Implications for the 2015 VAT Changes
Customers, Supplies, Place of Consumption
VAT Department
3rd September 2014
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
2
• Customers - different categories, different VAT obligations
• Place of the customer/place of consumption
• Supplies - state of play, liability for supplies
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
3
Customers - different categories, different VAT obligations
As of 1st January 2015, taxation for Telecommunications, Broadcasting and
Electronically supplied services shall be, in all circumstances, i.e. for B2B or
B2C, both in the EU and outside of the EU, at the place where the
customer is located.
• the customer can be a taxable person (business) or a non taxable person
(consumer)
- for a taxable person = the place where the business is established or
has a fixed establishment to which services are provided
- for a non-taxable person it will be:
(a) for a legal person the place where that person is established;
or
(b) for a physical person the place where that person has a
permanent address or where he usually resides
• the supplier can be established within or outside the EU
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
4
EU supplier providing services to:
1. a business located in a different Member State: VAT is not
included in the invoice. Customer accounts for the VAT
(reverse charge mechanism). Nothing changes, but
2. a non-taxable person located in a different Member State: VAT
is to be charged in the Member State of the customer (no
longer the VAT of the MS of the supplier). Supplier has to
account for VAT. This is the new concept.
3. a business or a non-taxable person who are located outside of
the EU, the place of supply will be outside of the EU and
therefore no VAT will be charged
Exception: if the service is effectively used and enjoyed within
the EU, the Member State concerned may decide to tax it.
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
5
Non EU supplier providing services to:
1. a business located within the EU: VAT is not included in
the invoice. Customer accounts for the VAT (under the
reverse charge mechanism). No changes.
2. a non-taxable person located in an EU country: VAT of the
Member State of the customer should be included in the
invoice. The supplier accounts for VAT.
This is the position already existing since 2003 for
electronically supplied services but which will also be
extended for broadcasting and telecommunications.
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
6
For a Maltese supplier, there will be the following possibilities:
•
Business customer in Malta
Non business customer in Malta
•
EU business customer - no VAT. VAT number of customer on
the invoice. Report sale in the recapitulative statement – no
change;
EU non-business customer - charge the VAT of the Member
State of the customer – the new concept
•
Non EU business customer
Non EU non-business customer
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
-
charge Malta VAT
charge Malta VAT
-
no VAT
no VAT
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Who is the customer and where is the place of the
customer?
Three elements to consider:
• Status of the customer
- Taxable person
- Non-taxable person
(a) Physical person (private individual)
(b) Legal person (e.g. public authority)
• Capacity of the customer
- Business or private use of a taxable person
• Location of the customer
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
8
Customer and VAT identification number
• Art 18 of the VAT Implementing Regulation provides guidance for
the supplier to identify the status of the customer:
Art 18(1):
- a customer can be seen, by the supplier, as a taxable person
when he has a VAT number or is in the process of getting one
provided the supplier has no information to the contrary
Art 18(2) first subparagraph:
- a customer can be seen, by the supplier, as a NON-taxable
person when the supplier can demonstrate that the customer
did not communicate a VAT number provided he has no
information to the contrary
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
9
Customer does not communicate his VAT identification number
– option for the supplier
• New provision - second subparagraph in Art. 18(2)
 irrespective of any information to the contrary, for
telecommunications, broadcasting and electronic services the
customer may be treated as a non-taxable person when he
does not communicate his VAT identification number
 Option for the supplier – he does not have to follow, but
 More sure and easy for the supplier to apply. Otherwise he
might have reporting problems – invoicing / recapitulative
statement, etc.
 Revenue only for one and the same Member State in any case
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
10
Location of the final consumer
• for a physical person – permanent address or usual place
of residence
• for a legal person – place where established:
1) place where functions of central administration are
carried out, or
2) other establishment: sufficiently permanent with a
suitable human and technical structure allowing it to
receive and use services supplied for its own needs
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
11
Customer in more than one place
• Guidance in NEW Art 24 of the VAT Implementing Regulation
 For physical persons priority to the place where the person
usually resides unless
- there is evidence that services are used at a permanent
address
 For legal persons priority to the place where its functions of
central administration are carried out unless
- there is evidence that services are used at other
establishment with sufficient permanence and suitable
human and technical structure allowing it to receive and
use services supplied for its own needs
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
12
How to determine the place of consumption
• How to determine where the customer is:
- Established
- Has his permanent address, or
- Usually resides?
• In many situations it is practically impossible to
determine with certainty
• Solution = PRESUMPTIONS
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
13
Presumptions
• Implementing Regulation provides for specific and
general presumptions for different situations
• High volume low value supplies
• Assist supplier in identifying place of taxation
• Provide simplicity and legal certainty
• Presumptions can be rebutted in certain circumstances
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
14
Presumptions – supplies at a physical location of supplier
• Presence of the customer is required
Examples ‐ Telephone booth, internet cafe, hotel, wi‐fi spot
Practical issues for the supplier
- Business and non‐business customer?
- Customer address?
• Presumption = B2C supply + customer resides at location of
telephone booth, internet café, hotel, wi‐fi spot
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
15
Presumptions – services through other specific means
• Fixed land line
- Presumption = where land line is located
• Mobile networks (Prepaid/Post paid)
- Presumption = country code of SIM card
• Decoder / viewing card
- Presumption = where decoder is located or viewing card is
sent
- Decoder + landline? Landline takes precedence
• Presumptions above apply for B2C only
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
16
Presumptions – other digital supplies
• Supplies not covered by specific presumptions
General presumption
 Supplier decides presumption based on 2 items of noncontradictory evidence
More than 2 items of evidence?
Contradictory evidence? – use 2 most reliable
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
17
Evidence
• Billing address of customer
• IP address of device used by customer
• Bank details (location of bank account used for payment)
• SIM Country code of customer
• Location of fixed landline
• Other commercially relevant information
Examples
- Unique payment mechanisms
- Customer trading history
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
18
Rebuttal of presumptions
• Supplier can rebut presumptions
 Usually on approach by customer
 3 items of non‐contradictory evidence
• Tax Administration can rebut presumptions
 where indications of misuse or abuse
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
19
Electronic Services and Telephone Services supplied online – Article 9a
(Imp. Reg.)
•This article applies to situations where electronic services and telephone services,
including VOIP, are supplied via a telecommunications network, interface or portal
•The taxable person providing the services is presumed to act in his own name
and on behalf of the electronic service provider and he shall be deemed to have
received and supplied those services himself UNLESS
He indicates the provider of the electronic service as the supplier and this is
reflected in their contractual arrangements;
He does not sanction the charge to the customer or sanction the delivery of
the services or set general terms and conditions of the supply;
He invoices or issues bill or receipt by specifically identifying the electronic
service provider as the supplier of those services.
•These conditions do not apply where a taxable person only provides for
processing of payments for electronic services without taking part in the supply of
those electronic services.
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
20
Transitory Provisions
• For B2C supplies made by an EU business the following shall apply:
(a) Services that are rendered before 1st January 2015 shall be taxed
at the place of the supplier
(b) Services that are rendered on or after 1st January 2015 shall be
taxed at the place of the customer
(c) Payments made on account before 1st January 2015 but service
rendered on or after 1st January 2015, taxable at the place of the
supplier (as per VAT Committee guidelines almost unanimously
agreed)
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
21
For further detailed explanation:
Explanatory notes
on
the EU VAT changes to the place of supply of
telecommunications, broadcasting and
electronic services that enter into force in 2015
• Very extensive explanatory notes published by the Commission
• Not legally binding but enjoying a very wide consensus among the
Member States
• May be accessed at:
http://ec.europa.eu/taxation_customs/resources/documents/t
axation/vat/how_vat_works/telecom/explanatory_notes_2015
_en.pdf
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta
22
Thank You
MINISTRY FOR FINANCE
VAT Department, Centre Point Building,
16, Ta’ Paris Road, Birkirkara, Malta