SESSION E DESIGN FRAMEWORK FOR FUTURE GUIDELINES ON B2C SUPPLIES OF SERVICES AND INTANGIBLES 17-18 April 2014 Tokyo, Japan Pia Michelsen, European Commission
• Tax policy perspective • Ms Pia Michelsen, Policy Officer, VAT Unit, Taxation and Customs Union, EU Commission 2
Introduction • Case study • Associated challenges • Possible solutions 3
EU VAT system • The supply of services is subject to VAT if the place of supply is within the EU • Reform gradually implemented between 2010 and 2015 • Distinction now made between B2B and B2C supplies • Possible shift in liability when supplied B2B 4
EU VAT system • After reform in 2010 Service Proxy Taxation B2B in general* Customer location Subject to EU VAT if customer is established in the EU. Possible shift of liability (reverse charge). B2C in general* Supplier location Subject to EU VAT if supplier is established within the EU 5
EU VAT system • After reform in 2010 Service Proxy Taxation Immovable property Location of immovable Subject to EU VAT if property is located property within the EU Restaurant and catering Place of performance Subject to EU VAT if physically carried out within the EU. On board restaurant and catering Place of departure Subject to EU VAT if place of departure of transport is within the EU. Passenger transport Place of performance Subject to EU VAT if and to the extent transport is within the EU. Short-term hiring of means of Place of performance Subject to EU VAT if put at disposal transport* within the EU. 6
EU VAT system • After reform in 2010 Service Proxy Taxation B2B admission to events Place of performance Subject to EU VAT if event actually takes place within the EU. B2C cultural, artistic, sporting, Place of performance Subject to EU VAT if activities actually scientific, educational, take place within the EU. entertainment or similar activities B2C goods transport Place of performance Subject to EU VAT if and to the extent transport is within the EU. B2C goods transport within EU Place of departure Subject to EU VAT in all circumstances. B2C long-term hiring of means of Customer residence Subject to EU VAT if customer is transport* resident within the EU. 7
EU VAT system • After reform in 2010 Service Proxy Taxation B2C telecom, broadcasting and Customer residence Subject to EU VAT if customer is electronic services* resident within the EU. Payment facilitated through the MOSS (as from 2015). B2C intermediation ( agents ) Supplier location/location of Subject to EU VAT if the underlying immovable property/place of supply is taxable within the EU. performance/customer residence Certain B2C services ( legal Customer residence Not subject to EU VAT under the advice, advice of consultants, general B2C rule when provided by an banking, financial and insurance EU-based supplier if customer is transactions etc. ) supplied to resident outside the EU. place outside the EU* 8
EU VAT system • After reform in 2010 Service Proxy Taxation Certain B2B and B2C services Place of effective use and Although subject to EU VAT, possible (those marked by *) the place of enjoyment to adjust if service effectively used and supply of which is within the EU enjoyed outside the EU. If option used, the service will not be taxed. Certain B2B and B2C services Place of effective use and Although not subject to EU VAT, (those marked by *) the place of enjoyment possible to adjust if service effectively supply of which is outside the EU used and enjoyed within the EU. If option used, the service will be taxed. 9
Case study – seen from the EU Service Proxy Taxing rights ① Hotel Place of performance Country B (also taxable for non-residents) (B2B and B2C) ② Car repair Place of performance Country B (also taxable for non-residents) (B2C) ③ Restaurant Place of performance Country B (also taxable for non-residents) (B2B and B2C) ④ Hotel Wi-Fi Customer residence or hotel Country B (also taxable for non-residents) (B2B and B2C) ⑤ Download of digital movie Customer residence Country A （ not taxable for non-residents ） (B2B and B2C) ⑥ International phone call Customer residence Country A （ not taxable for non-residents ） (B2B and B2C) 10
Case study – comments • Impact of reform – ① : no change – ② : change for B2B supplies only – ③ : change but not substantial – ④ + ⑤ + ⑥ : substantial changes which will see all such B2C supplies taxed at destination as from 2015 11
Case study – comments • 2015 challenges – determining whether B2B or B2C • relevant for who accounts for the VAT • mainly based on VAT number • with telecom, broadcasting and electronic services, supplier can treat as B2C if no VAT number – establishing who is the supplier • particular challenge when long supply chain • presumption put in place to tax as close as possible to customer 12
Case study – comments • 2015 challenges – identifying where customer resides • specific presumptions to cover certain situations • otherwise need for 2 items of non-contradictory evidence – accounting for the tax • can be done through single electronic portal (MOSS) • guidance given on its working 13
Case study – comments • Customer residence ④ when together with hotel accommodation, regarded supplied at location of hotel ⑤ if SIM card used for download, then presumed resident in country of issue otherwise presumed resident in country identified on the basis of 2 items of non- contradictory evidence ⑥ presumed resident in country of issue of SIM card 14
• Associated challenges – Most (other) B2C services are taxable at the place of the supplier – Technology increasing allows some supplies to be made at a distance – Main challenge is to ensure taxation of those supplies at the place of consumption but also for VAT to be collected 15
• Possible solutions – Need for common approaches at international level – Customer residence seen as solution where supply is made at a distance – Solution already adopted by the EU for telecom, broadcasting and electronic services – Need for facilitation measures (for business) and international cooperation (between tax administrations) 16
• Possible solutions – Common approaches needed • where to tax: at customer residence or … • when to use that as proxy: particularly relevant for remote supplies • how best to facilitate collection: to MOSS or not to MOSS • improving cooperation 17
• Possible solutions – MOSS as introduced by the EU • will be available for both EU and non-EU suppliers • provides a single point of contact • standardises registration, reporting, payment and record keeping • leaves other elements governed by rules of country of destination (VAT rate, bad relief and invoicing) • calls for a coordinated approach to audit • covers only telecom, broadcasting and electronic services but is likely to be extended to other B2C supplies in due time 18
• Possible solutions – Could the MOSS serve as model? • part and parcel of making the destination principle operational • facilitates compliance by business • serves to better ensure collection – How could this come about? • world-wide or on a bilateral basis • based on multilateral or bilateral agreements • need for exchange of information 19
EU legal framework • VAT Directive • as amended by Directive 2008/8/EC Article 58 The place of supply of the following services to a non-taxable person shall be the place where that person is established, has his permanent address or usually resides: (a) telecommunications services; (b) radio and television broadcasting services; (c) electronically supplied services, in particular those referred to in Annex II. Where the supplier of a service and the customer communicate via electronic mail, that shall not of itself mean that the service supplied is an electronically supplied service. Article 359 Member States shall permit any taxable person not established within the Community supplying telecommunications, broadcasting or electronic services to a non-taxable person who is established in a Member State or has his permanent address or usually resides in a Member State, to use this special scheme. This scheme applies to all those services supplied within the Community. Article 369b Member States shall permit any taxable person not established in the Member State of consumption supplying telecommunications, broadcasting or electronic services to a non-taxable person who is established or has his permanent address or usually resides in that Member State, to use this special scheme. This special scheme applies to all those services supplied in the Community. 20
• EU legal framework VAT Implementing Regulation • as amended by Regulation 967/2012 Listing the main obligations of taxable persons under the special schemes and regulating issues such as registration, deregistration and exclusions • as amended by Regulation 1042/2013 Dealing with the place-of-supply rules and clarifying how to apply them Commission Implementing Regulation • Regulation 815/2012 Standardising declarations and exchanges of data between Member States to ensure interoperability of the MOSS 21
• EU legal framework Guidance • on place-of-supply related issues • on the MOSS published on Commission’s website Information • on specific national rules applied in the 28 Member States will be published on Commission’s website 22
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