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VAT News From 1 May 2009, the following rules are not changed: – goods not released for free circulation/non-taxed goods can be stored in a free warehouse; – supplies of goods that are stored in a free warehouse are zero rated; – work on goods (which is considered to constitute a supply of goods under Swiss VAT law) that are stored in a free warehouse is zero rated; – import VAT will be due before the goods are imported for free circulation and will be levied by the customs authorities; – supplies of services that qualify as ancillary to transport, and are deemed to be supplied in the free warehouse, are zero rated; – when they have received the customs document, taxable persons can claim the zero rate on export, if the goods are exported by means of placing them under the free warehouse arrangements; – the letting of space in a free warehouse is exempt from VAT, albeit with the possibility to opt for taxation. Standard rate The voters will decide in a referendum on 27 September 2009 whether or not the standard rate of VAT of 7. % will be increased to 8% with effect from 1 January 2010. This increase is necessary in order to finance the risen costs of the disability insurance. The increase of the tax rate would be limited to a period of seven years. From our correspondent Reginald Derks VAT plus, Bern Anti-fraud agreement with the European Union See under European Union. Togo Free zones The Budget for 2009 has been enacted as Law No. 2008- 018. Under Law No. 2008-018, goods manufactured in a free zone using raw materials imported from member countries of the Economic Community of West African States (ECOWAS), or produced in Togo, have become subject to VAT and customs duties. Companies qualifying for the free-zone regime are not subject to VAT for a period of ten years in respect of specific “essential goods and services”. Tunisia Electronic tax returns On the basis of a decision of the Minister of Finance of 1 December 2008, which was published in Official Gazette No. 98 of December 2008, the turnover threshold, including all taxes and levies, above which businesses are required to file their tax returns electronically has been reduced from TND million to 2 million. The obligation to file tax returns in electronic format applies to all tax returns, including VAT returns, due on or after 11 December 2008. Ukraine Energy-saving technologies Materials, equipment and spare parts imported for the implementation of energy-saving technologies for “industrial enterprises” are relieved of import duty and VAT. Guidance regarding eligible entities and the procedure for claiming the relief are expected to be released in due course. It is unclear from what date the concession will apply. Yulia Logunova, DLA Piper Ukraine, Kiev United Kingdom Budget 2009 The Chancellor will issue the Budget Statement on 22 April 2009, which is after the start of the new tax year and leaves Parliament not much time to scrutinize any new legislation before Royal Assent. Unjust enrichment In 2008, the European Court of Justice (ECJ) considered the claim made by Marks & Spencer (M&S) for repayment of VAT overpaid in respect of the supply of chocolate-covered cakes over a period of more than 20 years (that supply should have been zero rated) and ruled that the UK tax authorities (Her Majesty’s Revenue and Customs; HMRC) had contravened EU principles by treating M&S’s claim differently from similar claims made by its competitors. 24 Due to its supply of clothing, M&S was a “payment trader”, 2 whereas other suppliers of these teacakes were food retailers and, therefore, in a repayment position. Until May 200 , HMRC only applied the unjust enrichment defence (that, by receiving the refund, the claimant would be unjustly enriched because it had shifted the burden of the wrongly charged VAT to its customers) to output tax claims made by payment traders so the repayment traders received their refund in full, whereas M&S only received 10%. In May 200 , the law changed in order to ensure that both categories of claimants were treated equally. The ECJ broadly found in M&S’s favour that a blanket distinction between claims made by payment and repayment traders in respect of the same supplies could not be objectively justified and the case was remitted to the national court for final judgment. This final judgment was given recently and M&S received its refund in full. Following the decision of the House of Lords, HMRC issued a Brief in which they declared not to apply the unjust enrichment defence to any claims originally made before the change of law in May 200 . In order to receive a refund, claimants do not need to show that they were in competition with repayment traders making similar 24. ECJ judgment of 10 April 2008 in Marks & Spencer plc v. Commissioners of Customs and Excise, Case C- 09/0 . 2 . Taxable persons for whom, for a tax period, the amount of output tax payable to the tax authorities exceeds the amount of deductible input tax. 1 2 INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 © IBFD
supplies. Claims that are still open will be settled. Closed claims, i.e. cases in which the taxable person had not challenged HMRC’s refusal to accept his claim on the ground of unjust enrichment, and those in which HMRC’s refusal had been upheld in court, can be resubmitted for consideration. However, it is not clear what time limits apply in this respect. If HMCR treats the resubmitted claim as a new claim, it will be out of time under the United Kingdom’s three-year limitation period. HMRC have been asked to clarify this point. Revenue Brief 0 /09. From our correspondent Karen Killington KPMG UK LLP United States California Nexus of Internet vendors Following the success of the New York Department of Taxation in the proceedings before the New York Superior Court concerning the so-called “Amazon-tax”, 2 other states are following suit in introducing similar legislation. In California, two pieces of legislation have been proposed thus far to change the definition of nexus and force certain Internet vendors to collect sales and use taxes. Proposal AB 27 establishes a presumption of nexus forcing certain remote sellers to collect and remit Californian sales and use taxes. This presumption is satisfied when a resident of California, directly or indirectly, refers potential customers to a remote seller that generates over USD 10,000 in sales annually. The legislation further seeks to implement the Multistate Tax Commission’s controversial Nexus Bulletin 9 -1, which would impose the obligation to collect sales tax on retailers who utilize independent contractors to perform repair services. AB 178 is comparable to AB 27, except that it does not include the MTC Nexus Bulletin provisions. In Connecticut, Proposal SB 80 also establishes a presumption of nexus when a resident of Connecticut, directly or indirectly, refers potential customers to a remote seller that generates over USD ,000 in sales annually, with effect from 1 April 2009. The bill was referred to the Joint Committee on Finance, Revenue and Bonding. In Minnesota, Proposals SF 282 and HF 401 would also impose the obligation to collect sales and use tax on remote sellers when a resident of Minnesota, directly or indirectly, refers potential customers to them, which generates over USD 10,000 in sales. Proposal SF 282 was referred to the Senate Taxation Committee and proposal HF 401 to the House Taxation Committee. In North Carolina, the Revenue Laws Study Committee has proposed Legislative Proposal # to impose the obligation to collect sales and use tax on remote Internet sellers (in addition to imposing the state’s sales and use tax on “digital goods”). The bill has yet to be introduced. Connecticut Nexus of Internet vendors See California. Michigan © IBFD INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 VAT News Definition of sales price The definition of the term “sales price” has been amended to include consideration received by a seller from a third party. PB 4 8, 2008. Conformation to SSUTA By way of Public Acts 4 , 4 7 and 4 9, 27 Michigan has amended its state law in conformity with the Streamlined Sales and Use Tax Agreement (SSUTA 28 ) by means of: – allowing consideration received by auto dealers from a manufacturer as reimbursement pursuant to a “family plan”-type discount transaction to be exempt from sales tax; – clarifying the instance in which certified service providers are eligible for a sales tax exemption; and – updating and clarifying various definitions. Redefinition of gross receipts Michigan SB 10 8, which was signed into law as Public Act 4 , removed taxes, fees, interest income, royalties, surcharges, and other elements from the concept of gross receipts for the purposes of the state’s business tax. PA 4 , 9 January 2009. Biomass-harvesting machinery Michigan HB 8 2, which was signed into law as Public Act 41 , amended the sales tax provisions to provide an exemption for the sale of machinery that is capable of simultaneously harvesting crops and biomass residue, or that is manufactured for the purpose of harvesting agricultural biomass grown solely as an energy source. Medicaid medical services Michigan HB 192, which was signed into law as Public Act 440, amended the Use Tax Act to provide that the use or consumption of medical services provided by Medicaid-managed care organizations be taxed in the same manner as tangible personal property. PA 440 of 9 January 2009. 2 . See Amazon.com LLC and Overstock.com Inc. v. New York State Department of Taxation under VAT Case Notes in this issue, p. 1 . 27. See Michigan HB 4 80, 4 and , respectively. 28. See Robert F. van Brederode,“The Harmonization of Sales and Use Taxes in the United States”, International VAT Monitor (2007), pp. 4 8 to 44 . 1
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