Place of provision of services:
An international perspective
Distance to GST. Has the Union budget 2012 shortened it?
Saturday, June 2nd, 2012
Michael Evans CA FCPA FTI
Taxsifu ©
Liability is limited by a scheme approved under Professional Standards Legislation.
1
Scope of topic
The two approaches to collection of
VAT/GST
NZ, Singapore, Australia, Canada, South
Africa
The EU
Sharing the tax base and enforcement in
Federal jurisdictions and common markets
2
The “NZ model”
GST is payable to the central government by the
supplier on goods and services supplied by him
Exported goods and services are zero-rated
Registered recipients claim input tax credits
“Place of supply” is used to identify transactions for
which the obligations of registration and collection of
GST can be imposed
Imports of goods are subject to GST at the border
Reverse charge applies to acquisition by registered
traders of services from offshore
No reverse charge in Singapore
Limited application in Australia and NZ
3
EU model
VAT is payable by the supplier to the State in
which he is established for:
Goods and services supplied by him in that State
to recipients in that State
Goods and services supplied if the place of supply
is in that State
Goods and services supplied by him to
unregistered recipients in another State
Sometimes a different rule for goods
Services supplied to non-EU recipients do not
have a place of supply in any State of the EU
 effectively a zero-rate
4
EU model (cont)
VAT is payable by a recipient that is registered in
a State if:
The supplier is not established in that State
The place of supply is in that State
The reverse charge
“Place of supply” is used to identify the State of
taxation
Which state collects the revenue
Imports of goods are subject to GST at the border
Reverse charge applies to acquisition by registered
traders of services from offshore
5
Difference
The difference between the two models is:
NOT ABOUT how much VAT / GST is collected
BUT IT IS ABOUT how the revenue is shared
between the States
The problem arises because
State taxing authority
How to claim ITCs for tax collected by other State
Enforcement is easier on local sale by local
authority
Supplier is the main point of focus
6
Sharing revenue between States
Singapore and NZ – no sub-national states
Australia and Canada – central collection
Australia - Redistributed on “HFE” system
Interim report of GST distribution review panel
Canada – proportionate to provincial consumption
EU model – collected by member States on
supplies made “in the member State”
Place of provision for inter-state supplies - general
B2B services – where registered recipient is established
» Reverse charge in place of receipt
B2C services – where supplier is established
7
EU specific rules
Connected with immovable property
Transport
Passenger – place of transport proportionate
to distance
Goods – place of departure
Cultural, artistic, sporting, scientific, educational,
entertainment or similar – where carried out
Loading and handling / valuations and work on
movable property – where the work is carried out
Short term hire of transport – place of delivery
8
EU Specific rules
Restaurant and catering
On board ships, boats or trains – point of
departure
Otherwise - where the services are carries out
Electronically supplied services by person
outside the EU – place where unregistered
recipient is resident
Effective use and enjoyment override
Generally if recipient is not registered, in the
place in which the
9
Other ideas for Federal jurisdictions
Common external tariff (CET) model
Lodge in home State
GST and ITC separated per State
State pays across to other States
P-VAT
Supplier pays GST collected to other State
CVAT
Separate return to central clearing house for
interstate sales
Each registrant pays interstate GST and claims
interstate ITC
10
Comments
Generally, traders are not required to register
and collect VAT/GST in the State in which they
are not established – lack of enforcement
Audit and integrity issues
Trader in one State does not remit VAT/GST on sale
made from its establishment (to a resident in another
State)
Risk of fraud, error, inconsistent interpretation
Recapitulative statements in EU – expert study
» http://ec.europa.eu/taxation_customs/common/public
ations/studies/index_en.htm
Only relevant in practice for registered recipient
with exempt supplies.
11
Comments
Different rates / scope?
Complexity, uncertainty and inconsistency
Rules reflect negotiations between the States
as to revenue share
US States have enforcement limitations for
goods purchased from interstate
GST on imported goods and services
How to match integrity, State revenue needs,
certainty, simplicity and neutrality
12
Exported services from EU
licences, trade marks and similar rights advertising services;
consultants, engineers, consultancy firms, lawyers, accountants , data
processing and the provision of information;
obligations to refrain from pursuing or exercising a business activity or
a right referred
banking, financial and insurance transactions including reinsurance,
with the exception of the hire of safes;
the supply of staff;
the hiring out of movable tangible property, with the exception of all
means of transport;
access to natural gas and electricity distribution systems and the
provision of other services directly linked thereto;
Telecommunications, radio and television broadcasting services;
electronically supplied services
13
NZ zero-rated exported services
Services directly connected with goods or real
property outside the country
Not connected with tangible property in NZ
To a non-resent that is not in the country
Not connected with tangible property in NZ
To any person who is not in the country where
use and enjoyment is outside
Rights or information for use outside the country
Restrictive covenants for same
International transport of goods and passengers
Services connected with temporary imports
14
Michael Evans CA, FCPA, FTI
Regd. Tax Agent (55349002)
PO Box 1678, Rozelle, NSW, 2039
Phone: +61 2 98183315
Mobile: +61 412252228
email: mbevans@taxsifu.com.au
Liability is limited by a scheme approved under Professional Standards Legislation.
15