PARALLEL SESSION D SERVICES CONNECTED WITH IMMOVABLE PROPERTY INTRODUCTION 17 – 18 April 2014, Tokyo, Japan Sandra Denis, Ministère des finances, Luxembourg
Second meeting of the OECD Global Forum on VAT 17-18 April 2014, Tokyo, Japan • Schedule for this session - Short introduction of the Guidelines to be discussed - A government perspective, Mr Amadou Abdoulaye Badiane - A business perspective, Mr Bertrand Monfort - Rapporteur, Ms Hilde Bervoets - Discussion with the floor - Possible conclusions
Second meeting of the OECD Global Forum on VAT 17-18 April 2014, Tokyo, Japan Aim of this session Look at the implementation of Guideline 3.6: place of taxation for services directly connected with immovable property Case Study Questions - What constitutes a “sufficient connection with immovable property” to justify the application of a specific rule? - How to deal with services that are subcontracted to suppliers which are not located in the jurisdiction of the immovable property ?
Second meeting of the OECD Global Forum on VAT 17-18 April 2014, Tokyo, Japan Guideline 3.5 The taxing rights over internationally traded services or intangibles supplied between businesses may be allocated by reference to a proxy other than customer location as laid down in Guideline 3.2 […] Guideline 3.6 For internationally traded business-to-business supplies of services and intangibles directly connected with immovable property, the taxing rights may be allocated to the jurisdiction where the immovable property is located. § 3.120 When internationally traded services and intangibles are directly connected with immovable property, there may be circumstances where the Main Rule does not lead to an appropriate result under the criteria of Guideline 3.5 and where a specific rule allocating the taxing rights to the jurisdiction where the immovable property is located may be appropriate.
Second meeting of the OECD Global Forum on VAT 17-18 April 2014, Tokyo, Japan § 3.121 This is most likely to be the case when there is a supply of services or intangibles belonging to one of the following categories: - the transfer, sale, lease or the right to use, occupy, enjoy or exploit immovable property; -supplies of services that are physically provided to the immovable property itself, such as constructing, altering and maintaining the immovable property, or - other supplies of services and intangibles that do not fall within the first two categories but where there is a very close, clear and obvious link or association with the immovable property .
Second meeting of the OECD Global Forum on VAT 17-18 April 2014, Tokyo, Japan Customer A Supplier 2 Supplier 3 Supplier 1
Second meeting of the OECD Global Forum on VAT 17-18 April 2014, Tokyo, Japan Case study A company (Customer A) established in Country A wishes to exploit a copper mine there. To prepare this activity, Customer A engages Supplier 1 in Country B to provide evaluation services, i.e. assessment of port and rail infrastructure located in Country A. Customer A also engages Supplier 2 in Country B to provide geology/scientific services about the soil of the mine and to provide a complete report. Customer in Country A finally engages Supplier 3 in Country B to provide legal services concerning legislation on land in Country A (the supply is not connected with any particular property). Transaction 1: Supplier 1, established in Country B, provides an assessment of port and rail infrastructure in Country A. This requires Supplier 1 to undertake a 2-week site visit to Country A – core activities performed by Supplier 1 include video/filming and photographs of infrastructure. Supplier 1 then prepares the report in Country B and delivers the report electronically to Customer A.
Second meeting of the OECD Global Forum on VAT 17-18 April 2014, Tokyo, Japan Transaction 2: In order to provide geologic/services about the soil in Country A, Supplier 2 needs to obtain soil samples. For this purpose Supplier 2 engages Sub-Co 1 in Country A to obtain the samples. Sub-Co 1 sends the samples to Supplier 2 in Country B. Supplier 2 then engages Sub-Co 2 in Country C to undertake laboratory tests of the soil; and Sub-Co 3 in Country C to undertake scientific analysis of the field data. Following results of the laboratory test and scientific analysis Supplier 3 provides a report electronically from Country B to the Customer in Country A. Transaction 3 : Customer in Country A engages Supplier 3 in Country B to provide legal services concerning land situated in Country A (The service does not relate to the transfer, sale, lease or the right to use, to occupy, to enjoy or to exploit immovable property). Supplier 3 never visits the Customer in Country A or the land. Supplier 3 delivers the report electronically from Country B to the Customer in Country A.
Second meeting of the OECD Global Forum on VAT 17-18 April 2014, Tokyo, Japan Questions : How would your country treat those transactions? Would this treatment be different by the application of the VAT/GST Guidelines? Would it be different for Transaction 3 if the legal service would be connected with the sale of a specific piece of land?
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