VAT Treatment of Cross-border Trade in B2C Services Professor - - PowerPoint PPT Presentation

SESSION 4 KEYNOTE SPEECH VAT Treatment of Cross-border Trade in B2C Services

Professor Rebecca Millar (University of Sydney Law School)

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My brief:

• 1. Overview of existing models.
• 2. ‘Have a go’ at identifying common

principles/approaches.

• 3. Consider emerging conclusions of WP9.
• 4. Ideas on how to advance the work on B2C

guidelines to meet countries’ expectations.

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EXISTING MODELS FOR APPLYING VAT TO CROSS-BORDER TRADE

IN SERVICES

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Legal design approaches

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Two main models for implementing ‘place of taxation’ rules in a VAT law. Categorisation:

➙sub-categorise services ➙specify place of taxation for each category ➙usually one step: place of supply = place of taxation

e.g. EU VAT Directive & EU Member States

➙specific rules for 14 or 15 different groups of services

(some B2B, some B2C, some both)

➙a general rule for all other B2C services: proxy =

supplier location

Legal design approaches

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Two main models for implementing ‘place of taxation’ rules in a VAT law. Iterative (principle-based):

➙systematically applies a series of proxies for place of

consumption to all kinds of services

➙limited or no sub-categorisation ➙e.g. Australia, New Zealand, Singapore, South Africa

Bangladesh, Botswana, IMF models Hybrids:

➙Many VAT/GST laws include both categorisation and

iterative elements

Iterative Approach Explained

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Step 1: Place of supply

• supplier’s place of business

(Singapore; Botswana; South Africa)

• plus place of performance (NZ)
• plus right or option to acquire something in the

jurisdiction (Aus)

‘Place of supply’ rule makes a preliminary assertion of jurisdiction to tax (the right to tax) on the basis of enforcement jurisdiction + expectation of co-location

Iterative Approach Explained

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Step 2: Adjust to match destination-based substantive jurisdiction Outbound (if place of supply = jurisdiction)

• zero-rate
• place of taxation refers to multiple proxies
• connection with tangible property (land/goods outside) or

absence of connection with local tangible property

• customer location and/or residence
• location of other person to whom the services are delivered
• place where ‘for use’, place of effective use or enjoyment…

Inbound (if place of supply ≠ jurisdiction)

• taxed on ‘import’
• main proxy = customer residence (e.g. NZ reverse charge)

EU General & Specific Rules

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Consider EU list of categories from Session E

• 13 categories of services
• All or part of 5 of the categories are not treated as services in

Australia & New Zealand: – immoveable property; – short and long term hire of means of transport; – restaurant services, whether on-board or not.

• Of the other 8, only 2 =(partly) subject to special rules

– international transport of goods & passengers; – telecommunications (global roaming)

• Even where there are special rules, it is not possible to

specify a single proxy that relates to each EU category

Consequences?

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• Consider Session E case study
• Reminder of the facts of the case study

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Service Taxing rights (EU) Taxing rights (NZ) Taxing rights (Aus) ① Hotel Country B Country B Country B (residence of customer irrelevant) (residence of customer irrelevant: but on what value?) (Non-resident reseller exclusions from registration threshold) ② Car repair Country B Country B Country B (also taxable for non- residents) (also taxable for non-residents) (residence of supplier & customer irrelevant) ③ Restaurant Country B Country B Country B (also taxable for non- residents) (also taxable for non-residents) (residence of supplier & customer irrelevant) ④ Hotel Wi-Fi Country B Country B Country B (also taxable for non- residents) (also taxable for non-residents) (residence of customer irrelevant) ⑤ Download of digital movie Country A Not Country B Not Country B （not taxable for non- residents） （Movie streamed in NZ by non-resident from non-resident) (Consumed in Aust but no tax collected) ⑥ International phone call - global roaming Country A Country B Country B （not taxable for non- residents） (Non-res. supplier exclusions from registration threshold) (Consumed in Aus but not taxed under special rule)

WHERE DO WE GO FROM HERE?

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Broad categories of situations

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WP9 Nov 2013 TAG Task Teams Apr 2014 Services relating to tangible property Services relating to immoveable property Services relating to tangible moveable property Non-remote services Non-remote services Remote services: digital Remote services: Remote services: other