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– the service provider’s presence in the customer’s Member State constitutes a “fixed establishment”? or – all conditions for the service provider’s VAT liability are fulfilled? In view of the objective of Directive 2008/8 to simplify the VAT system and reduce the compliance costs for businesses, taxable persons should not be expected to check the validity of the VAT aspects of invoices received in respect of services supplied to them by non-resident service providers. Correctness of those VAT aspects should be the sole responsibility of the service provider. Where, on the basis of the criteria mentioned above, a non-resident service provider takes the view that his fixed establishment intervenes in the supply and, consequently, charges VAT to his customer, but the tax authorities take the view that the non-resident service provider’s presence does not constitute a fixed establishment or that it has not intervened in the supply, 22 the customer should nonetheless be allowed to deduct the VAT that was (erroneously) charged to him because he has only limited ability to check whether or not the invoice correctly mentioned VAT. 5.3. Recapitulative statements The new Arts. 2 2 to 2 4 provide further details of the recapitulative statement through which service providers must report the business customers to whom they have supplied services in the reporting period, which are subject to the reverse charge mechanism, and the value of those cross-border services supplied to each customer. The new Art. 2 2 provides that every taxable person identified for VAT purposes must submit a recapitulative statement of: (a) the acquirers identified for VAT purposes to whom he has supplied goods under the conditions specified in Art. 1 8(1) and (2)(c); 2 (b) the persons identified for VAT purposes to whom he has supplied goods which were supplied to him by way of intra-Community acquisitions referred to in Art. 42; 24 (c) the taxable persons, and the non-taxable legal persons identified for VAT purposes, to whom he has supplied services, other than services that are exempt from VAT, in the Member State where the transaction is taxable, and for which the recipient is liable to pay the tax pursuant to Art. 19 . In general, the requirements for filing recapitulative statements should apply uniformly in all 27 Member States. At this stage, less than a year before they must be complied with, details of those requirements have not yet been published, which makes it difficult for businesses to ensure that their administrative systems are adapted on time. In view of the untimely information, it would only be fair if, on the basis of the principle of proportionality, Member States would not impose any penalties on mistakes made by businesses in filing their recapitulative statements in a transitional period. © IBFD INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 Articles It appears from the new Art. 2 2 that the cross-border services must be reported through the same recapitulative statement that is also used for reporting zero-rated intra-Community supplies of goods. Art. 2 4(1)(d) in fact only states that recapitulative statements should show separate values for supplies of goods and services. As regards cross-border services, the obligation to file a recapitulative statement exists where the service provider is a “taxable person registered for VAT purposes” and the recipient of the services is also a taxable person or a non-taxable legal person identified for VAT purposes. At first sight, the wording of that provision seems to suggest that non-registered service providers escape from the reporting obligation. However, that initial impression is not correct because, under the amended Art. 214, Member States must take the measures necessary to ensure that every taxable person who receives services for which he is liable to pay VAT under the reverse charge mechanism, and every taxable person who supplies services for which the customer must account for VAT under the reverse charge mechanism, are identified by means of an individual number. The obligation for Member States to register all taxable persons receiving cross-border services should have the effect that, for the purposes of filing recapitulative statements, service providers may rely on their customers’ VAT identification numbers. The reporting obligation does not apply to services that are exempt from VAT in the Member State where the transaction’s tax liability would normally arise. In view of the transitional exemptions that are still applicable in the nine Member States that adopted the Sixth Directive in 1977, that provision requires service providers to know what special exemptions still apply in the Member State where their customers are established. Service providers must also keep track of the extent to which the Member States where their customers are located enable those customers to opt for taxation of financial services and insurance transactions. In practice, when they are in doubt as regards the VAT regime applicable to services rendered to customers located in another Member State, service providers will be inclined to treat the services as being taxable and include their value in the recapitulative statement, which may lead to over-declaration of the services. Under the principle of proportionality, Member States should not impose penalties in the case of such overdeclarations. The new Art. 2 2(c) provides that only services“for which the recipient is liable to pay the tax pursuant to Art. 19 ” are to be included in the recapitulative statement, and the new Art. 19 provides that VAT is payable by any taxable 22. A taxable person’s presence in another Member State, which does not fulfil the conditions for a fixed establishment as laid down by the ECJ. 2 . The zero rate applicable to intra-Community supplies of goods. 24. Art. 42 of the VAT Directive refers to the intra-Community acquisition made by the intermediate customer under the simplification measure for intra-Community triangular transactions. Consequently, the new Art. 2 2(b) refers to the final customer of the goods supplied under the simplification measure for intra-Community triangulation. 109
Articles person or non-taxable legal person identified for VAT purposes, to whom the services referred to in the new Art. 44 are supplied, if the supply is made by a non-resident service provider. Although Art. 44 also covers services supplied to taxable persons established outside the European Union, it must nonetheless be assumed that the reporting obligation is limited to services that are deemed to be supplied in one of the Member States. Currently, recapitulative statements have a standard format throughout the European Union. It has not yet been confirmed that a standard form will be used after the recapitulative statement has been extended to include services. In addition, it has not been confirmed that the 6. Conclusion This article provides an overview of some practical VAT aspects of the new place-of-supply rules applicable to B2B services, which require further clarification before they come into effect on 1 January 2010. In view of the importance of the place-of-supply rules for the functioning of the EU VAT system, it is essential that all elements of the new rules are clear and will be interpreted uniformly in all Member States. The most efficient method of ensuring uniform interpretation is to include all concepts and arrangements that lack clarity in a new Implementing Regulation. Divergent interpretation of the amendments made to the VAT Directive under Directive 2008/8 may not only lead to the risk of VAT return forms will not have a separate box for reporting cross-border services that must be included in the recapitulative statement. Such an additional box would enable the tax authorities to quickly compare the information included in the recapitulative statement with that included in the VAT return, just like they can compare the value of the intra-Community supplies of goods between the suppliers’ recapitulative statements and VAT returns. The proposed amendments to that effect 2 of Art. 2 1 were not included in the resulting Directive that the Council adopted on 1 December 2008 2 but cannot be excluded as a result of the multiple implementations of new rules by the Member States. double or non-taxation of cross-border services and VAT avoidance schemes, but will also give rise to unnecessary compliance costs for businesses and may even lead to the imposition of penalties on businesses for non-compliance with the rules, as interpreted by the individual Member States. Finally, the lack of harmonization of the place-of-supply rules will also lead to higher administration costs for the tax authorities of the EU Member States. It is clear that Directive 2008/8 was adopted with the aim of avoiding all those negative consequences, which will nonetheless result from less than perfect harmonization. 2 . Proposal of 17 March 2008 for a Council Directive amending Directive 200 /112/EC on the common system of value added tax to combat tax evasion connected with intra-Community transactions, COM(2008) 147 final. 2 . Council Directive 2008/117/EC of 1 December 2008 amending Directive 200 /112/EC on the common system of value added tax to combat tax evasion connected with intra-Community transactions, OJ L 14 of 20 January 2009. 110 INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 © IBFD
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The New EU Place-of-Supply Rules from a ... - empcom.gov.in

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