VAT package...one year later
First changes as from 2010
On 1 January 2010, a set of VAT rules came into force involving:
- changes to the VAT treatment of international services, in particular cross-border business-to-business (B2B) supplies, for example where VAT is chargeable and who must account for this VAT;
- an obligation to report to an EC Sales List services rendered to EU businesses where the recipient is liable to pay VAT in its country (often referred to as "ESL" or "recapitulative VAT statement"); and
- an electronic procedure, together with tighter timeframes, for the processing and paying of refunds of VAT incurred in other Member States.
Additional changes as from 2011
Some further changes are effective as from 1 January 2011. These changes relate to the place of taxation of B2B services in relation to cultural, artistic, sporting, scientific, educational and entertainment activities. As from 1 January 2011, a distinction must be made between the "admission" to an event and the "organisation" of the event, for the determination of the place of taxation of the services. There has been some discussion at EU level on the definition of "admission" and "organisation". In this regard, the Luxembourg VAT authorities issued circular 750 on 23 December 2010 which gives some more details on what is to be understood by “admission”.
Since 1 July 2011, new measures have been introduced, notably to clarify diverging interpretations of the VAT rules and requirements further to the entry into force of the VAT package (Regulation of 15 March 2011 laying down measures for Directive 2006/112/EC). Please follow this link for further information on the implementation regulation.
In addition, further changes are already planned for 2013 and 2015.
As from 1 January 2013, new rules will come into force for long term hiring of means of transport to private individuals (B2C), with specific rules for leisure boats.
As from 1 January 2015, the place of supply rules for B2C will change for:
- Telecommunication services,
- Radio and television broadcasting services and
- Electronically supplied services by EU suppliers.
How we can help
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Transaction consulting and monitoring services
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PwC can help clients identify and resolve issues around the application and interpretation of the VAT package rules by the Member States, and can also support clients in reviewing their service contracts, VAT registration and business structures to make sure they are compliant with the VAT rules.
Examples of areas where we have seen issues arising include:
- Determining customer status and location, and dealing with global contracts;
- Applying the B2B rules in relation to business customers receiving supplies for a non-business activity;
- Identifying where the key issues are for the hiring of means of transport and what is meant by the terms "put at the disposal" and "continuous possession or use";
- Analysing the concept of restaurant and catering services, in particular what is the level of service that turns a supply of goods into a supply of services;
- Dealing with cultural, artistic, educational, entertainment services, in particular what is covered by "admission to an event";
- Managing the “force of attraction”principle; and
- Bringing clarity to how Member State apply the “use and enjoyment” provisions.
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System advice and reconfiguration
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The adoption of the VAT package has led some taxpayers to update their systems to more easily gather client information, export data necessary for the EC Sales List for services, etc.
A review or adaption of internal system processes can also be necessary in the light of the new FAIA obligations introduced by the Luxembourg VAT authorities.
Our team includes experienced VAT specialists, experienced systems specialists, and VAT professionals with significant systems and technology experience. Together these specialists can help clients identify and analyse the VAT accounting processes and the ERP/accounting system requirements arising from the changes brought by the VAT package, advise on their reconfiguration and implementation and/or carry out post-implementation reviews.
There may also be interested in using this opportunity to make further value added systems changes (e.g. enhanced tax coding). A number of our clients reviewed their accounting systems to simplify the administrative obligations imposed by the VAT package and have at the same time taken the opportunity to review their activities from a VAT point of view. For further information on what we have done and what we can do in this regard for our FS and non-FS clients please see our VAT Package Implementation Program by following the corresponding link.
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Monitoring changes and training your staff
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In 2009, PwC launched the "VAT Package Monitoring Service" to bring support to clients in the monitoring of the new rules across the 27 Member States. This takes into consideration the various options given to Member States in implementing EU VAT legislation and specific VAT legislation in these Member States. It is an online service which is updated regularly and can be accessed, for a subscription, via GlobalVATOnline.
Also, many clients attend the VAT package trainings at the PwC's Academy instructed by our VAT specialists and have at the same time taken the opportunity to refresh their VAT knowledge of the basic rules. Others have followed trainings tailored to their very specific needs.
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