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EY VAT News – week to 16 January 2017 Welcome to the latest edition of EY VAT News, which provides a roundup of indirect tax developments. If you would like to discuss any of the articles in more detail, please speak with your usual EY indirect tax contact or one of the people below. Previous editions of EY VAT News can be found here. In this edition: Events
EY Indirect Tax Perspectives: Seminar material
Court of Justice of the European Union
Referral Calendar Update
Court of Appeal
Latest appeal updates
First-tier Tribunal
Mark up attributable to (taxable) removable contents sold with lodges accepted as 0%
EY Global Tax Alerts
Argentina, Honduras, Italy and Russia,
India
Potential delay to the implementation of GST
Events EY Indirect Tax Perspectives: Seminar material On 11 January 2017, EY held an Indirect Tax Perspectives seminar giving an update on current indirect tax issues and developments including cross border e-commerce, MTIC fraud and case law updates. The material from the event is now available on our EY Indirect Tax Perspectives Linked-In Group. In order to join our LinkedIn group, please click ‘Ask to Join’ in the top right hand corner of the page. Our next Indirect Tax Perspectives event will be on 7 April 2017. Details will be available nearer the time. If you have any questions, feedback or suggestions for topics for the next event, please contact your usual EY contact, or Alex Dixon.
Court of Justice of the European Union Referral The CJEU website shows the following new referral:
A UK referral from the First-tier Tribunal - C-544/16 Marcandi Ltd T/A "Madbid" asking whether the issue of ‘credits’ to ‘users’ of an online auction, by Madbid, in return for a monetary payment is a ‘preliminary transaction’ outside the scope of VAT (Article 2(1) of Council Directive 2006/112/EC) or a supply of services, namely the grant of a right to participate in an online auction. If a supply of services, is it a supply made for consideration when it issues the ‘credits’, if not, is such a supply made at any other time? The referral also asks what, in these circumstances and considering the answers to the initial questions referred, is the consideration received by Madbid for the supply of the goods; Is the ‘credit’ a ‘payment on account’ and therefore consideration for a supply of goods, what is the total value of the supply of the goods and what is the effect of unsuccessful bids and ‘credits’ used?
Comment: Madbid is a similar business to that discussed in the Welmory CJEU judgment, and the questions being referred this time are questions that were also discussed by the AG in Welmory, but which were not addressed as the judgement went in a different direction. The referral will be of interest to businesses offering vouchers and promotion schemes, where there may be a read across in terms of the scope and implications for ‘credits’. For further information please contact Rosie Higgins. Calendar Update Wednesday 18 January 2017 Judgment- C-471/15 Sjelle Autogenbrug – Danish referral asking whether the sale of spare parts removed from redundant vehicles may be regarded as second-hand goods for the purposes of the VAT margin scheme. For further information please contact Jamie Ratcliffe Judgment - C-37/16 SAWP - Polish referral concerning the VAT accounting treatment of certain transactions involving (i) authors, performers and other right holders, (ii) producers and importers of audio recorders and similar devices and blank media, and (iii) collective management organisations levying fees on behalf of those authors, performers and other right holders. Thursday 19 January 2017 Judgment - C-344/15 National Roads Authority – Irish referral asking whether a public body, which operates a toll road, should be deemed to be in competition with private operators of different toll roads, such that treatment of the public body as a nontaxable person would lead to a significant distortion of competition. Hearing – C-164/16 Mercedes Benz Financial Services UK - UK referral from the Court of Appeal concerning the VAT treatment of a specific motor vehicle finance product offered by the taxpayer, specifically whether for VAT purposes it falls to be treated as a supply of services (as contended by the taxpayer) or a supply of goods (as contended by HMRC), with resulting cash flow implications. For further information please contact Jamie Ratcliffe Thursday 26 January 2017 Hearing - C-101/16 Paper Consult - Romanian referral, continuing a long-running theme of referrals from Eastern European EU Member States, concerning the right of input tax deduction in respect of transactions considered by the tax authorities to be suspicious, in the presence of irregular conduct on the part of the supplier (specifically, on this occasion, where the supplier has been declared inactive by the tax authorities).
Wednesday 1 February 2017 Opinion –C-26/16 Santogal M-Comércio e Reparação de Automóveis - Portuguese referral concerning the scope of the exemption with credit (zero-rating) under Article 138(2)(a) of the VAT Directive for the intra-Community supply of a new means of transport. Thursday 9 February 2017 Hearing– C-303/16 Solar Electric Martinique - A French referral asking whether the sale and installation of photovoltaic panels and solar water heaters on buildings, with a view to supplying electricity or hot water to buildings, constitutes a single transaction that may be characterised as works of construction. Judgment – C-21/16 Euro Tyre – A Portuguese referral asking whether a supplier is entitled to zero-rate an intra-Community supply of goods in circumstances where the customer, whilst being registered for VAT in its Member State, is not registered in the VIES database nor is subject in that country to a system of taxation on intra-Community acquisitions of goods. Wednesday 15 February 2017 Hearing – C-616/15 Commission v Germany - Action brought by the European Commission against the Federal Republic of Germany. The applicant claims that the Court should declare that, by restricting, to groups whose members exercise a limited number of professions, the exemption from VAT for the supply by independent groups of persons carrying on an activity which is exempt from VAT, or in relation to which they are not taxable persons, of services to their members for the direct purposes of the exercise of that activity where those groups merely claim from their members exact reimbursement of their share of the joint expenses, the Federal Republic of Germany has failed to fulfil its obligations under Article 132(1)(f) of the VAT directive.
Court of Appeal Latest appeal updates:
The Court of Appeal will hear the appeal of ING Intermediate Holdings Limited against the Upper Tribunal's decision by 19 December 2017. This is a complex case and concerns the decision that ING's deposit taking activities amounted to the provision of VAT exempt financial services, such that related input VAT could not be recovered. For further information please contact Simon Harris
First-tier Tribunal Mark up attributable to (taxable) removable contents sold with lodges accepted as 0% TC05576 - Cottingham Park Lodges Limited A partly successful appeal by Cottingham Park Lodges Limited (CPL) concerning the values attributable to the supply of lodges and removable contents. The appeal also considered whether a grant of a licence to occupy a ‘pitch’ only, where a customer provides the lodge, was standard rated or zero rated as part of a composite supply by two suppliers. CPL sells lodges, wooden moveable buildings, for a single payment which includes removable content (as specified by the purchaser) and a licence to occupy a ‘pitch’ of land which it owns. CPL sells the lodges and removable content at the same discounted price that it purchases them, charging the same amount of VAT on the sale of the removable content as it was charged by the manufacturers. CPL contended that its business model was to make all profit from the land/infrastructure element only when selling a package of land/ infrastructure and lodge/contents. It was not disputed that the lodges quality as ‘caravans’ within the meaning of Group 5, Schedule 8 VATA94. The issue was what part of the overall consideration should be regarded as consideration for the removable content and consequently subject to VAT? In allowing this part of the appeal, the First-tier Tribunal (FTT) dismissed HMRC's contention that the value of the removable contents should be calculated on a cost proportion basis, as CPL's calculation assigns all of the profit to the non-taxable
element of the supply resulting in a lower VAT payment and an unreasonable result. The FTT accepted that CPL's business model was not a ploy to save VAT and that the mark up for the lodges and contents was 0%. CPL's method is ‘fair and reasonable’ and is one that properly attributes the appropriate part of the consideration to the removable content. The FTT also considered the grant of a licence where CPL did not, at the same time, sell a lodge. In dismissing this part of the appeal, the FTT agreed with HMRC that the supply was a grant of a licence, the pitch, only and that the licence was a grant within Item 1, Gp1 Schedule 9 VATA94 which would be exempt but for the exclusion in item 1(f) read with Notes (14) and (14A). The grant by itself fell to be standard rated. The FTT dismissed CPL's contention that although the lodge which was to be ultimately sited on the pitch came from a different supplier, its supply was a composite supply of the land and the lodge and should properly be considered zero rated. Comment: Businesses with supplies subject to different rates of VAT which have been challenged by HMRC may wish to revisit the position following this decision.
EY Global Tax Alerts Argentina - Argentina enacted Law No. 27,346 (the Law), through publication in the Official Gazette on 27 December 2016. The Law makes several changes to the Argentine tax regulations including the addition of a mechanism for the payment of VAT on services provided in Argentina by non-residents and the introduction of new taxes for betting and gambling activities. Honduras - On 27 December 2016, Honduras published, in the Official Gazette, Decree No. 171-2016, which sets out the general provisions of the Honduran General Income and Disbursement Budget for 2017, including a new tax amnesty programme. Taxpayers and withholding agents that have failed to submit or failed to submit in a timely manner Annual or Monthly Sales Tax Credit Returns, Monthly Withholding Tax Information Returns, Tourism Information Tax Returns, Customs Rectification Returns, Tax Residency Updates or Administrative Notifications for the periods up to 31 December 2016 have until 31 March 2017 to fulfil their obligations without penalties. Italy - On 1 December 2016, the Italian Parliament enacted Law no. 255, (the Fiscal Law), which provides for new measures to tackle tax evasion. The new law is mainly aimed at encouraging electronic invoicing and the recovery of unpaid VAT through the introduction of new reports including:
Communication of VAT invoice data to be filed on a quarterly basis Communication of calculations data to be filed on a quarterly basis
Due to the introduction of these new VAT filing obligations the law repeals certain VAT filings previously required:
The Annual Communication of customer and supplier data (Spesometro) Intrastat declarations for EU acquisitions of goods and purchases of services The report communication of transactions in “Black List” countries
The Fiscal Law also sets out new filing deadlines for Annual VAT Returns. The Alert provides more detailed information regarding these changes including relevant dates and deadlines. Italy - The Italian Revenue Agency (IRA) has recognised the application of the decision of the Court of Justice of the European Union in the Fast Bunkering (CJEU-526/13) case concerning the supply of fuel for use by high sea vessels. Specifically, the IRA has clarified that, contrary to its previous position, in a triangular fuelling transaction, the supply of fuel to a business can benefit from the VAT exemption. For further information please contact Jamie Ratcliffe Russia - On 1 January 2017, the new Russian VAT rules for electronic services (e-services) came into force. These new rules introduce an obligation for non-resident providers of e-services to register for VAT and apply Russian VAT to services provided to private individuals. The deadline for VAT registration is 31 January 2017.
India Potential delay to the implementation of GST We understand that the Indian Finance Minister has announced that realistically, the implementation of Indian GST may be delayed until 1 July 2017. Indian GST had been scheduled to take effect from 1 April 2017. The Central and State Governments are still working towards a consensus on various administration and legislative issues but we understand that significant progress has been made. While the comment from the Finance Minister does not set a new date in stone, with such a short timeframe to implementation, any delay could be welcomed by businesses operating in India, in order to allow extra time to consider the associated commercial, systems, pricing and tax implications of the introduction of GST.
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