Indirect Tax News 1 - March 2012 - BDO International

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2 INDIRECT TAX NEWS 1 Editor’s Letter Dear Readers, As the new Chair of the BDO international VAT Centre of Excellence (VCOE), I am pleased to introduce the first edition of BDO Indirect Tax News for 2012. Heading into 2012, the good news is that the strength of the Indirect Tax advisor network within BDO continues to grow, and my colleagues and I on the VCOE Committee are continually using our best endeavours to ensure that the Firm is well placed to provide our clients and contacts with any assistance they may require with future compliance and advisory matters. As you are aware, indirect taxes are significant generators of revenue for governments across the globe, and it is interesting to note that the austerity measures being introduced in the wake of the economic crisis are heavily focused on increasing VAT rates, particularly within the European Union. In the circumstances we need to remain mindful of the shift from direct to indirect taxation, and the challenges and opportunities which this presents. I hope you find this publication both useful and informative. The VAT specialist of your BDO Member Firm will be pleased to advise if further information on a specific issue is needed. Kind regards from Dublin. IVOR FEERICK Chair of the BDO international VAT Centre of Excellence Ireland – Dublin ifeerick@bdo.ie BELGIUM NEW VAT REGIME FOR NON-PROFIT-MAKING ASSOCIATIONS THAT PURSUE TRADE UNION GOALS The Belgian VAT Authorities recently issued a circular letter (No. ET 121.844 of 3 January 2012) that provides clarification on the scope of the VAT exemption regarding membership fees paid to a nonprofit-making association. In accordance with European case law (Court of Justice of the European Union (CJEU) case C-149/97, Institute of the Motor Industry), this exemption is applicable to the total amount of the membership fees when the main objective of the association is the pursuit of trade union goals. By virtue of article 132, 1, (l) of the Council Directive 2006/112/EC, the supply by nonprofit-making organisations of services consisting of the defence of common interests of members, and representation of them towards third parties (i.e. trade union/lobbying services), in return for a subscription fixed in accordance with the articles of association, is exempt from VAT. However, it happens that these organisations (as part of the subscription) render some “individualised” services to their members (general promotional activities, advice, participation in events, etc.) in addition to the trade union/ lobbying services. The new circular mainly comments on whether the above mentioned VAT exemption also applies to these additional “individualised” services. In the past, the Belgian VAT authorities allowed a split of the subscription between the part that covers the trade union/lobbying services and the one that covers the other activities. The first part was VAT-exempt (and did not give any entitlement to deduct input VAT) whereas the second part was in principle subject to VAT (and thus gave an entitlement to deduct input VAT). On this basis, the organisation had the status of mixed taxable person. In some cases, the apportionment was fixed by the VAT Authorities through a specific decision (which could give organisations with a trade union nature an entitlement to input VAT deduction of over 80%). According to the new circular, there will, in principle, be only two possible scenarios: • the main objective of the association is of a trade union/lobbying nature. In this case, the exemption will apply to all activities performed in return for a subscription fixed in accordance with the articles of association (i.e. a membership fee), including “individualised” services – they would be considered as ancillary to the trade union/ lobbying services, but covered by such membership fees. In this case, the association will be treated as a VAT-exempt taxable person without any entitlement to deduct input VAT; or • the main objective of the association is not of a trade union/lobbying nature. In this case, VAT will apply to all activities covered by the membership fees, including trade union/lobbying activities that would be considered as ancillary. In this case, the association will be treated as a taxable person with full entitlement to deduct input VAT. In other words, it is now a case of ‘all or nothing’ with regard to the activities covered by membership fees. Either they will be fully subject to VAT or they will be fully exempt. However, if it is not possible to determine the main objective, a split (as in the past) could still be affected (in principle 50% lobbying and 50% other services). Supplies made to all or part of the membership in return for a charge separate from the membership fees should always follow their own VAT treatment and are not covered by the exemption for trade union/ lobbying activities. It is thus still possible that an association qualifies as a mixed taxable person, with partial entitlement to input VAT deduction.
INDIRECT TAX NEWS 1 BRAZIL THE POSSIBILITY OF OFFSETTING ACCUMULATED TAX CREDITS 3 In addition, in the event of a change to their input VAT deduction entitlement, the organisation must/can normally revise the input VAT related to investment goods acquired within the last 5 years (for movable goods or immovable work) or within 15 years (immovable goods) with effect for 2012 and the remaining years of the applicable revision period. We note also that, in the event of an improvement to the input VAT deduction entitlement of an organisation (based on the new circular), it could even be argued that the organisation would have an entitlement to input VAT recovery of all input VAT paid since 1 January 2009 (on normal costs and investment goods), as the current administrative circular is only the confirmation of an existing interpretation of the European VAT legislation by the CJEU. However, this would imply the need for a regularisation of invoices issued in the past, which may not be beneficial for the organisation (and/ or the members). On the other hand, the Belgian VAT Authorities have confirmed in the aforementioned circular that they would not claim any VAT for the past. This new circular came into force on 1 January 2012. It cancels and replaces all previous administrative commentaries. International associations should therefore review their VAT situation depending on the nature of their main objective. Finally, we note that a change in the VAT status of an organisation does not necessarily imply a change in its status for income tax purposes. However, an (in-depth) analysis of this aspect could be advisable, especially if the application of the new rules significantly changes the VAT status of the organisation. Erwin Boumans JEAN-CLAUDE SEMUCYO Belgium – Brussels erwin.boumans@bdo.be jean-claude.semucyo@bdo.be In general terms, Brazil’s legal system allows the taxation of certain business operations when these involve a taxable event which creates a tax liability. Among the various tax rules established by Brazilian law, the principle of noncumulativeness stands out. According to this principle, it is possible to deduct from the tax levied on the shipment of goods, tax amounts already paid in previous transactions referring to the same goods or to the raw materials required for their manufacturing. The ICMS (State VAT) is an example of a tax subject to this principle. Most Brazilian companies encounter this tax. Certain companies end up generating an accumulated credit as a result of not offsetting credits wholly or partly against debts in nontaxable shipments. These shipments occur for different reasons, among which exports stand out. In particular, the accumulated credit can be used both to settle tax debts with the State and to transfer the credit to a different establishment of the same company, supplier, service provider or other companies recognised by the Finance State Department. With proper tax planning, it is therefore quite possible for companies which are fully active in Brazil to offset accumulated tax credits, subject to compliance with the legal requirements. This would certainly increase business profitability and reduce the tax burden. RAFAEL LEITE JIVAGO ALMEIDA WAGNER BASTOS Brazil – São Paulo rafael.leite@bdobrazil.com.br jivago.almeida@bdobrazil.com.br wagner.bastos@bdobrazil.com.br
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Page 7 and 8: LUXEMBOURG A 3% VAT RATE FOR E-BOOK
Page 9 and 10: NAMIBIA CHANGES TO THE VAT ACT FROM

Indirect Tax News 1 - March 2012 - BDO International

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