Global Indirect Tax Brief

Transcription

GLOBAL INDIRECT TAX SERVICES
Global Indirect
Tax Brief
A roundup of developments in
VAT, GST, trade and customs, and
other indirect taxes
Issue No. 26 – July 2012
kpmg.com
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
Contents
03
Introduction
04
OECD Briefing 2012
05
Australia
06
Belgium
07
Brazil
08
Canada
09
China
10
Colombia
11
Cyprus
12
Denmark
13
France
14
Germany
15
Indonesia
16
Mexico
17
Portugal
18
Romania
19
Spain
UK
US
20
22
2 Global Indirect Tax Brief
Introduction
Welcome to the new edition of KPMG’s Global Indirect Tax
Brief, a quarterly roundup of insightful commentary on indirect
tax-related legislative changes, court decisions and policy
determinations from various jurisdictions.
In March, KPMG’s Global Indirect Tax Services released the
2012 Benchmarking Survey on VAT/GST, which established
benchmarks for measuring VAT/GST performance. Some
73 percent of respondents reported a VAT/GST turnover above
US$1 billion. Considering an average global VAT/GST rate of
15.42 percent1, these companies are potentially charging about
US$422,465 of VAT/GST every day (notwithstanding exemptions).
Therefore, any small error in calculation, any oversight of recent
changes, any mistake in applying the relevant legislation, or any
missed opportunities to optimize a company’s VAT/GST position,
can trigger costly consequences. This is why taxpayers should
concentrate more than ever on the performance of their indirect
tax functions.
There is now an additional incentive, too, as many countries
shift their focus towards indirect tax. It is a trend that should be
embedded in a company’s indirect tax strategy, ensuring they
closely monitor indirect tax developments throughout the world.
• indirect tax audit remediation and tax arbitration procedures
available to taxpayers in the US and Portugal
• VAT developments in the real estate sector (Belgium
and Cyprus)
• the harmonization of rates applied to interstate goods
supplies in Brazil.
Besides VAT/GST, recent developments in customs (Canada,
China) and stamp duties (Australia) also deserve attention.
In recent years, the Organisation for Economic Cooperation and
Development (OECD) has been developing a global framework
for applying VAT/GST on international trade. In the article ‘OECD
Briefing 2012’, two KPMG Indirect Tax partners who are involved
in this initiative summarize the work done so far, and how the
OECD is shaping the future of VAT/GST.
I hope that you find the topics covered in this publication of
interest and of value.
If you would like to discuss any of the issues raised, or if you have
any other indirect tax question, please contact me or any of the
KPMG member firms’ Indirect Tax specialists. Their details are
listed at the back of this publication.
In this edition of the Global Indirect Tax Brief, we comment on
issues including:
• the way some European Member States have been applying
certain areas of the European Directive or European
jurisprudence, notably for:
• voucher taxation
• the VAT treatment applied to waiving debts
• the input tax deduction right of holding companies
• the criteria used to ascertain the existence of a permanent
establishment for VAT purposes
• the taxation of supplies or leasing of aircrafts to airlines (see
articles from the UK, France, Germany, Spain).
Tim Gillis
KPMG’s Head of Global Indirect Tax
T: +1 202 533 3700
E: [email protected]
1Source: KPMG Tax rates online
Global Indirect Tax Brief 3
taxation in the jurisdiction(s) of use have
been considered: The Direct Use Method
(where only one supply is recognized:
the supply of a service or intangible by
the supplier) and the Recharge Method
(where two supplies are recognized: (i)
the supply between the external supplier
and the establishment that represents
the MLE in the business agreement
and (ii) the subsequent internal
recharge to the establishment(s) of
use). The Recharge Method is generally
considered as the preferred option and
Guidelines are currently being drafted.
OECD Briefing 2012
The Organisation for Economic Cooperation and
Development (OECD) is developing a global framework for
applying VAT/GST to international services. These guidelines
are needed to address uncertainty and risks of double or
nontaxation resulting from inconsistencies in the application
of VAT/GST to international trade.
Amanda Tickel (Partner, KPMG in the UK)
and John Bain (Partner, KPMG in Canada)
participate in a Tax Advisory Group (TAG)
at the OECD considering this framework.
The group consists of governments,
businesses and academia, and is focused
on shaping the principles and wording of
the new guidelines. Here, Amanda and
John provide an update on the work of the
advisory group so far and a look ahead to
what is coming in the future.
So far…
The OECD has recognized that the
development of VAT/GST systems on
a country-by-country basis has led to
different rules as to when and by whom a
supply should be taxed. In 2006, the OECD
announced its intention to develop a set
of internationally recognized guidelines
for VAT/GST. They aim to improve the way
different countries’ VAT/GST systems
interact, and seek to ensure services
and intangibles are subject to tax only
once – in the country of consumption.
To date, guidelines have been developed
and published with respect to the following:
• applying the destination principle
on place of taxation for business-tobusiness (B2B) internationally traded
services or intangibles
• applying the ‘neutrality’ principle to
ensure that business has the right to
deduct/recover input tax, recognizing
that recovering VAT/GST paid in
foreign countries is often costly and in a
significant number of cases impossible.
3)Place of taxation for cross-border trade
in services and intangibles linked to
immovable (or real) property. The advisory
group has accepted the underlying
principle that taxing rights should be
allocated to the country where the
property is located. A description of the
main categories of services/ intangibles
covered by these exceptions to the main
rule have been agreed and will be used to
draft guidelines by the end of this year.
The guidelines referred to in points two and
three mentioned are expected to be ready
for public consultation in early 2013.
Currently…
In future…
Work is in progress in the following areas:
Looking ahead it is expected that further
work will be done in 2013-2014 to develop
guidelines in respect of cross-border
supplies of services and intangibles to final
consumers (B2C); dispute resolution and
mutual cooperation between countries
to resolve conflicts and consideration of
issues related to avoidance and abusive
practices. A complete set of International
VAT/GST guidelines should be presented
by the end of 2014.
1)Commentary on the interpretation of
‘neutrality’ and guidance on a practical
implementation. A draft Commentary
was approved for a public consultation
in June 2012 and comments are invited
by 26 September 2012 (www.oecd.org/
ctp/ct).
2)The VAT treatment of B2B supplies of
services/intangibles across borders to/
between branches of a single legal entity
with establishments (e.g. branches) in
more than one jurisdiction (a multiple
legal entity or MLE). The advisory
group is developing guidelines to
determine how best to allocate taxing
rights on externally acquired services
or intangibles by an establishment of
a MLE for use by one or more other
establishment(s) of the same MLE.
Two approaches were considered:
a) Taxation at the establishment where
the service or intangible is used
(Allocation Approach)
b)Taxation at the head office of
the MLE, irrespective of the
establishment where the service
is used (Head Office Approach).
The Allocation Approach is preferred
and from this two methods to ensure
Conclusion
Businesses need internationally agreed
upon principles to ensure a consistent
interaction of VAT/GST systems. The
guidelines currently being developed should
improve the way different countries’ VAT/
GST systems interact by striving to ensure
services and intangibles are subject to
tax only once.
If you would like to know more about this
subject, please contact:
John Bain
KPMG in Canada
T: +1 416 777 3894
Amanda Tickel
KPMG in the UK
T: +44 20 7694 3780
Importantly, some
acquisitions can be liable
for Australian stamp duty
even where no Australian
entity is directly involved –
the only requirement is
that it involves Australian
land.
Australia
Transferring shares in a company with downstream
interests in Australian real estate can trigger major
Australian tax implications – and even result in the
land being charged and sold.
Australian stamp duty is an often
overlooked area of tax that can have major
ramifications on offshore transactions.
What is it?
Stamp duty is a tax imposed at state and
territory level on certain transactions, for
example transfers of businesses, land
or intellectual property, and acquiring
interests in partnerships or trusts with
Australian assets.
In terms of offshore transactions,
stamp duty can also apply to dealings in
companies and trusts (entities) that are
entitled to Australian real estate assets,
whether directly or through downstream
entities. Where these ‘landholder’
provisions apply (not to be confused with
the ‘land rich rules‘ of Australian capital
gains tax), state stamp duty can be
payable at rates of up to 7.25 percent of
the gross market value of the landholdings
and goods of both the entity and any
downstream entities.
As Australia’s mainland has five states
and three territories, it should come as no
surprise that the stamp duty regimes differ
significantly, both in the way they operate
and in their rates.
What types of transactions
will attract landholder duty?
Landholder provisions must be considered
when:
• acquiring an interest of 50 percent in an
unlisted private company
• acquiring an interest of 20 percent in an
unlisted unit trust
• acquiring an interest of 90 percent in
a listed company or trust.
Importantly, some acquisitions can be
liable for Australian stamp duty even where
no Australian entity is directly involved –
the only requirement is that it involves
Australian land. For stamp duty purposes
‘land’ means not only freehold land, but also
interests in land such as leases, fixtures
(such as buildings and infrastructure),
mining tenements and also items that are
merely attached to the land.
Duty liability can result not only from direct
acquisitions of entities, but also as a result
of mergers or liquidations. For example, a
takeover of one listed multinational mining
company by another on the NYSE, LSE or
other international exchange could result in
stamp duty being imposed (commonly at
5.5 percent) on the gross value of all of the
Australian mining tenements, offices, plant
and machinery of the acquired company, as
well as its downstream entities.
Even a transaction between group
entities, such as a merger or internal
restructure, can be liable for duty.
Although some exemptions are available
for intra-group transactions, the
requirements differ significantly between
different states and territories and are
not automatic. Businesses will need
to prepare submissions to the revenue
authorities detailing why the exemption
should be granted and satisfying
complicated requirements.
To add to the complexity of the landholder
rules, anti-avoidance provisions exist that
pool interests acquired by related parties
(such as related corporations) or unrelated
parties acting in tandem. Duty can also arise
on certain derivative arrangements relating
to rents, profits and capital appreciation of
landholdings. This means that an entity can
be deemed a ‘landholder’ even though it
doesn’t actually own any land.
Why should you care about
Australian stamp duty?
The enforcement mechanisms differ
between states. If the duty is not paid,
the revenue authorities have the power
to seize and sell the land to settle the
liability. Other impacts can include director
liabilities, financial penalties and, of
course, reputational risk, which can be
hard to recover.
subject or any other indirect tax matter
concerning Australia, please contact:
Matthew Stutsel
KPMG in Australia
T: +61 2 9455 9094
… in the first half of
2012 there have been some
interesting developments,
notably in connection to
the VAT revision period as
well as to the VAT-exempt
immovable rent.
Belgium
Recent VAT developments in
the real estate sector
Given the complexity of the Belgian VAT
regime on immovable property, and the
magnitude of the VAT amounts at stake,
VAT has always been an important aspect
of the Belgian real estate sector.
In the first half of 2012 there have been
some interesting developments, notably
in connection to the VAT revision period as
well as to the VAT-exempt immovable rent.
The pace at which these VAT rules evolve
requires businesses to be watchful and
react accordingly.
As a general rule, taxpayers can
immediately deduct the input VAT they
incur. However, for investment goods, the
VAT legislation allows for a revision period,
during which the initial VAT deduction
can be revised if the investment goods
are no longer to be used for VAT taxable
activities. For immovable property, this
revision period is 15 years. In the past this
15 year period began on 1 January of the
year in which the VAT became due (i.e. at
the moment of supply – unless the invoice
is issued or the payment is received prior
to the supply, in which case the VAT would
become due on that earlier point in time).
According to a recent administrative
decision, effective from 1 January 2012,
the VAT revision period starts on 1 January
of the year in which the immovable
property is taken into use. In practice,
this extends the VAT revision period, in
particular in situations where construction
and invoicing are spread over several
years.
Another important development relates
to a Belgian court case on immovable
property. Such a transaction is in principle
VAT exempt and therefore does not grant
any right to deduct input VAT. This is why
many VAT taxpayers seek VAT taxable
alternatives that enable them to deduct
the often large amounts of input VAT they
incur in connection to buildings. Since the
Temco Europe SA case of the European
Court of Justice1, it has been generally
accepted that the essential object of a
VAT exempt immovable rent is the passive
manner in which the immovable property
is put at the disposal irrespective of the
fact that the tenant has an exclusive
enjoyment of the immovable property.
However, recently the Brussels Court
of Appeal leaned towards a more civil
law approach, stating that the exclusive
enjoyment is an essential element for a
VAT-exempt immovable rent.
Regarding the revision period, the new
administrative standpoint provides a
clear and workable ground rule, although
not always beneficial for the taxpayer. In
relation to the VAT-exempt immovable
rent, the interpretation of the court
limits the scope of the exemption and
could therefore create opportunities. The
practical impact is, however, less clear,
certainly given the fact that Belgian VAT
authorities have not yet officially reacted to
this judgment.
concerning Belgium, please contact:
Peter Ackerman
KPMG in Belgium
T: +32 2 708 3813
1 Judgment of 18 November 2004 in case C-284/03.
This 40 percent ratio of
imported content should
be verified by the tax
authorities, according to
specific procedures to be
further regulated by the
National Council of Fiscal
Policy (CONFAZ).
Brazil
Harmonization of interstate
VAT rates involving imported
goods
Federal Resolution 13, published on
26 April 2012 and in force as of 1 January
2013, unifies the Brazilian State VAT
(ICMS) interstate rate applicable for
imported goods, when those goods are
part of interstate transactions.
Currently, there are various rates
applicable on interstate transactions:
• 7 percent applicable on sales made by
business based in the south or southeast regions to customers in the north,
north-east and mid-west regions, as
well as to Espírito Santo state.
• 12 percent applicable on:
a) sales from any region to the
customers in south or southeast regions
b) sales from north, north-east,
mid-west regions and Espírito
Santo State to customers in north,
north-east, mid-west regions and
Espírito Santo state.
Under Federal Resolution 13, these
rates were unified into one single rate
of 4 percent for interstate transactions
involving imported goods, regardless of
the origin and destination in Brazil.
However the unified 4 percent ICMS rate
will be applicable only in the following
situations:
• if the imported goods are not subject
to any kind of industrial process after
customs clearance
• if the manufactured product resulting
from the assembling or manufacturing
process has more than 40 percent of
imported good or raw materials. This
40 percent ratio of imported content
should be verified by the tax authorities,
according to specific procedures to
be further regulated by the National
Council of Fiscal Policy (CONFAZ).
The unified ICMS rate will not be
applicable to transactions involving:
• imported goods with no national
equivalent, according to guidance to
be provided by the Council of Foreign
Commerce Representatives (CAMEX)
• imported goods purchased by
companies located and benefiting
from the Manaus Free Trade Zone
regional tax incentives (Basic
Productive Process)
• goods covered by other listed
tax incentives (e.g. digital TV
manufacturing, electronics and IT, etc.)
• natural gas originated from
foreign sources.
for domestic products against imported
products.
Considering this tax environment, many
Brazilian ICMS taxpayers structured their
operations and supply chains to take
advantage of ICMS reductions on imports.
This involved channeling imports into
Brazil through trading companies located
in states where ICMS benefits were
granted.
Even though the legality and
constitutionally of such ICMS import
incentives have been discussed by
Brazilian judicial courts for many years,
the unified ICMS rate of 4 percent will
harmonize the current harmful scenario
of tax competition.
concerning Brazil, please contact:
Elson Bueno
KPMG in Brazil
T: +55 1121833281
The aim of this new rule is to reduce or
tackle the harmful tax competition among
Brazilian states, known as the ‘Tax War
of Ports’. Because some Brazilian States,
such as Espírito Santo and Santa Catarina,
granted ICMS tax incentive on imports,
the effective ICMS rate on imports
sometimes reached 3 to 4 percent,
despite ICMS interstate rates (of 7 or
12 percent) and the mandatory CONFAZ
pre-approval necessary for state
incentives. Moreover, this measure
intends to create a more competitive price
Importers and
exporters will have
unique client identifier
numbers, which will
enable the CBSA to
manage their identification
and enrollment in CBSA
programs and services
more efficiently.
Canada
Canada to streamline
customs process for
importers and exporters
what is owed. The AR ledger will also
produce a consolidated statement of each
importer account.
Companies importing and exporting goods
in and out of Canada will be affected
by a Canada Border Services Agency
(CBSA) initiative to modernize systems for
assessing and collecting duties and taxes,
and to automate many processes.
The AR ledger will include an electronic
payment option through which the CBSA
will be able to offset refunds against
receivables. In addition, importers will
be able to obtain their statements via
a secure website. The CBSA proposes
completing this phase of the program
in 2013.
Once implemented, the program will allow
importers and exporters to use online
services to make electronic payments,
view consolidated account statements
and register for CBSA programs (e.g.
Partners-in-Protection or Customs
Self Assessment) via a new client
registration module.
The CBSA’s key objective is to ensure
more accurate, complete, reliable and
timely reporting of goods, while providing
stronger internal financial controls for
both importers and exporters and the
CBSA. The CBSA proposes a 10 year
implementation of the program in
four phases.
Accounts receivable ledger
The CBSA will compile the financial
reporting of import transactions and the
payment of duties and taxes electronically
in an electronic accounts receivable
(AR) ledger, eliminating existing manual
processes. For example, transactions
will be listed under the individual
importer with a running balance of
Client identification
Importers and exporters will have unique
client identifier numbers, which will enable
the CBSA to manage their identification
and enrollment in CBSA programs and
services more efficiently. The CBSA
proposes completing this phase of the
program in 2014.
Assessment, reassessment
and client registration
In the third phase of the program, the
CBSA will address the functionality
between CBSA assessments and
re-assessments, which can affect the
amounts importers and exporters owe
to the CBSA. In addition, the CBSA will
create a new client registration module
allowing it to integrate trade programs
under one umbrella. Importers and
exporters will be able to register for
CBSA programs and view their accounts
through a self-service portal. The proposed
timeline for this phase is 2013-2016.
Trade modernization
The final phase focuses on new processes
and tools to modernize the CBSA’s trade
programs (tariff, original and valuation)
and change how the CBSA collects and
reports trade data. The CBSA will continue
to enhance and modernize the self-service
portal for importers and exporters and
improve its processes. The timeline of this
phase is 2014-2020.
The CBSA notes that the benefits of this
modernization will include:
• providinganelectronicpaymentoption
for importers and exporters enabling
them to retrieve their statements
through a secure website
• improvingthefinancialinformationflow
between importers and exporters and
the CBSA
• improvingtheaccuracyandreliabilityof
trade data collected
• improvingthedisseminationoftimely
and accurate data relating to trade
management.
The CBSA is currently carrying out
consultations on this initiative.
concerning Canada, please contact:
Angelos Xilinas
KPMG in Canada
T: +1 604 691 777 3894
Under an AVR, a
company applies to the
customs authority in
the destination port of
its imported goods for a
review of the dutiable value
of such goods, before
they are declared at the
customs for import.
China
China customs implement
an advance valuation review
system for imported goods
On 29 November 20111 the General
Administration of Customs (GAC)
announced that all Chinese customs
houses must implement by 1 January
2012 an Advance Valuation Review (AVR)
system for imported goods.
Under an AVR, a company applies to the
customs authority in the destination port
of its imported goods for a review of the
dutiable value of such goods, before they
are declared at customs for import.
The Notice on Promulgation of the
Provisional Regulations on Advance
Valuation Review on Import Goods,
(Circular 419) states:
• Enterprises that have a Class A or AA
status may apply for an AVR. Customs
departments in various districts may set
out qualifying conditions.
• The commodities listed in the scope of
AVR are mainly those that are difficult
for customs to assess and determine
the value of on-site. Each customs
office directly under the GAC may set
out the scope or conditions of the
commodities applicable for AVR.
• The AVR does not apply to imported
goods that are valued using a particular
formula. Customs in various districts
have the discretion to decide whether
or not to bring bonded goods sold
domestically under the scope of
an AVR.
• An application for an AVR should be
submitted at least 15 days prior to the
goods arrival. Once the AVR decision is
made, it remains valid for 90 days, and
only for the goods under application.
In special circumstances it may be
extended for 30 days with the consent
of customs.
• The tariff departments of the various
customs authorities directly under the
GAC (including the commodity price
information agencies established by
the GAC) will be in charge of the AVR in
their respective customs district.
Although Circular 419 has clarified many
issues, there are a number of matters
regarding the practical operation to be
further specified, for example:
• the AVR is not specified for imported
goods involving royalty payment or
related-party transactions
• the application processing time by
customs is not specified
• an AVR decision issued by customs
is generally valid only in its customs
district. The issue of how to apply such
a unified decision across different
customs districts is not clarified.
Conclusion
The customs valuation is a very technical
process which may require business:
• to conduct a desktop analysis of
their customs valuation risk, and the
feasibility for applying for an AVR review
• to communicate with the relevant
customs house and obtain opinions on
the customs valuation issues
• to submit the required documents and
process the necessary formalities for an
AVR, price registration or valuation with
a certain formula.
subject, or any other indirect tax matters
concerning China, please contact:
Lilly Li
KPMG in China
T: +86 20 3813 8999
1 Notice on Promulgation of the Provisional Regulations on Advance Valuation Review on Import Goods,
(Circular 419)
Transport companies
would also have right
to discount input VAT
incurred when purchasing
or nationalizing cargo
transport equipment.
Colombia
Government VAT incentive in
tax reform package
The government is currently working
on a tax reform project including a
VAT incentive aimed at stimulating the
capitalization of companies. According
to the current draft, taxpayers meeting
certain conditions would be allowed to
deduct input VAT incurred on purchasing
capital goods – a deduction not allowed by
current legislation.
A distinction is made between taxpayers
(business or individuals) liable to pay the
VAT, and those not liable to pay.
Companies or individuals
classed as taxpayers for VAT
purposes
According to the tax reform project,
companies or individuals liable for VAT
for importing or purchasing fixed assets
that might be considered capital goods
would be able to deduct part of the
VAT as follows:
• 27percentoftheVATpaidin2013
• 50percentoftheVATpaidin2015.
The remaining amount cannot be treated
as input VAT and therefore would be
included in the value of the goods.
For example, if a taxpayer incurred
100 Colombian pesos (COP) of VAT on
the acquisition of capital goods in January
and February 2013, it would be able to
treat COP27 as input VAT. The remaining
COP73 would be considered as part of the
value of the good, depreciated for income
tax purpose.
Companies or individuals not
classed as taxpayers for VAT
purposes
Companies or individuals that do not pay
VAT (e.g. because they carry out activities
excluded from the scope of VAT) would
also benefit when importing/acquiring
fixed assets that might be considered
capital goods. However, the benefit would
relate to income tax.
Accordingly, VAT incurred by taxpayers on
the import or acquisitions of fixed assets
might be considered as a tax credit for
income tax purposes. The percentage that
might be treated as a tax credit would be
as follows:
The value of the goods, including the VAT
not treated as tax credit, would be subject
to depreciation, for income tax purposes.
The above incentive should also be
available for financial leasing purchases,
provided that an irrevocable option of
purchase is agreed in the contract.
According to the proposed tax reform,
the following goods would qualify for the
incentive: machinery and equipment, fixed
assets for the production or extraction of
consumption goods, or the production of
other capital goods.
Transport companies would also have
right to discount input VAT incurred when
purchasing or nationalizing cargo transport
equipment.
• 50percentoftheVATpaidin2015.
Finally, if the capital goods which have
generated the right to the benefit are sold
or transferred or before the end of their
useful life, the discount granted must be
returned. The proportion returned must
correspond to the shortfall in the likely
useful life.
The remaining amount cannot be
treated as tax credit and therefore would
constitute a higher value of the good.
concerning Colombia, please contact:
For example, if the income tax
corresponding to tax year 2013 was
COP200 and the VAT paid by the taxpayer
on the acquisition of fixed goods was
COP150, the income taxpayer could
treat COP40.50 as tax credit. Therefore,
the taxpayer would only have to pay
COP159.50 as income tax in 2013.
María Consuelo Torres
KPMG in Colombia
T: + 57 1 618 8000
A new amendment
was passed by the Cyprus
House of Representatives
stating that, when a
taxable person imports
an aircraft to the Republic
from outside the EU,
import VAT is not payable at
the time of the import.
Cyprus
Worldwide call to property
investors and aircraft owners
New building disposals have been subject
to the standard VAT rate since May 2004.
However, in an attempt to boost local
property sales, amendments to the
VAT Act have been passed. The latest of
these was introduced on 8 June 2012.
Simultaneously, a measure concerning the
import of various aircraft into the Republic
of Cyprus was also introduced.
Land development sector
The above mentioned measures have
evolved as follows:
• 1 May 2004: a special state subsidy
was granted to Cypriot and EU citizens
for the purchase or the construction of
new residential properties, which were
subject to 15 percent VAT.
• 1 October 2011: the special state
subsidy was replaced by granting
Cypriot and EU citizens a relief of
10 percent on the standard VAT rate.
As such, they effectively had to pay
the reduced VAT rate of 5 percent on
the value of newly-constructed or sold
residential properties.
• 8 June 2012: The Cyprus House of
Representatives voted in favor of
extending the VAT relief to non-EU
citizens purchasing or constructing
residential properties in Cyprus.
This meant that non-EU citizens purchasing
or constructing a residential property in
Cyprus (with the intention of using it as
their main and permanent residence while
staying in Cyprus) are entitled to claim the
VAT relief.
For someone to be entitled to the VAT relief,
a number of conditions must be satisfied:
• the applicant must be at least 18 years
of age
• the intended use of the property is that
of a main and permanent residence while
residing in the Republic
as input VAT, thus ending up with no cash
payment of import VAT.
Nevertheless, the VAT Commissioner
reserves the right to request payment of
a guarantee, of a value not exceeding the
import VAT payable.
concerning Cyprus, please contact:
Harry Charalambous
KPMG in Cyprus
T: +357 22 209300
• for a property to qualify for the relief, the
total covered area should not exceed
275m2.
Deferred VAT on importing
aircraft from outside the EU
A new amendment was passed by the
Cyprus House of Representatives stating
that, when a taxable person imports an
aircraft to the Republic from outside the
EU, import VAT is not payable at the time
of the import. Instead, it is payable when
the taxable person importing the aircraft
submits their VAT return. The amendment
covers aircrafts intended for business
activities.
In practice, no VAT is actually payable,
because when the output VAT is due (i.e.
upon filing the VAT return) the taxable
person may also claim the same amount
Danish tax authorities
have sent letters to 2,000
VAT registered holding
companies in Denmark
seeking to lower their
VAT recovery rate and
make them pay any
over-recovered VAT.
Denmark
Danish tax authorities target
holding companies
Danish tax authorities have sent letters to
2,000 VAT registered holding companies
in Denmark seeking to lower their VAT
recovery rate and make them pay any
over-recovered VAT.
The selection criteria was based on the
presence of the word ‘holding‘ in the
company’s name, or whether the business
registration code used was the one for
holding companies.
In the letter, the holding company is
informed that a VAT audit is pending and
that the company had until 1 July 2012 to:
• calculatethecorrectrecoveryrate
• adjusttheVATforthepastthreeyears
• payanyoutstandingVATthismay
result in.
Otherwise, they may be penalized or
charged interest. Depending on the
size/volume of activities of the holding
company, the figures involved may
be significant.
According to an interpretation of the
Danish VAT Act, entities with holding
as their main activity must use this VAT
recovery rate. However, according to
the letter from the tax authorities, this
also applies to operating companies
holding shares in subsidiaries and other
companies. Therefore, these companies
should also adjust their recovery rate. This
has been the view of the tax authorities
for many years. However, up until now
they had not enforced it. In light of the
audit letter, it remains to be seen if this
will change, but from the wording of letter
this most certainly seems to be the tax
authorities’ intention.
If the tax authorities’ view is not changed,
it is likely that the number of cases being
raised at the Danish National Tax Tribunal
will increase.
This is obviously an area of uncertainty,
and it remains to be seen to what extent
the Danish tax authorities will enforce
its interpretation.
concerning Denmark, please contact:
Peter K. Svendsen
KPMG in Denmark
T: +45 73 23 35 45
The Supreme Court
found that waivers of
debt granted by a parent
company to one of its
subsidiaries should be
considered as subsidies
supplementing the price of
services rendered.
France
New view on VAT with
respect to waivers of debt
It is common for a parent company holding
a claim over a subsidiary in a difficult
financial situation to waive the debt owed.
The effect of this on corporate income
tax is well understood, since it results in
a loss for the parent company (thereby
decreasing the taxable revenues), while
the revenues earned at the subsidiary’s
level – and which are normally taxable –
are offset by any deficits.
As far as French VAT is concerned, the
situation has become less clear over the
last few years. The position adopted by the
French tax authorities during tax audits
has cast doubts over the VAT treatment
applicable to waivers of debt and, more
generally, to subsidies.
A recent decision of the French
Administrative Supreme Court, stating
that intra-group waivers of debt could also
have adverse VAT effects1, has reinforced
these doubts.
The Supreme Court found that waivers
of debt granted by a parent company
to one of its subsidiaries should be
considered as subsidies supplementing
the price of services rendered. As such,
these subsidies should be subject to VAT.
Indeed, the subsidies were deemed to
have enabled the reassessed company
to provide services at prices below cost
price, the prices being dictated by a
group contract concluded beforehand.
Consequently, the debt waiver should not
be construed as a budget-balancing grant,
but as a taxable subsidy, one directly
linked to the price of the services provided
by the subsidiary.
The position of the Supreme Court
impacts inter-company services to the
extent that, when a subsidy is considered
as supplementing the price paid by a third
party, the VAT due on the subsidy is not
recoverable by the beneficiary. This has
two effects:
(ii)the inability to deduct such VAT at
company level.
However, the French taxpayer may be able
to challenge the tax authorities following
the principle laid down by the ECJ in the
Office Des Produits Wallons case2.
Therefore, the recent decision by the
French Administrative Supreme Court,
strengthening the position of the French
tax authorities, should prompt companies
granting intra-group waivers of debts to
consider the VAT consequences on a caseby-case basis, in light of the conditions in
which they are granted.
subject or any indirect tax issues in France,
please contact:
Gwenaelle Bernier
*Fidal
T: + 33 1 55 68 14 18
(i) a VAT reassessment at the level of the
company obtaining the waiver of debt
or subsidy
* Fidal is an independent legal entity that is separate from KPMG International and KPMG member firms.
1 Conseil d’Etat, 10th and 9th sub-sections, 16 April 2012, no. 323232, Société Geodis Division Messageries Services.
2 Judgment of 22 November 2001 in case C-184/00.
The BFH indicates
that input tax deduction
depends on the direct and
immediate allocation of an
input transaction to a single
output transaction, which
is to be evaluated as an
economic activity.
Germany
Input tax deduction for
holding companies
In a recent ruling, the German Federal
Tax Court (BFH) addressed the following
question: to what extent is a holding
company, with several extensive holdings,
entitled to deduct input tax, when
there is little to no supply of goods and
services being made between the holding
company and its subsidiaries?
The ruling concerned a joint stock
corporation. According to its articles
of association, its purpose was the
acquisition, management and disposal of
holdings, and the performance of services
for its subsidiaries. In the year in which
the case was brought, the corporation
engaged in economic activities (advisory
services), the provision of a motor vehicle
to an employee, and the concession of a
loan relating to no more than two of its 50
subsidiaries. One matter in dispute was
the percentage of input tax deduction on
overheads. Another was the tax office’s
denial of input tax deduction on the supply
of legal advice regarding the disposal of
one of the subsidiaries.
The BFH indicates that input tax deduction
depends on the direct and immediate
allocation of an input transaction to a
single output transaction, which is to
be evaluated as an economic activity.
Otherwise, input tax may be deducted if
the costs of the transaction are included
among general business expenditures,
and are incorporated in the price of the
services to be supplied by the business.
Where the input transaction serves
an activity that is both economic and
non-economic, input tax deduction is
allowed (in line with the European Court
of Justice’s (ECJ) ruling in the Securenta
case1) only if the expenditure is attributed
to the economic activity. In this situation,
the proportion of input tax deduction
would be based on the extent of economic
versus non-economic activities.
Following these principles, the BFH
assumed that the activities of the
corporation in question were both
economic and non-economic. Because the
mere acquisition, holding and disposal of
shares does not constitute an economic
activity, and only results in economic
activity in exceptional circumstances (such
as a direct or indirect intervention in the
management of the subsidiary company),
the BFH assumed in this case that the
activity was predominantly non-economic.
Even if the granting of a loan could be seen
as an economic activity (possibility left
open by the ECJ ruling in the EDM case2),
the BFH found that in this case, the
non-economic activity would have to
be the corporation’s main activity. An
appropriate estimate would allow a
deduction of no more than 50 percent of
the VAT paid on overheads. With the tax
office allowing an excessively high input
tax deduction of 75 percent, the BFH
disregarded the question of input tax
deduction in connection with the costs
incurred in the sale of the holding.
The ruling is of great importance for
holding companies, which are advised to
assess what measures they can take to
avoid or reduce the risk of their input VAT
deductions being limited.
subject or have any other questions about
indirect tax issues in Germany, please
contact:
Claudia Hillek
KPMG in Germany
T: +49 89 9282 1528
1 Judgment of 13 March 2008 in case C-437/06.
2 Judgment of 29 April 2004 in case C-77/01 (Empresa de Desenvolvimento Mineiro SGPS SA (EDM)
v Fazenda Pública).
Predictably, this will
result in uncertainty in
the industry and may
affect other integrated
industries.
Indonesia
Input VAT and the integrated
Crude Palm Oil (CPO)
industry
Late last year, the Directorate General
of Tax (DGT) banned integrated CPO
companies from crediting input VAT on
plantation activities. The DGT argued that
the delivery of oil palm ‘fresh fruit bunch’
(FFB) is VAT-exempt.
In particular, the DGT’s circular stated that
input VAT attributable to CPO production
can be credited, while input VAT
attributable to delivery of FFB cannot. If an
entity produces both CPO (VAT-able) and
FFB (non VAT-able), the input VAT needs to
be apportioned accordingly.
The industry believes recent tax audits
and queries might not be in line with the
spirit or letter of the VAT law, since in the
production chain of an integrated CPO
company, there is no ‘delivery’ of FFB.
The prevailing Indonesian VAT law includes
provisions for crediting input VAT. It also
prohibits crediting input VAT incurred in the
course of delivering goods and services
not subject to VAT. Following the latest
VAT law, the Ministry of Finance issued
further guidelines for companies engaged
in activities only partially subject to VAT.
A circular was later issued by the DGT
regulating the creditability of input VAT
within the integrated CPO industry.
On a separate but related note, a
government regulation was issued earlier
this year outlining direct guidelines for the
VAT law. One of the regulation’s provisions
could be misinterpreted as defining ‘selfconsumption for productive purposes’
as possibly triggering VAT imposition.
This would mean that processing selfproduced FFB in a CPO refinery, within
an integrated CPO company, could be
considered a ‘delivery’. Under the VAT
law, input VAT incurred in the delivery of
non-VAT-able goods cannot be credited.
This may impact all input VAT incurred by
planting activities.
and appeal levels. Based on known cases,
the DGT views all input VAT attributed to
planting activities as not creditable against
output VAT, regardless of the entity’s final
output. Based on provisions in the VAT law
and on other regulations, there could be
grounds for integrated CPO companies
to defend, at appeal level, the crediting
of input VAT.
subject or have any other questions about
indirect tax issues in Indonesia, please
contact:
Erlyn V Tanudihardja
KPMG in Indonesia
T: +62 215 704888
Predictably, this will result in uncertainty
in the industry and may affect other
integrated industries. The current industry
reaction varies by company.
We note that there is substantial risk
associated with crediting input VAT from
planting activities, both at the tax audit
In 2012, Mexico
introduced new tax
requirements regarding
invoices and electronic
invoicing.
Mexico
New developments in
invoicing requirements
In 2012, Mexico introduced new tax
requirements regarding invoices and
electronic invoicing. The rules are
regulated by the Mexican Federal Tax
Code and developed in General Tax Rules
approved by the tax authorities (Regla
Miscelánea Fiscal).
These new rules restructured the legal
framework of invoicing regulations. They
unify all the basic legal rules in the Federal
Tax Code, and simplify them by eliminating
some previously required content (such as
the supplier’s name and tax domicile). It
also comprehensively answers questions
around the treatment of paper invoices
(in a system where electronic invoicing is
the default rule for the largest companies),
the tax validity of statements generated
by financial institutions, and simplified
invoices (such as those issued in retail
transactions).
The approval of these rules was
accompanied by changes to the General
Tax Rules which provide the legal
framework. Among these changes are
specific new rules for non-residents in
Mexico issuing service supply invoices
documenting:
• asupplyofservices
• adeliveryofgoods
• aassetleasedtoaMexicantaxpayer.
These rules set the mandatory content
these invoices must include to be
regarded as valid for local tax purposes.
The most critical developments in
invoicing obligations apply to electronic
invoicing. The new rules promote the
universal application of the new electronic
invoicing system introduced in 2011, called
Comprobante Fiscal por Internet (CFDI).
This system has the following main
characteristics:
• theuseofacompulsoryelectronic
format for generating and storing
invoices
• theuseofelectroniccertificatesby
taxpayers to generate electronic
signatures and digital stamps attached
to the e-invoices
• theinterventionofathird-party
services provider, pre-determined
by the Mexican tax authorities, in an
electronic pre-validation invoice process
These developments impact how
companies must manage their invoice
systems. They oblige local taxpayers
to confirm the accuracy of the invoice
contents.
The use of electronic invoicing and storage
is an important topic, not only in Mexico
but also across Latin America. Taxpayers
should monitor the introduction of new
obligations to ensure compliance.
subject or any other indirect tax matter in
Mexico, please contact:
Cesar Catalan
KPMG in Mexico
T: +52 55 5246 8374
• theobligationoftherecipientofthe
invoices to verify the code obtained
by a third-party service provider from
the tax authorities, and to validate the
electronic certificate generating the
digital stamps.
This invoicing system is the general
protocol applicable to Mexican taxpayers.
Some other formats are still valid, such as:
• paperinvoicesincludingawatermarked
security code
• statementsgeneratedbyfinancial
institutions
• otherelectronicformatspermittedin
exceptional cases by the tax authorities.
This new regime
results from the urgent
need to deal with an
increasing number of
cases pending before the
tax authorities and tax
courts. Portugal
New tax arbitration regime
Recently, the Portuguese government
enacted Decree-Law no. 10/2011,
introducing an alternative dispute
resolution between taxpayers and the
tax authorities – the Tax Arbitration
Regime (TAR).
Tax arbitration represents an alternative
method for resolving tax disputes through
a neutral and impartial third party – one or
more arbitrators – chosen by the parties or
nominated by an Administrative Arbitration
Board. Their rulings have the same legal
force as a decision issued by a tax court.
This new regime results from the
urgent need to deal with an increasing
number of cases pending before the tax
authorities and tax courts. It is also aimed
at preventing judicial litigation. Taxpayers
should consider using this regime to solve
VAT disputes.
To guarantee the necessary procedural
promptness, a process not requiring
special formalities was adopted, according
to the principle of independency of the
arbitrators. Simultaneously, a six month
time limit was imposed on resolving
cases, extendable up to a maximum
of six months.
Taxpayers may request arbitration on
several types of claims, such as the
legality of tax assessments and selfassessments, property taxes, and others.
Notwithstanding this, tax authorities
are not bound to arbitral proceeding in
disputes, if they relate to:
• assessments of taxable income or tax
made by indirect methods
• tax litigation with an amount higher
than €10 million.
Considering all of this, the tax arbitration is
a new, valuable and efficient option in case
of tax disputes.
Portugal, please contact:
Alexandra Martins
KPMG in Portugal
T: +351 21 011 0962
Generally, a tax arbitration decision cannot
be appealed. Nevertheless, in specific
situations, it is possible to appeal to the
Constitutional Court, to the Supreme
Administration Court, or the Central
Administrative Court.
Whenever the Arbitration Court is the
last appeal, the decision should refer to
a preliminary ruling from the Court of
Justice of the European Union. This is
because the entire arbitration procedure
is equivalent to the state court, and
is entirely carried out by a body (the
Arbitration Centre) created by the Ministry
of Justice.
The special taxation
regime involves collecting
the VAT only on the profit
margin.
Romania
VAT treatment for
pawnshops
In the current climate of economic and
financial difficulties, more short-term
loans are taken out. But the reluctance of
banks to lend, plus the bureaucracy of the
banking system, are driving more people
to pawnshops.
Generally, pawnshops accept goods of
a certain value, such as gold and silver
jewelry, electronics and home appliances.
Some people pawn their cars and even
their apartments.
Should the depositors recover the goods
before the deadline set by the contract,
this operation would not trigger VAT
implications, because there is no official
transfer of ownership.
What happens if, due to their precarious
financial situation, those who use
pawnshops are unable to recover the
goods pawned? After waiting a certain
period of time from the due date, if the
loan is not returned and the related fees
not paid, the pawnshop may sell the
pawned goods to recover the amount
borrowed. Therefore, depending on the
nature of the goods sold, the pawnshop
may apply for the normal taxation
regime, or for the special taxation regime
for second-hand goods, works of art,
collectors’ items and antiques.
The special taxation regime involves
collecting the VAT only on the profit
margin. This is calculated as the difference
between the selling price applied by
the pawnshop and the purchase price.
However, the profit margin cannot be
reduced by considering costs associated
with storage, repair, cleaning and other
activities related to keeping the items
pawned in good condition.
Moreover, the special taxation regime
can be applied only to certain categories
of goods, specifically mentioned in the
Romanian Fiscal Code. Since 1 March
2011, gold objects and jewelry made of
precious metals, or precious or semiprecious stones, no longer fall within
the category of second-hand goods.
Consequently, the special second-hand
regime cannot be applied for their sale,
and VAT must be collected on the
sale price.
In practice, the lack of clear legislation
in this area leads pawnshop owners
to calculate VAT for these transactions
differently. Some pawnshops consider the
fees granted for the loans to be included
in the purchase price (which must be paid
by depositors), while others take a more
prudent approach, including the fee in the
VAT-taxable base.
The first approach might be challenged by
the Romanian tax authorities in the event
of a future tax audit, resulting in charges
of significant amounts of VAT and late
payment penalties.
Romania, please contact:
Ramona Jurubita
KPMG in Romania
T: +40 3 7237 7795
If depositors do not recover the goods
pawned and the pawnshop decides to
sell the goods at a price equal to or less
than the purchase price, there are no VAT
implications. On the other hand, if the
selling price is higher than the purchase
price, different approaches arise as to
what the profit margin should include.
The concept of PE is
stated in Spanish VAT Law,
in the relevant European
Council regulation, and
has been interpreted by
the DGT.
Spain
‘Permanent establishment’
from a VAT perspective
The Spanish General Tax Directorate
(DGT) has issued a recent tax ruling on
the existence and scope of a permanent
establishment (PE).
Since the introduction of VAT package
rules in 2010, a non-resident entity making
domestic supplies of goods or services to
taxpayers in Spain is only liable for VAT if it
meets two conditions:
• it has a PE in Spain
• the PE intervenes in the performance of
the transactions carried out on Spanish
VAT territory.
The concept of PE is stated in Spanish
VAT Law, in the relevant European Council
regulation, and has been interpreted by
the DGT. However, the scope has not
always been the same, leading to different
interpretations and some confusion.
Based on the European Council
Regulation, the intervention of the PE
only exists if it has a sufficient degree
of technical or human resources in the
performance of its core activities, and
these resources are effectively used to
carry out the supplies. Spanish VAT Law
has a similar approach to the European
Council regulation. Under these rules,
the mere storage of goods in call-off/
consignment stock structures does not
generally trigger VAT PE exposure in Spain;
consequently, a reverse charge could be
applied to domestic supplies of goods
derived from the delivery of the stock to
the customer.
Nevertheless, the DGT has recently
issued a controversial tax ruling in which
the concept of a VAT PE and intervention
are subject to wider interpretation.
In particular, the DGT considered the
mere hiring of a warehouse, or the
use of technical or human resources
to handle the storage and supply of
goods on Spanish territory, enough to
trigger the existence of a VAT PE that
intervenes in the supplies of goods. The
entity in question would therefore be
deemed a VAT taxpayer liable to apply
the corresponding VAT on the supplies
of goods to Spanish customers (the
reverse charge mechanism would not
be applicable).
This interpretation differs from the one
applied by tax authorities previously,
where the mere use of a storage space did
not create any PE.
It is important for companies to consider
this new interpretation. However, this is
only one ruling and tax authorities are not
expected to officially review their criteria
in the near future. Still, businesses should
carefully follow the issue as it develops.
subject or any other VAT matter in Spain,
please contact:
Natalia Pastor Caballero
KPMG in Spain
T: +34 914 563 400
The UK was clearly
concerned that businesses
might look to secure a
benefit if they had warning
of the changes.
UK
New rules for UK voucher
taxation
The United Kingdom (UK) has changed its
rules for the taxation of vouchers, as a result
of the Lebara ECJ decision1 concerning
phone cards. The ECJ decision meant the
old UK voucher rules, disregarding the issue,
at face value or less, of any voucher and
requiring the issuer to account for VAT only
on redemption, were not applicable in cases
where the voucher could only be used for
one type of supply. The phone cards in Lebara
were this type of single-purpose voucher.
The changes were announced the same day
that the EU Commission released its longawaited proposal for a harmonized approach
to vouchers. The Commission wishes
Member States to distinguish between
single and multi-purpose vouchers. A single
purpose voucher (SPV – a voucher that
can only be redeemed for a single type of
supply – where the information to account
for the correct amount of VAT is available at
issue) should be taxed both on issue and on
any subsequent sale down the supply chain;
a multi-purpose voucher (MPV) meanwhile
should be taxed only at redemption.
However, the distribution of an MPV for
consideration is a separate taxable supply,
as is any charge made by the redeemer to
the issuer for redemption.
To a great extent the UK changes align
with the Commission proposals. It creates
a new category of voucher equivalent to
the SPV, which from 10 May 2012 is taxed
at the time of issue, even if the voucher is
never redeemed. Other UK vouchers are
not affected; the current complicated rules
remain in place for these. However, these
too will probably have to change once the
EU proposals are adopted because the
way the UK treats supplies by distributors
is not consistent with the Commission’s
proposals.
The UK has applied the comments made in
Lebara to all types of SPVs, not just single
purpose phone cards. Interestingly, many
phone cards issued in the UK will not be
SPVs because of the multiple uses that
mobile phone credit can be put to, and hence
will be unaffected. Such uses could include:
• making calls in the EU
• making calls outside the EU
• donations to charity by text
• downloading of applications and data.
The differing type and place of supply of
these various services means these cards
are multipurpose.
As far as vouchers which are now SPVs
are concerned, this change both advances
the time VAT is due and removes the VAT
saving on non-redemption. This means
there is a real commercial benefit for
taxable persons to review what types of
voucher they supply and switch from SPVs
to MPVs if this is at all feasible. Examples
provided by the UK tax authorities (HMRC)
suggest they may be quite flexible in their
interpretation of ‘multi-purpose’ which is
encouraging. If this switch is not possible,
suppliers should consider how to mitigate
the extra costs these changes will lead
to – changes in contracts may be required.
These changes give rise to some interesting
questions. Where the SPV can only be
redeemed for zero rate or exempt supplies,
no VAT will be due. This is in line with the
Commission’s view that the rights inherent
in a voucher, and the underlying supply
it can be redeemed for, are not separate
transactions. This is because those rights
(if separate) would normally be standardrated, unless the legislation specifically says
otherwise. However, HMRC is not being
consistent here because they also demand
that VAT is declared even where the voucher
is not redeemed. If the inherent right is not
a separate supply, then in cases where the
voucher is not redeemed, has there actually
been a supply?
The UK was clearly concerned that
businesses might look to secure a benefit if
they had warning of the changes. This is why
the new rules took immediate effect from
the date of the announcement, even though
the relevant legislation is not yet enacted.
The UK also introduced rules to tax on
redemption any SPVs issued before 10 May
and redeemed afterwards, if these would
1 Judgement of 3 May 2012 in case C-520/10, Lebara Ltd v Commissioners of HRMC.
not be taxed in any other Member State.
Without these rules, such vouchers would
escape tax because VAT would be due
neither at issue (when the old rules would
have applied to tax them on redemption) or
on redemption (when the new rules would
apply to tax them on issue). Therefore, the
UK’s approach in bringing in these rules may
well be proportionate to the risk of nontaxation. HMRC could, for instance, have
deemed that all existing SPVs unredeemed
by 10 May should be taxed on that date,
which would have been very difficult for
suppliers to comply with.
However, set against that justification for
HMRC’s actions, it is clear that businesses,
having had no warning of these changes
and no transitional period, could not have
planned to issue a large number of vouchers
before the rules changed. Therefore, any
vouchers that span the change have been
issued as part of normal commercial
operations, not as part of any plan to
avoid VAT. On that basis, is the immediate
effect of these changes (and of HMRC’s
approach in taking all the benefits of the
new rules without shouldering any of the
corresponding burdens) truly justified? No
doubt we will see as time goes on.
If you would like to know more about
this subject or any indirect tax matters
concerning the UK, please contact:
Gary Harley
KPMG in the UK
T: +44 20 7311 2783
Twenty states offer a
managed audit program
which allows a taxpayer,
or qualified practitioner, to
perform an audit under
certain guidelines set by
the state.
US
Sales and Use Tax audit
remediation
As United States (US) state and local
governments continue to combat budget
deficits, fiscal authorities are turning to
indirect taxes as a potentially significant
source of revenue and are issuing indirect
tax audit notices as a result. Businesses
may find themselves with outstanding tax
liabilities as a result of:
• frequent changes in legislation and tax
rates
• market and production expansion
• insufficient processes for identifying
new registration requirements
• self-accruing use taxes.
In the US, each state conducts its own
indirect tax audits for each legal entity
and tax type. To make matters more
complicated, some local governments
(e.g. localities in Alabama, Colorado, and
Louisiana) administer indirect tax audits at
the local level.
By their nature, indirect tax audits can be
meticulous and time consuming and create a
number of challenges for taxpayers. Indirect
tax audits require additional resources
to work with the tax authorities and to
reconcile transactional data for the periods
under audit. Audits also underscore the
challenges of communicating across multiple
business units and locations, to gather and
substantiate supporting information and
documentation.
Taxpayers have a few tools to approach
what may be a rapidly-growing open audit
listing and to reduce their overall indirect
tax exposure: audit defense, managed
audits, reverse audits, voluntary disclosure
agreements, and amnesties.
Audit defense
Large taxpayers generally have experienced
indirect tax audit departments with auditfocused professionals – and so can be
successful in remediating indirect tax audits.
Other taxpayers, however, may not have the
capacity to handle multiple indirect tax audits
and typically rely on practitioners to resolve
audits as needed.
Regardless of taxpayer size, audit defense
requires working one-on-one with
auditors to gather the necessary data and
documentation for review. An important
first step is to reach an understanding in
writing with the auditor regarding the audit
timeline and any sampling procedures that
may be used. Taxpayers might consider
performing a self-review of tax paid on
purchases to identify potential overpayments
that may offset any potential liabilities arising
during the audit. The statute of limitations
will generally expire shortly after the
state-administered audit is closed.
Managed audits
Twenty states offer a managed audit
program which allows a taxpayer, or qualified
practitioner, to perform an audit under
certain guidelines set by the state. Taxpayers
generally must request participation within
30 to 60 days of receiving an audit notice.
Managed audit programs offer several
benefits including potential waiver of
penalties and interest for underpayments,
more control over audit design and review,
and quicker resolution. However, managed
audit timelines are monitored closely by the
state and interest waivers may be revoked
by the state for audits exceeding deadlines
without good reason. Upon successful
completion of a managed audit, the period
under review is closed.
Reverse audits
Reverse audits, typically performed
by practitioners simultaneously with
state-administered audits, seek to
identify overpayments of taxes on
a business’ purchases. Reverse
audits may be conducted outside of a
state-administered audit:
• for taxpayers operating in industries
with broad exemptions
• if there are potential deficiencies in use
tax accrual processes
• when tax authorities issue rulings
that retroactively change the taxability
treatment of certain items.
However, reverse audits performed outside
of a state-administered audit do not officially
close-out periods, and may trigger audit
notices.
Voluntary disclosure and
amnesty programs
Voluntary disclosure and amnesty
programs are very similar in that they offer
non-compliant taxpayers an opportunity to
‘come clean’ with the state. In some cases,
penalties and interest may be waived.
Voluntary disclosure programs are usually
ongoing programs for registered taxpayers
with known underpayments and participation
can usually be initiated anonymously. They
are typically limited to one submission per
year per taxpayer.
Amnesties, on the other hand, are generally
established by legislation and are only
available for a limited period of time.
Amnesties are geared towards unregistered
taxpayers that did not collect or remit tax
on sales in the jurisdiction. Amnesties and
voluntary disclosure submissions typically
do not close-out periods and may result in
taxpayers receiving notification of audits.
If you would like to know more about
this subject or any indirect tax matters
concerning the US, please contact:
Leah Durner
KPMG in the US
T: +1 202 533 5542
KPMG’s Global Indirect Tax Network member firms’
contacts for VAT/GST and Trade and Customs
(*denotes Trade and Customs)
KPMG in Argentina
KPMG in Colombia
KPMG in Greece
Vivian E Monti
Maria Consuelo Torres
Angela Iliadis
Eduardo H Crespo*
KPMG in Croatia
KPMG in Hungary
KPMG in Australia
Paul Suchar
Michael Glover
Dermot Gaffney
KPMG in Cyprus
KPMG in Iceland
KPMG in Austria
Harry Charalambous
Soffía Eydís Björgvinsdóttir
Stefan Haslinger
KPMG in Czech Republic
KPMG in India
KPMG in Belgium
Marie Konecna
Sachin Menon
Peter Ackerman
KPMG in Denmark
KPMG in Indonesia
Diederik Bogaerts*
Peter K Svendsen
Erlyn V Tanudihardja.
KPMG in Brazil
KPMG in Estonia
Sundfitris Marulitua*
Roberto A Cunha
Joel Zernask
KPMG in Ireland
KPMG in Bulgaria
KPMG in Finland
Niall Campbell
Ivan Vargoulev
Juha Sääskilahti
KPMG in Italy
KPMG in Canada
Matti Alpua*
Eugenio Graziani
John Bain
France
Massimo Fabio*
Angelos Xilinas*
Herve-Antoine Couderc
KPMG in Japan
KPMG in Chile
(Fidal is an independent legal entity
separate from KPMG International and
KPMG member firms)
Masaharu Umetsuji
Mauricio Lopez
KPMG in China
Lachlan Wolfers
Lilly Li*
Gwenaelle Bernier
Pascal Dewavrin*
KPMG in Germany
KPMG in Republic of Korea
Dong Suk Kang
Mun Gu Park*
Karsten Schuck
Kay Masorsky *
KPMG in Latvia
KPMG in Philippines
KPMG in Sweden
Steve Austwick
Roberto L Tan
Susann Lundstrom
KPMG in Lithuania
KPMG in Poland
Leif Kadin*
Vita Sumskaite
Tomasz Grunwald
KPMG in Switzerland
KPMG in Luxembourg
KPMG in Portugal
Patrick Conrady
Laurence Lhote
Alexandra Martins
Ivo Gut*
KPMG in Malaysia
KPMG in Romania
KPMG in Taiwan
Eng Yew Tan
Ramona Jurubita
Willis Yeh
KPMG in Malta
Valentin Durigu*
KPMG in Turkey
Anthony Pace
KPMG in Russia
Yavuz Öner
KPMG in Mexico
Vitaly Yanovskiy
Murat Palaoglu*
Cesar Catalan
KPMG in Singapore
KPMG in the UK
Luis Ricardo Rodriguez*
Kok Shang Lam
Gary Harley
KPMG in The Netherlands
KPMG in Slovakia
Bob Jones*
Leo Mobach
Tomas Ciran
KPMG in the US
Leon Kanters*
KPMG in Slovenia
Loren Chumley
KPMG in New Zealand
Nada Drobnic
Douglas Zuvich*
Peter Scott
KPMG in South Africa
KPMG in Venezuela
KPMG in Norway
Johan Heydenrych
Zulay Perez Sanchez
Oddgeir Kjørsvik
Venter Labuschagne*
KPMG in Vietnam
KPMG in Peru
KPMG in Spain
Nhan Huynh
Javier Luque
Celso Garcia Granda
Related
Publications
Global IndIrect tax ServIceS
Global indirect
tax brief
a roundup of developments in
vat, GSt, trade and customs, and
Issue no. 25 – May 2012
tax
kpmg.com
Contact us
If you have any comments or suggestions in relation to
KPMG’s Global Indirect Tax Brief, please contact:
Frederic Raepers
Editor and Global Indirect T
ax
Knowledge Manager
KPMG in Turkey
T: +90 216 6819 122
Global IndIrect tax ServIceS
Global indirect
tax brief
a roundup of developments in
vat, GSt, trade and customs, and
december 2011
tax
kpmg.com
Maria Stripling
Global Indirect Tax Practice Manager
KPMG in the UK
T: +44 161 246 4075
GITB_December_Issue_v6_Final.indd 1
1/4/12 7:41 PM
GLOBAL INDIRECT TAX SERVICES
Global indirect
tax brief
A roundup of developments in VAT, GST,
Trade and Customs, and other indirect taxes
Issue No. 23 – October 2011
Special feature: the Financial Service Sector
TAX
kpmg.com
kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any
particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no
guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the
future. No one should act on such information without appropriate professional advice after a thorough examination of
the particular situation.
The material contained within draws on the experience of KPMG tax personnel and their knowledge of local tax law
in each of the countries covered. While every effort has been made to provide information current at the date of
publication, tax laws around the world change constantly. Accordingly, the material should be viewed only as a general
guide and should not be relied on without consulting your local KPMG tax adviser for the specific application of a
country’s tax rules to your own situation.
Fidal is an independent legal entity that is separate from KPMG International and KPMG member firms.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. No member
firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does
KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of
KPMG International.
Printed in the United Kingdom.
Designed by Evalueserve.
Publication name: Global Indirect Tax Brief
Publication number: 120893
Publication date: July 2012
Back issues are
available to
download from:
www.kpmg.com/
indirecttax

Global Indirect Tax Brief

Transcription

Similar documents

TRANSLATION Independent Auditors` Report TO

customer information sheet

Joint Ventures - The `new normal` for corporate growth?

High Level Observa^ons - Departamento de Hacienda de Puerto Rico

Federal and Provincial Income Tax Rates and Brackets

IntForumAgendaAndRegistration_16Nov2011

View Sample

Media 2020

press clipping - The Malaysian Institute Of Certified Public Accountants