SESSION C ASSESSING THE SPECIFIC RULE 17-18 April 2014 Tokyo, - - PowerPoint PPT Presentation

SESSION C

ASSESSING THE SPECIFIC RULE

17-18 April 2014 Tokyo, Japan Christophe Waerzeggers, IMF

Context = B2B cross-border supplies of services and intangibles

As a rule, and irrespective of their place of taxation, these supplies should not raise net VAT revenue in any jurisdiction involved Determining their place of “taxation” therefore a misnomer, instead focus is on neutrality

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Country A and/or Country B may tax, but whoever taxes will have to give tax back

 Guidelines: no tax in Country A (exempt with credit, zero

rate); OR tax in Country B (reverse charge, or A to register);

OR no tax (no reverse charge if B entitled to full ITCs)

 In B2B context place of taxation therefore effectively

means place of tax credit/refund

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Country A Country B

A B

Guidelines prescribe outcomes or results, not legal designs or methods

 Destination principle ∴ taxation in country of consumption, determined by customer location (= Main Rule), unless this “doesn’t lead to an appropriate result” (= Specific Rule(s))

IMF drafts typically follow ‘New World’ not EU model, using iterative instead of categorization approach Not all VATs have direct refund mechanisms or liberal registration policies, thus rely on cross-border rules to achieve neutrality Two common “Specific Rules” found outside EU model:

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(1) Presence of a person (C), to whom the services are rendered/delivered, in the jurisdiction of the supplier

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Country A Country B

A C B ？

(2) Place of (effective) use or enjoyment and/or consumption of services (e.g., TV broadcasting)

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Country A Country B

Broadcast Co

Individual Pay TV subscribers

(2) Problems with place of (effective) use or enjoyment (e.g., advertising)

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Country A Country B

Marketing Co Global Co Local media Local Licensee

Viewers/Readers/Listeners

？