-company changes licenses, royalties • • Collected from buyer on sales, or collected from importer on imports Vendors charge VAT based on the price of the goods or services. • 11 11
The basics of Value Added Tax Principle - VAT shown on purchase invoices received from • vendors ( “ input tax ” ) - credit for business buyer • Businesses do not normally have an on-going net VAT cost - all VAT paid is normally reclaimable VAT is finally a cost by the end customer, which is a private • person • The net balance shown as due to / reclaimable from the tax authorities is a balance sheet item (credit or debit balance) 12
Product sold to Retailer Distributor $200+$40 VAT Goods sold to distributor for $100+$20 VAT $20 remitted ($40 VAT - $20 credit) Total $20 remitted Government Supplier Retailer Revenue $20 remitted $60 ($60 VAT - $40 credit) Final Product sold to Consumer has the tax burden of $60 VAT consumer consumer for $300+$60 VAT 13
Slide Intentionally Left Blank
Daniela Treptow, Euro VAT Refund Inc. VAT ON ONLINE SERVICES
VAT on services sold Online • Most services sold online qualify as “Electronically Supplied Services” Samples: Online games, software, music, apps, and telecom services • VAT has to be charged when selling to private persons within the EU B2C • VAT does not have to be charged when selling to companies B2B 16
VAT registration for Online sales When selling to private persons in the EU, the US company can register in one EU country From there, charge VAT according to the local VAT rate. Sample: 20% to British customers, 25% to Swedish customers Declare all the VAT in the UK VAT return if registered in the UK 17
VAT return for Online sales of services US company registers for VAT in the UK. Sells to private persons in the EU countries. UK VAT return ₤1,000 VAT 20% ₤200 Sales to the UK: ₤1,000 VAT 19% ₤190 Sales to Germany: ₤1,000 VAT 25% ₤250 Sales to Sweden: ₤640 VAT due the UK tax authorities 18
Daniela Treptow, Euro VAT Refund Inc. SELLING GOODS ONLINE: A VAT GUIDE
VAT on goods sold and shipped from the US • Goods and products sold from website, shipped from a US warehouse to customers world-wide • Customer has to pay duty and local VAT to customs • Duty is always a cost • VAT is refundable if the customer is a company • VAT is not refundable if the customer is a private person 20
VAT on import of goods VAT will be assessed by customs on imports to the “ VAT countries ” Sample: Import to the UK Value of shipment $1,000 Duty 3% 30 (Pay to UK customs) Value for VAT $1,030 20% UK VAT*: $206 (Pay to UK customs) * VAT is usually refundable to companies - not refundable to private persons 21
To keep in mind when selling from US warehouse State on website that the customer is responsible for the duty and local sales tax/VAT Make sure to prepare shipping documents so that the freight forwarder does not send the invoice for duty and VAT to the US seller/vendor Or, absorb the duty and local taxes/VAT, but add into the price Note the difference when selling to a company versus private person 22
VAT on goods sold from website shipped from a EU warehouse • Goods and products sold from website, shipped from a EU warehouse i.e. Amazon.uk. • US company has to register for VAT in the UK • US company has to import goods and pay duty and import VAT • Must charge VAT to the customers per the EU laws 23
VAT return for sales of goods from EU warehouse US company registers for VAT in the UK. Sells to private persons in the EU countries through Amazon.uk UK VAT return ₤1,000 VAT 20% ₤200 Sales to the UK: Sales private persons (other EU countries): ₤1,000 VAT 20% ₤200 Sales to VAT registered companies (other EU countries): ₤1,000 VAT 0% 0 VAT 20% ₤300 Less Import VAT paid to customs ₤100 VAT due the UK tax authorities VAT is not a cost to the US merchant. It is a cost to private persons within the EU 24
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