TAX OPTIMIZATION - VAT & GOODS SUPPLY CHAIN STRUCTURES AGN EU REGIONAL MEETING 2017

Transcription

1 TAX OPTIMIZATION - VAT & GOODS SUPPLY CHAIN STRUCTURES AGN EU REGIONAL MEETING 2017 KEY VAT PRINCIPLES Who is the Supplier? Who is the Customer? Where are the goods delivered from and to? Where does ownership transfer? Who is the Importer? What are the delivery terms [Incoterms]? Differences - contracts vs. invoices vs. delivery INCOTERMS DELIVERY TERMS Contract terms Invoice delivery description Website terms and conditions Shipping agent & Import declarations EXW Sold ex-works, typically at Supplier s factory gates Supplier selling in own country - local indirect export rules Intermediate/website Seller possibly also selling in Supplier s country Final Customer is normally the importer into his own country CIF/FOB/DUP

2 Cost, Insurance & Freight, Free on Board, or Delivered Duty Unpaid Delivered to port in Customer s country or directly to Customer Customer is normally the importer Seller selling as export from own country Pricing exclusive of Import Duty and free of VAT [sold on the high seas ] DDP Delivered Duty Paid to the Customer Seller is often the importer into the Customer s country Seller is seen as selling the goods in the Customer s country after Import clearance Seller may have to register for VAT in the Customer s country Selling price includes the cost of Import Duty and charges VAT. DDP (VAT Unpaid) Delivered Duty Paid to the customer Customer is the importer for VAT purposes Price includes Import Duty, but Duty frequently seen as being paid on behalf of the Customer. PROBLEMS & SOLUTIONS FOR EXAMPLES TRIANGULATION (1) Invoice chain (1) is normal triangulation requirements. (2) For Invoice chain (2) USCo 1 may not have an EU VAT number. FrCo cannot invoice for the goods free of VAT but must charge French VAT. USCo 1 can get a French VAT number to claim a refund of the French VAT and declare the despatch to ItCo as an intra-eu supply. Alternatively, USCo 1 can get an Italian VAT number so that the French supplier can zero-rate his despatch. (3) For Invoice chain (3) USCo 1 still needs a French or Italian VAT number as in (2), but now cannot zero-rate the sale to USCo 2. USCo 2 must also get either a French or Italian VAT number. 2

3 Solutions: One common solution is for one or both of the US companies to operate on a commission basis if the commercial arrangements will allow this. Alternatively, if either US company has a subsidiary company in the EU, they could contract through that company instead. MULTIPLE EU SUPPLY CHAIN assume all EU companies are VAT registered. Need to reduce the intra-eu transactions if we want to create triangulation. Problems with the current arrangements: FrCo can zero-rate its despatch to Germany. BCo cannot use triangulation so must register for VAT in Germany and charge German VAT to LuxCo, etc. BCo, LuxCo and ItCo probably all need German VAT numbers unless there are local VAT rules for nonresident businesses. Possible Solutions: (1) BCo and LuxCo both get a French VAT number The supply chain between LuxCo, ItCo and GCo could now qualify for triangulation. (2) LuxCo and ItCo both get a German VAT number The supply chain between FrCo, BCo and LuxCo could now qualify for triangulation. (3) BCo & LuxCo OR LuxCo & ItCo operate on a commission basis (4) The delivery of the goods is changed ONLINE MARKETPLACE Known [frequent] problems: Supplier 1 is delivering his goods into the Marketplace warehouse. Who is the importer into Marketplace Member State? The warehouse may not be in the same country as the Marketplace company. When Marketplace sells Supplier 1 s goods is it acting as Agent or Principal many online Marketplaces act as a Disclosed Agent? Agent = commission, Principal = margin, leads to difference between the VAT returns and the company accounts or tax returns. Many online Marketplaces will treat the transaction as a sale TO the Marketplace and a sale BY the Marketplace some EU Member States may make this treatment mandatory. Are the goods in the warehouse under the VAT rules for Call-Off Stock or Consignment Stock which can 3

4 either delay the import clearance until the point of sale, or treat the Marketplace as the importer for VAT purposes? Rules may vary in different countries. Someone is likely to have EU VAT obligations for imports, filing VAT returns, EC Sales Lists (Recapitulative Statements) and possibly Intrastat. The Distance Selling rules are often overlooked. Supplier 2 is delivering his goods directly following an order on the Marketplace website. Terms and conditions often do not make clear what the delivery terms are or whether the price includes local import duty and VAT. If Marketplace is an Agent, when it self-bills Suppliers 1 & 2, it deducts its commission. The commission should be outside the scope of VAT in both cases, but VAT is often charged by mistake. Government actions: In the UK, the Government is considering a split payment model where the online Marketplace splits the customer s payment and pays the VAT directly to the Government. Another UK solution for when an overseas supplier does not meet his VAT obligations is to make the online Marketplace jointly liable for the VAT due. The EU Commission is considering extending the Mini One Stop Shop solution for electronic services to supplies of goods to replace the Distance Selling rules. Solutions: For Supplier 1, it is clearly better for the Marketplace to act as a Principal buying and selling the goods at the point of sale, but many will not want that business model. For Supplier 2, the Marketplace will only want to act as Agent. For electronic supplies of services the online Marketplace is presumed to deal with the VAT filing requirements. It is likely that a similar solution will impose this obligation on the Marketplace for goods as well. DROP-SHIP Known Problems: Seller s terms and conditions do not make clear that the customer will have to pay additional import duty and/or VAT, leading to customer complaints and pricing problems Seller paying import duty on the retail value when he might be able to use the lower purchase price. Seller wrongly accounting for his local VAT on the sale. Seller may have a VAT registration obligation in the customer s country. Overseas supplier attaching the lower value first invoice to the package so the customer finds out the wholesale price and the Seller s profit margin. Overseas supplier mis-declaring the goods on the paperwork leading to the goods being seized by the Customs authorities. 4

5 Issues to deal with: Seller must specify the delivery terms to the customer DDP, DUP, etc have different implications for the importation. Seller cannot charge his local VAT as the goods are not delivered from his Member State to the customer s If the Seller is the importer, he will need to account for import duty and VAT and sell at duty-inclusive prices. If the customer is the importer, the Seller sells the goods on the high seas free of VAT, but the customer pays import duty and VAT at the final, higher, price. The shipping agent may have to switch the documents before the goods are declared to the Customs authorities and ensure the correct value is declared. If customers are in EU countries, Seller may need local VAT registrations in all the customers Member States unless he specifies that the prices are exclusive of duty and VAT and that the customer is the importer. Overseas supplier and shipping agent will need to be fully informed of the shipping and import arrangements to make sure that the right documents are attached to the package. Solutions: There are no actual solutions needed for drop-ship arrangements, only to understand what the Seller wants to do commercially and what the VAT and Duty obligations will be and arrange the contracts and delivery terms as necessary. 5