Prsentation PowerPoint

1
INTERNATIONAL VAT ASSOCIATION LISBON 19/20
APRIL 2007
2

• Thursday 19th April 2007
• 14.30 Introduction and welcome - JC Bouchard
• 15.00 IVA Fraud S Dale/JC Bouchard/R Ostilly
• 15.45 Coffee
• 16.00 IVA Update and future strategy
• P Beighton/M Redman/R Ostilly
• 17.15 Closing Remarks Day 1 - JC Bouchard
• 19.30 Cocktail reception

Agenda
3
INTRODUCTION AND WELCOME J.C. Bouchard
4
FRAUD S. Dale JC. Bouchard R. Ostilly
5
VAT FRAUD IN THE EUROPEAN UNION WILL THE CURRENT
VAT REGIME SURVIVE ? 19 April 2007 Stephen
Dale Jean-Claude Bouchard Ryan Ostilly
6

• The importance of VAT fraud in the EU
• The types of fraud
• Missing trader intra-Community fraud
• A number of possible solutions
• What your association has been doing
• Will the existing VAT regime survive ?

7
A brief reminder of some important dates

• The original 6 Belgium, The Netherlands,
  Luxembourg, Germany, Italy and
• France sign a treaty forming the
  European Coal and Steel Community.
• Treaty of Rome ("EC Treaty") is signed.
  It forms the European Economic
• Community (EEC). It becomes
  effective on 01.01.1958. The EC Treaty is the
• basis for co-operation between
  Member states on direct and indirect tax
• matters with the aim of removing
  any trade barriers and therefore to promoting
  and enhancing the internal market.
• Adoption of the first 2 VAT Directives,
  establishing a general, multi-stage but
• non-cumulative turnover tax to
  replace all other turnover taxes in the Member
• states. These Directives laid down
  only the general structures of the system
• and left it to the Member states
  to determine coverage of VAT and the rate
• structure.
• 1973 UK, Ireland, Denmark join the EEC.
• 1976 Directive 76/308/EEC of 15 March 1976
  ensures mutual assistance and administrative
  co-operation between all EU Member states.

8
A brief reminder of some important dates
1977 Adoption of the Sixth VAT Directive.
Establishes a uniform VAT coverage in all Member
states. This guarantees that the VAT contributed
by each Member state to the Community budget can
be calculated. It still allows Member states to
have many possible exceptions and derogations,
resulting in largely un-harmonised VAT systems in
the EEC. 1981 Greece joins the EEC. 1983 Spain
and Portugal join the EEC. 1985 Single European
Act sets out the timelines to abolish internal
borders within the EEC. 1987 The Commission
tables a proposal aimed at introducing a VAT
system aimed to work within a single market
1993 Realization of the EU Single market by the
abolition of controls at fiscal frontiers. To
achieve this, the Commission proposed to move
from the pre-1993 "destination principle" to an
"origin based system". This was not acceptable
to Member states as the rates of VAT were too
different, and there was no adequate mechanism to
redistribute VAT receipts to mirror actual
consumption. Therefore, a transitional VAT system
was adopted maintaining different fiscal systems
but without frontier controls.
9
A brief reminder of some important dates
1995 Austria, Finland and Sweden join the EEC
2001 Directive 2001/112/EC on VAT invoicing
amending the 6th VAT Directive. To be
implemented into national law by 01 .01.2004.
2002 Directive 2000/65/EC of 17.10..2000
eliminates the requirement for a fiscal
representative for Inter Community traders
2004 Cyprus, Malta, Czech Republic, Estonia,
Hungary, Poland, Latvia, Lithuania, Slovakia,
Slovenia join the EU 2007 Romania and
Bulgaria join the EU 2007 Directive
2006/112/EC repeals the EU Sixth VAT Directive
77/388/EEC, as well as the First and Second
Directives, in a major exercise which has
simplified the text of the principal VAT
legislation in Europe.
10
The importance of VAT fraud in the UE

• 60 bn
• 100 bn
• 200 bn?
• What is the Commission doing ?
• Working paper May 2006
• ECOFIN November 2006
• ATFS Anti Tax Fraud Strategy Paper N4
• Conference on Fraud Brussels 28 March 2007

11
Types of fraud

• Forced liquidations
• Black market
• Fictitious deductions  Taxi 
• Missing Trader/Carousel type frauds

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• Missing trader Intra-Community fraud

13
Missing trader Intra-Community fraud changing
in nature
14

• A number of possible solutions
•   Reverse charge  on all transactions
  Germany,Austria, Brazil
•  Reverse charge  targeted UK,Netherlands
• Taxation of intra-EU movements
• Authorised economic operator
• Cash accounting

15

• Reinforced information exchanges
• Intra EU transactions
• Domestic transactions
• Technology as a  solution ?
• Korean solution ?

16

• Frances proposed solutions
• Reporting via VIES
• Reduce to 1 month, in all Member States, the
  period allowed to
• declare the intra-EU delivery
• Access to data should be allowed from 1 month
  after the
• declaration
• Establish a joint-responsibility for the
  supplier in case of
• missing declarations
• Provide a detailed list of intra-community
  deliveries for each
• transaction
• Improve the security level of the system
  delivering VAT
• Intracommunity numbers.

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• Frances proposed solutions
• Reporting of domestic transactions
• Quid Italy ?

18
Origin principle
Source Options for a definitive VAT system,
European Parliament, September 1995
19
Destination principle
Source Options for a definitive VAT system,
European Parliament, September 1995
20

• A move towards the  definitive system ?
• Tracking all movements on a real time basis
• Application of a positive rate of VAT
  with/without
• adjustment
• Clearing House ?

21

• Next steps
• Proposals by the Commission
• Ecofin in June 2007
• Further requests for derogations ?

22

• Will the existing regime survive ?
• The level of fraud must be reduced
• The burdens on business must not become too
• heavy (Lisbon strategy)
• The system has in-built checks
• Any change needs unanimous agreement

23

• Will the existing VAT regime survive ?
• Introduced in France 10 April,1954 Maurice
  Lauré
• Enshrined in the 1st/2nd VAT Directives and in
  the Treaty
• Requires tax authorities attitudes to change
• Greater transparency (a price Business is
  willing to pay ?)
• On line reporting ?

24
WHAT HAS YOUR ASSOCIATION BEEN DOING?
25

• IVA Report key successes

• 45 pages of thought provoking content
• Professional typesetting
• Comprehensive pitch to the media and interviews
  in London and Paris on 22 and 23 March
• Presented to Commissioner on 26 March
• Pg2, Financial Times article on 26 March
• Formal launch at Dinner on 28 March
• Stanhope Hotel , Brussels
• 45 guests
• 22 from Member States
• Keynote address emphasising report findings
• Bound copy of report for guests

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• IVA Report key successes

• 250 copies of Executive Summary made available to
  delegates during Conference on March 29
• Key messages delivered by IVA board during
  interactive workshop sessions during conference
• Existing Media coverage so far
• FT (pg 2)
• FT.com
• International Tax Review online
• Tax Journal
• Tax Notes International
• Tax Analysts

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• IVA Report key successes

• Media coverage pending
• International Tax review (print)
• Indirect Taxes (monthly)
• Tax Notes International lead article
• and more still to come
• Significant numbers of hits to www.iva-online.org
  
• Large nuber of downloads of the report (so far)
• Additional requests for membership of IVA

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• Articles to date

• FT Pg2
• FT.com
• International tax review
• Tax Journal
• Tax Notes International
• Tax Analysts

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COFFEE
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IVA UPDATE AND FUTURE STRATEGY M.Redman R.
Ostilly
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• THE WAY FORWARD
• 3 YEAR
• STRATEGIC PLAN

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AGENDA

• Status Quo
• Whats missing?
• Reaching our Potential
• How to get there
• 3-Year Strategy
• Proposal
• Feedback from Members
• Conclusion
• Next Steps

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STATUS QUO

• STRUCTURE
• 70 Members
• 600 per annum

• RESULTS
• Bi-annual conference
• Knowledge sharing
• X-border VAT law
• Code of practice
• Networking
• Inactive agenda

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WHATS MISSING

• No significant improvement in reciprocity/
  opening of major new markets
• Increasing obstacles - Tax Administrations
• Delays in obtaining refunds
• Lack of industry statistics
• Credible Professional Body to represent

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WHATS MISSING

• Truly International VAT Body

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REACHING OUR POTENTIAL
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REACHING OUR POTENTIAL

• Clear GAP for international body
• Contribute and influence
• Serves Members interests
• Efficient operation - international VAT
• Requires key ingredients
• Will of the Membership
• Credibility
• Resources (Financial Human capital)
• Activity

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HOW TO GET THERE

• More active
• Broader base
• Clear aims
• Clear actions
• Funding

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HOW TO GET THERE

• Make IVA more credible
• Make IVA more attractive
• Grow membership
• Active lobbying

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3-YEAR STRATEGY

• Board proposals have been expanded into a draft
  3-year strategy which encompasses the following

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3-YEAR STRATEGY
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PROPOSAL
Board has analysed a number of strategic options
and propose

• Realign our mission to adopt a more active
  agenda
• Raise the profile and credibility of IVA
• Expand our the Membership base
• Restructure funding requirements
• Form activity committees dedicated to specific
  tasks
• Knowledge sharing
• Lobbying / influencing
• Funding
• Members affairs etc.

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FEEDBACK FROM MEMBERS

• Comments Suggestions?
• What else would you like the IVA to do?

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CONCLUSION

• IVA to punch its weight - deliver more
• Become recognised voice of the industry
• Requires more active agenda
• Requires increased profile and credibility
• Board needs mandate to implement 3-year plan
• Board ready to implement

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NEXT STEPS

• Review and prioritise activities
• Budget
• Establish subscription tables
• Form committees
• Active recruitment

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CLOSING REMARKS Day 1 J.C. Bouchard
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Good Morning
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Agenda

• Friday 20th April 2007
• 8.45 Coffee
• 9.00 Opening Remarks - JC Bouchard
• 9.10 Commission update Marysse Volvert
• 10.15 Update on Portugal Maria Lourdes Amancia
• 10.45 Coffee
• 11.15 HMRC 8th/13th Directive claims
• Electronic data capture P McMenamin
• 11.45 UK Face Vet rejections J McInnes
• 12.30 Lunch

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Agenda

• Friday 20th April 2007
• 14.00 Questions from the morning session
• 14.15 UK Recovery in financial services R
  OStilly
• 14.45 UK Developments P Beighton
• 15.00 Coffee
• 15.15 ECJ Case update S. Dale
• 16.00 Q A Session on problems encountered IVA
  Board
• 16.30 Closing remarks JC Bouchard

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COFFEE
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OPENING REMARKS J.C. Bouchard
52
COMMISSION UPDATE M. Volvert
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Most recent developments

• Lisbon strategy
• lower burdens on businesses
• increase competitiveness

54
Most recent developments

• VAT strategy
• launched in 2000 and updated in 2003
• seeks to
• modernise
• simplify
• ensure more uniform application
• increase administrative cooperation

55
Most recent developments

• Topical issues
• VAT package
• fight against fraud

56
Most recent developments

• Upcoming questions
• reduced rates
• financial services
• vouchers
• mechanism for elimination of double
  imposition

57
Most recent developments

• Dormant items
• travel agents
• postal services

58
Most recent developments

• VAT package
• has as objective to
• ensure taxation of services where these are
  consumed
• facilitate discharge of obligations by
  non-established
• traders
• modernise procedure for refund of VAT
• harmonise scope of restrictions for deduction
• review rules for small traders
• simplify rules for distance selling

59
Most recent developments

• VAT package
• seeks to achieve this by
• changing the rules governing the place of
  supply of services
• setting up a one stop mechanism for
  non-established traders
• overhauling the VAT refund procedure to allow
  for the use of
• modern technology
• approximating exclusions from right of
  deduction to facilitate the
• functioning of the refund procedure
• updating various schemes (SME, distance
  selling)

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Most recent developments

• VAT package
• was briefly discussed by ECOFIN on 28 November
  2006
• has seen e-commerce prolonged until end of 2008
• will be taken forward with a view to reach
  comprehensive solution by June 2007
• remains the priority of most Member States
• continues to be discussed at technical level
• still left with issues to be resolved

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Most recent developments

• VAT package
• (place of supply of services)
• change for B2B services
• for services between Member States, taxation at
  place of
• customer becomes general rule
• still combined with a number of exceptions
• immovable property, cultural services, hiring
  of means of
• transport, restaurant services, intermediary
  services
• accompanied by new obligations (listing)

62
Most recent developments

• VAT package
• (place of supply of services)
• change for B2B services
• general rule of taxation at place of supplier
  remains
• combined with extended number of exceptions
• immovable property, cultural services, services
  supplied
• at distance, hiring of means of transport,
  restaurant
• services, intermediary services
• with discernable revenue impact

63
Most recent developments

• VAT package
• (place of supply of services)
• at this stage
• almost ready from technical point of view
• reached consensus on many changes
• some few contentious issues still remaining
• prospect of agreement high

64
Most recent developments

• VAT package (one stop shop)
• provides single place of compliance for
  non-established taxable persons
• electronic VAT return (VAT due by rate and VAT
  deductible) to Member State of identification
• direct payment to Member State of consumption
• coordinated control

65
Most recent developments

• VAT package (one stop shop)
• at this stage
• slow in progress up to now
• remains with divergent views
• in need of more time to reach agreement

66
Most recent developments

• VAT package (one stop shop)
• at this stage
• link between new rules on place of supply of
  services and the one stop maintained
• possible intermediate solution identified
• efforts focus on mini one stop shop

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Most recent developments

• VAT package (one stop shop)
• at this stage
• look towards existing e-commerce scheme
• need to ensure that changes in place of taxation
  are accompanied by facilitation measures

68
Most recent developments

• VAT package (refund of VAT)
• leaves principles unchanged
• modernises procedure by
• introducing fully electronic procedure
• giving more legal certainty for businesses
• providing for better control

69
Most recent developments

• VAT package (refund of VAT)
• at this stage
• discussions well advanced
• agreement not far gone
• prospects of success good

70
Most recent developments

• VAT package (other elements)
• harmonising rules by which deduction is excluded
• targeting
• luxuries, amusements, entertainment
• travel and accommodation
• restaurant and catering
• vehicles

71
Most recent developments

• VAT package (other elements)
• updating SME scheme with equal access
• Proposed maximum threshold of EUR 100 000
• Objective put all MS on equal footing
• Give flexibility to MS
• simplifying distance selling rules
• EU-wide threshold of EUR 150 000

72
Most recent developments

• VAT package (other elements)
• at this stage
• discussions going slow
• some parts not agreeable
• likely to be kept for later

73
Most recent developments

• Fight against fraud
• this is
• a clear priority for all parties concerned
• at the centre of ongoing discussions
• aimed at identifying appropriate measures
• focused on reverse charge as tool

74
Most recent developments

• Fight against fraud
• as background
• German and Austrian requests to apply general
  reverse charge for domestic transactions
• both rejected as too general to be covered by
  procedure
• United Kingdom request to use reverse charge in
  targeting certain sectors was granted
• agreed after discussions but more limited than
  asked

75
Most recent developments

• Fight against fraud
• alternatives under discussion are
• applying reverse charge
• taxing intra-Community transactions

76
Most recent developments

• Fight against fraud
• at this stage
• discussion is very much ongoing
• views vary considerably
• difficult to predict outcome
• need to report back to ECOFIN in summer

77
Most recent developments

• Reduced rates
• reform of reduced rates proposed in 2003
• resulted in 2006 prolongation of experiment for
  
• labour-intensive services
• leaves obligation for the Commission to report
  on
• impact of reduced rates when applied to
  locally
• supplied services by mid-2007

78
Most recent developments

• Reduced rates
• at this stage
• work under way by independent economic think tank
• yet to come
• receiving final result from think tank
• reporting of outcome this summer
• identifying possible future avenues of reflection

79
Most recent developments

• Financial services
• need to modernise existing rules
• find (limited) solutions to most urgent and
  important problems
• legal uncertainty caused by outdated definitions,
  divergent application, rulings handed down by
  ECJ, etc.
• obstacle to modern business structures with
  outsourcing, pooling, cost-sharing, etc.
• competitive factor vis-à-vis third countries with
  VAT as additional cost

80
Most recent developments

• Financial services
• objective is to
• reduce administrative costs for administrations
  and businesses
• assure budgetary security for administrations and
  legal certainty for economic operators
• address inconsistencies between VAT provisions
  and objective of the Financial Services Action
  Plan
• modernise rules and ensure that they are more
  uniformly applied

81
Most recent developments

• Financial services
• possible elements
• full review of definitions serving for exemption
• right of option to tax
• improvements to right of deduction (pro-rata)
• limited cross-border grouping

82
Most recent developments

• Financial services
• at this stage
• work ongoing with preparing proposal
• in process of preparing impact assessment
• yet to come
• finalising preparatory work
• tabling proposal (autumn 2007)

83
Most recent developments

• Vouchers
• new rules must
• deal appropriately with cross-border situations
  (vouchers issued in one Member State but redeemed
  in another)
• ensure tax neutrality regardless of type of
  different payment (cash, voucher, other
  consideration)
• be simple and easy to enforce
• cope with future changes

84
Most recent developments

• Vouchers
• elements under consideration
• providing definitions of different types of
  vouchers
• harmonising tax point, if any
• reviewing taxation of distribution chain with a
  view to protect the taxable amount
• determining appropriate taxation of payment
  services supplied by the issuer of the voucher

85
Most recent developments

• Vouchers
• at this stage
• working to identify appropriate solutions
• taking account of work done on financial services
• yet to come
• much depending on progress made on financial
  services

86
Most recent developments

• Double imposition mechanism
• objective is to
• avoid double imposition of cross-border
  transactions
• put in place mechanism which may respond to
  problem
• limit this to individual cases
• cover cases not arising from different
  interpretation of basic legislation
• possibly have recovery of tax suspended until
  double taxation is eliminated

87
Most recent developments

• Double imposition mechanism
• at this stage
• web consultation currently ongoing until
  31/05/2007
• yet to come
• analysing responses to consultation
• Main question is it a real problem for
  businesses and citizens?
• deciding on direction of work

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UPDATE ON PORTUGAL Mme Maria Lourdes Amancia Mr.
Jorge Soares Mr. Manuel Prates Mr. Miguel Silva
Pinto Mr. Emílio Ribeirinho Mr. José Proença
Carvalho
89

• VAT REFUNDS TO NON-ESTABLISHED TAXABLE PERSONS
• Lisbon, 20 April 2007
• International VAT Association

90
Structure of the
PresentationI INTRODUCTIONII LEGAL
FRAMEWORKIII - REQUIREMENTS TO QUALIFY FOR
REFUND IV STATISTICS OF REFUNDS ALLOWED (8.th
and13.th DIRECTIVES)V GROUNDS FOR REFUSING
REFUNDS VI - CONCLUSION
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INTRODUCTION

• Council Directives
• Nº 79/1072/CEE of 6/12 (8th )
• Nº 86/560/CEE of 17/11 (13th )

• Internal Law
• Decreto-lei nº 408/87 of 31/12

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II LEGAL FRAMEWORK (DL n.º 408/87 of 31/12)

• VAT paid on supplies of goods and services having
  taken place in Portugal
• Non-established taxable person

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II Legal Framework (cont.)

• Definition of a non-established taxable person
• Any person who can prove his VAT registration in
  another Member state or, being established in a
  third country, is a turnover tax taxable person,
  in so far reciprocity is assured.

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III REQUIREMENTS TO QUALIFY FOR REFUND

• The taxable person cannot have the seat of his
  economic activity, nor a fixed establishment from
  which business transactions are effected, nor his
  domicile or normal place of residence in Portugal
• The taxable person cannot have supplied any goods
  or services in Portugal, with the exception of
• Transport services and services ancillary thereto
• Services provided in cases where tax is payable
  solely by
• the person to whom they are supplied

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III REQUIREMENTS TO QUALIFY FOR REFUND (cont)

• Application to be submitted by the taxable
  person (Model n.º 1496)
• Model 1496 can be purchased at
• site www.incm.pt or
• Imprensa Nacional - Casa da Moeda
• R. D. Francisco Manuel de Melo, 5
• 1099 -002 LISBOA

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III REQUIREMENTS TO QUALIFY FOR REFUND (cont)

• Annex A to the 8th Directive Form
• http//eur-lex.europa.eu/LexUriserv/site/eu/
• consleg/1979/L/01979L1072-20040501-en.pdf

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III REQUIREMENTS TO QUALIFY FOR REFUND (cont)

• Originals of invoices or any other document
  having the same legal value duly issued
• Taxable person certificate (EU - 8.th Directive)
  (valid for one year since issue)

98
III REQUIREMENTS TO QUALIFY FOR REFUND (cont)

• Turnover tax taxable person certificate and proof
  of reciprocity (third countries - 13.th
  Directive)
• Deadline for submitting the request until the
  last day of the month of June of the year
  following the one in which the tax became
  chargeable

99
III REQUIREMENTS TO QUALIFY FOR REFUND (cont)

• Minimum 19,95 (Year )
• 159,62 (Quarter)
• Expenditure not eligible for refund  (art. 21 of
  the Portuguese VAT code - CIVA)

100
III Expenditure not eligible for refund (cont)

• Expenditure listed in artº. 21º. of CIVA
• Gas, diesel, fuel, LPG and natural gas
  (partially)
• Cars, boats, helicopters, planes, motorbikes
• Accommodation
• Food, drinks and tobacco
• Luxuries
• With limits

101
III Requirements of the refund request (cont)

• The request must be submitted to
• Direcção-Geral dos Impostos
• Direcção de Serviços de Reembolsos
• AV. João XXI, n.º 76. 5.º
• 1049-065 Lisboa

102
III Requirements of the refund request (cont)

• Applications by third countries established
  taxable persons (13.th DIRECTIVE).
• Appointment of a tax representative in Portugal,
  in possession of the competent legal instrument,
  who shall be held jointly and severally liable
  for payment of the tax

103
IV STATÍSTICS OF REFUNDS ALLOWED (8ª AND 13ª
DIRECTIVES)
104
IV STATÍSTICS OF REFUNDS ALLOWED (8ª AND 13ª
DIRECTIVES)
105
IV STATÍSTICS OF REFUNDS ALLOWED (8ª DIRECTIVE)
106
IV STATÍSTICS OF REFUNDS ALLOWED (8ª DIRECTIVE)
107
IV STATÍSTICS OF REFUNDS ALLOWED (13ª DIRECTIVE)
108
IV STATÍSTICS OF REFUNDS ALLOWED (13ª DIRECTIVE)
109
IV STATÍSTICS OF REFUNDS ALLOWED (13ª DIRECTIVE)
110
IV STATÍSTICS OF REFUNDS ALLOWED (13ª DIRECTIVE)
111
IV STATÍSTICS OF REFUNDS ALLOWED (13ª DIRECTIVE)
112
V Grounds for refusal

• Request submitted beyond deadlines
• Irregular invoices or irregular documents having
  a similar legal value
• Non-deductible VAT
• (Art. 21. Of CIVA)

113
V Grounds for refusal

• Existence of a fixed establishment in Portugal
• Supplies of goods and services carried out in
  Portugal
• Lack of reciprocity (13th Directive)
• Lack of harmonisation of the exclusion to the
  right to deduct

114
(No Transcript)
115
(No Transcript)
116
COFFEE
117
HMRC 8TH/13TH DIRECTIVE CLAIM ELECTRONIC DATA
CAPTURE P.MC MENAMIN PAUL OHAGAN
118
Our new address from 21st May 2007

HM Revenue Customs VAT Overseas Repayments
Unit PO Box 34, Foyle House Duncreggan
Road Londonderry BT48 7AE
Tel. [phone] Fax. [phone]
119
The Agenda

• Talk about the new initiative

• Feedback and questions

• Provide some facts
• figures

120
Facts Figures
121
Claims received in 2006

• Total 33,395
• 8th Dir 19,721
• 13th Dir 13,674

122
Value of claims received in 2006

• Total 279.5million
• 8th Dir 168.4million
• 13th Dir 111.1million

123

• SPLIT OF CLAIMS 2006

124
FACE VET PROCEDURES 2006

• Introduced from 1st January 2006

• 3757 incomplete applications returned in 2006

• Most common reason No Cert of status

2673
759
675
17
376
364
125

• Numbers of errors per incomplete claim returned

126
Facevet rejections by month 2006/2007
127

• ORU SCANNING AND DATA CAPTURE
• PROJECT

New Process

Face vet, scan, data capture and perforate
paperwork
Stage 2, full details entered on system
Receive claims with invoices attached
Papers perforated
Stage 1 , basic details entered on system
Face vet
Claims classified and audited
Paid / Partly paid / Refused
Paperwork filed/ returned
6 months
ltltlt 3 - 4 months gtgtgt
128

• How will this work?

• New process takes data from paper application and
  populates the existing database.
• A new database for all the invoices received by
  the unit

• Processes that take up to 7 weeks will now be
  done in a matter of days.
• Claims are available for audit much earlier
• Analysis of invoices provides for more
  intelligent risk analysis
• Application available on screen for the auditor
  via an electronic document management system

• What are the benefits?

• Why not go for direct input of applications
  similar to the Spanish system?

• Tactical solution in advance of the reform of the
  8th and 13th Directive.
• Dont want to invest in something that will be
  shelved in 2009/10
• Makes best use of existing systems until 8th Dir
  reform

129
What the new on screen application might look
like.
130

• What the new schedule should look
• like

131
(No Transcript)
132

• ORU SCANNING AND DATA
• CAPTURE PROJECT

Current process
New Process

Questions?
Face vet, scan, data capture and perforate
paperwork
Stage 2, full details entered on system
Receive claims with invoices attached
Papers perforated
Stage 1 , basic details entered on system
Face vet
Claims classified and audited
Paid / Partly paid / Refused
Paperwork filed/ returned
6 months
ltltlt 3 - 4 months gtgtgt
133
UK FACE VET REJECTIONS Justine MC INNES
134

• Overview of general EU law
• principles
• The UK face vet procedure and problems
  encountered
• Application of EU law principles to the UK face
  vet procedure
• The UK appeal procedure
• Our action to-date

135
INTERNATIONAL VAT CLAIMS

• UK FACE VET REJECTIONS

136
Todays talk

• Overview of general EU law principles
• The UK face vet procedure and problems
  encountered
• Application of EU law principles to the UK face
  vet procedure
• The UK appeal procedure
• Our action to-date

137
Overview of general EU law principles
The Principle of Supremacy
By creating a Community of unlimited duration,
having its own institutions.the Members States
have limited their sovereign rights, albeit
within limited fields, and have thus created a
body of law which binds both their nationals and
themselves. Flaminio Costa v ENEL 1964 ECR 585
138
Some sources of EU law

• Treaties
• Directives
• Regulations

139
EU Directives
140
Implementation of Directives

• Directives must be implemented adequately and
  must give proper effect to Community law e.g.
  Commission v France 1974 ECR 359
• Directives must be implemented within specified
  time limits
• Directives must be implemented in accordance with
  general EU law principles e.g.
• Proportionality and
• Discrimination.

141
Proportionality

• General rules
• Is the measure suitable to achieve the desired
  end?
• Is it necessary to achieve the desired end?
• Does the measure constitute a burden on the
  individual that is excessive in relation to the
  objective sought to be achieved?
• Cases
• R v Intervention Board, ex parte E.D. F. Man
  (Sugar) Ltd 1985 ECR 2889
• Rewe-Zentrale AG v Bundesmonopolverwaltung fur
  Branntwein 1979 ECR 649
• Commission v UK 1982 ECR 2793

142
What happens when Directives have been
incorrectly implemented?
The National Court must try to interpret national
legislation in accordance with the EU
legislation Von Colson and Kamann v Land
Nordrhein-Westfalen 1984 ECR1891
143
What happens when Directives have been
incorrectly implemented? cont..

• Cases
• Van Duyn v Home Office 1974 ECR 1337
• Cooperativa Agricola Zootecnica S. Antonio v
  Amministrazione delle finanze dello stato 1996
  ECR 1-4373

144
Conditions for direct effect

• Subject matter must be unconditional and
  sufficiently precise
• Unconditional where the Directive sets out an
  obligation which is not qualified by any
  condition
• Sufficiently precise where the obligation is
  set out in unequivocal terms

145
What happens when Directives have been
incorrectly implemented? cont.

• Frankovich v Bonifaci v Italy (Cases 6 9/90)
  1991 ECR 1-5357 sets out conditions for state
  liability
• The result prescribed by the Directive should
  entail the grant of rights to individuals
• It should be possible to identify the content
  of those rights on the basis of the provisions of
  the Directive
• There must be a causal link between the breach
  of a States obligation and the harm suffered by
  the injured party(ies)

146
Where are we now?

• Supremacy of EU law
• Implementation of EU law particularly
  Directives
• Ways of dealing with misimplemented Directives

147
The UK face vet procedure

• Relevant to a client if that client
• Relevant to that client because
• The procedure consists of

148
The relevant legislation
149
Requirements for VAT to be refunded (under the UK
legislation)

• A valid certificate of status must be enclosed
• The amount claimed must exceed 16.00
• The claim must be signed by the Claimant or by
  their authorised agent
• The claim must include the original invoices,
  with the values in sterling
• If the claim is submitted by an agent, it must
  include a letter of authority from the Claimant.

150
Requirements for VAT to be refunded (under the UK
legislation) cont.

• The claim must be submitted by
• 30th June in the year following the year in which
  the tax was incurred (Eighth Directive claims)
• 31st December in the year following the year in
  which the tax was incurred (Thirteenth Directive
  claims)
• If claim is refused, it cannot be re-submitted
  beyond the deadline (the no second chance
  principle)

151
Problems we have encountered

• Client A and Client B
• A and B have their registered office in the USA
• A and B made a claim for the refund of UK VAT
• A and B had applied for a form IRS 6166 to
  satisfy the certificate of status requirement,
  but no form had been issued at the time of the
  claim
• Claim refused because no certificate of status

152
Has the Thirteenth Directive been misimplemented?
Is there a breach of the UK legislation? No.

• Yes
• The certificate of status requirement of
  Regulation 191(b)(i) does not reflect the terms
  of Article 3.1 of the Thirteenth Directive
• The certificate of status requirement is
  disproportionate
• The no second chance principle is
  disproportionate

153
What are the remedies that may be sought?

• A refund of VAT on the basis that
• The relevant UK legislation should be interpreted
  in accordance with the principle of indirect
  direct effect
• The relevant UK legislation should be set aside
  and the relevant EU legislation relied upon under
  the principle of direct effect
• Damages under the Frankovich principle

154
Where are we now?

• Our view is that
• The UK has implemented the Thirteenth Directive
  incorrectly
• A variety of remedies are available

155
WHAT HAVE WE DONE ABOUT IT?
156
The appeal procedure

• S.83 VAT Act 1994 an appeal may be made to the
  VAT and Duties Tribunal where a taxpayer does not
  agree with a decision by HMRC
• s.83(a) VAT Act 1994 to s.83(z) VAT Act 1994
  sets out the matters which may be appealed
• Where the Tribunal does not have jurisdiction,
  the matter may be eligible for Judicial Review
  e.g. British Sky Broadcasting Group Plc v
  Commissioners of Customs and Excise 2001 EWHC
  Admin 127 (23rd February 2001)

157
Tribunal Procedure SI 1986/590

• Rule 4(1) The time limit for appealing is 30
  days from the date of the decision OR
• Rule 4(2) 21 days from the date stipulated by an
  HMRC officer when they grant an extension to the
  deadline for submitting an appeal
• Rule 19(1) an application can be made for an
  appeal to be served out of time

158
Preparation for the hearing of the appeal

• Appellants and HMRCs list of documents
• HMRCs statement of case
• Witness statements and other evidence
• Bundles of documents

159
Costs

• Generally, a Tribunal direction is made for the
  unsuccessful party to pay the reasonable costs
  of the successful party
• As a rule of thumb, usually about 66 of the
  total costs incurred is considered reasonable

160
Where are we now?

• The matters which can be appealed to be a VAT and
  Duties Tribunal are detailed in s.83 VAT Act 1994
  
• Those which cannot be appealed to a VAT and
  Duties Tribunal may be eligible for Judicial
  Review
• Appealing a matter to a Tribunal can be an
  expensive process the benefits must outweigh the
  costs

161
Client A and Client B

• Notice of appeal submitted in February 2007
• Grounds of appeal are that
• The Thirteenth Directive has been incorrectly
  implemented
• Client A and Client B are entitled to a refund of
  VAT or to damages under the Frankovich principle

162
Client A and Client B cont..

• Very brief Statement of case dated 22nd March
  2007 received for Client B
• Client A will probably be stood over behind
  Client B
• Counsel to be instructed
• Argument is a legal, not a factual one
• Witness evidence unlikely

163
Where are we now?

• Appeals submitted for Client A and Client B
• Basis for appeals is that Thirteenth Directive
  has been misimplemented

164
Conclusion

• Face vet procedure is too stringent in light of
  the terms of the Thirteenth Directive
• We have had two clients with problems and are
  expecting more
• Two appeals have been submitted in respect of
  these clients

165
LUNCH
166
UK RECOVERY IN FINANCIAL SERVICES R.OSTILLY
167
FINANCIAL INSTITUTIONSClaiming into the
UKUpdate for Members of the IVA

• 19 20 April 2007
• Lisbon

168
AGENDA

• Background
• Technical Arguments
• Activity of IVA to date
• Next Steps Advice to Members
• Conclusion

169
BACKGROUND
GIBRALTAR
UK
Purchase of motor insurance policy
ASSOCIATED COMPANIES
1
2
100 Reinsurance Contract
National Insurance Group Ltd Established in the UK
Motor-Vehicle Repairs
4
85 Retrocession
3
5
6
Invoice to WHA for cost of repairs
Invoice to Viscount for cost of repairs
Garage / Mechanics Established in the UK
170
BACKGROUND

• WHA litigation
• Court of appeal rules in favour of WHA based on
  domestic legislation
• UK went too far in implementing 13th Directive
• Art. 17(3)(c) not carried through to 13th
  Directive
• HMRC believes it is entitled to amend UK domestic
  legislation to stop the mischief of WHA
• Reg. 190(1)(c) was added in Nov 2004, which
  blocks refunds of VAT for non-EU business making
  specified supplies ? i.e. Fin Institutions who
  make supplies to customers outside of E.U.
• Invoices dated Nov 04 onwards (mostly submitted
  in claims by 2005 and assessed by June 2006)
  would be rejected by HMRC
• Many agents have since seen rejections with
  standard 6 part questionnaires , or outright
  rejections.

171
TECHNICAL CONSIDERATIONS

• Art. 17(3)(c) allows deduction of VAT relating to
  exempt supplies, where provided to customers
  outside of E.U.
• Ensures neutrality of the tax
• Art. 2 of 8th Directive (which mirrors 13th
  Directive) specifically mentions scope of refunds
  to transactions referred to in Art. 17(3)(a) and
  (b)
• Explanatory memorandum to 8th Directive clearly
  indicates why express reference to Art. 17(3)(c)
  is NOT required.
• Court of Appeal ignores this. Places significance
  to the omission of Art. 17(3)(c), implying that
  refund is not allowed.
• It seems as if neither the Court of Appeal nor
  HMRC have considered the explanatory memorandum
  to the 8th Directive.

172
TECHNICAL CONSIDERATIONS

• HMRC believes that, they are bringing UK
  legislation into line with E.U. legislation
• HMRC understands that in doing so, not only will
  they effectively stop the abusive nature of
  WHA-type arrangements, but will also block all
  legitimate claims.
• HMRC does not feel that it has sufficient
  protection in light of the Halifx doctrine to
  stop the mischief, and are simply hiding behind
  the Court of Appeal decision as providing the
  vires for their actions.
• IVA Members (and their clients) have, since June
  2006, received two types of rejections for all of
  these claims
• Query rejection, with 6 standard questions
• Outright rejection, quoting Regulation 190(1)(c)
• Feedback from Members suggest that HMRC in
  Londonderry have applied this legislation
  inconsistently, sending out mixed messages to
  Members and their client.

173
ACTIVITY OF IVA TO DATE

• 24.11.06 Representation at joint HMRC/ LSCA
  conference
• 20.12.06 Meeting with HMRC Director of
  Business,
• Deputy Director of Policy
• 29.01.06 Meeting with HMRC Director of Policy,
• Anti-Fraud and ORU Policy
• 13.04.07 Letter of representation to HMRC by
  IVA with proposal
• Provide a way out to HMRC
• Allow legitimate claims
• Reserve views on wider aspects of 13th Directive
  in view of complaint to commission

174
NEXT STEPS ADVICE TO MEMBERS

• Follow up call with HMRC scheduled for 23 April
  2007
• Keep submitting claims
• Respond to all queries
• Keep all appeal periods open
• Provide feedback (via Pam)

175
UK DEVELOPMENTS P.BEIGHTON
176
Work in Progress

• 6166 Certificates from USA
• Out of Time claims
• Financial Services Companies
• New Address

177
6166 Forms or alternative proof

• Correspondence and discussions are currently in
  place to propose alternative means of evidence of
  Taxable Status
• Public Notice 723 states
• When you make your first claim you must also
  include a certificate from the official authority
  in your own country showing that you are
  registered for business purposes in that country.
  When you apply for the certificate, make sure you
  ask for it to show all the information that the
  UK authorities will need to process your claim.
  For example, if the invoices are made out in your
  companys trading style, the certificate must
  show this as well as the name of the person
  registered.
• The certificate must contain
• the name, the address and official stamp of the
  authorising body
• your own name and address
• the nature of your business and
• your business registration number.

178
Claims from Financial Services Companies

• Negotiations are in place with regard to the
  validity of claims submitted on behalf of
  financial service companies.
• HMRC are requesting additional information for a
  number of claims of this nature. On submission of
  the additional information some claims are being
  paid, others are subject to further scrutiny or
  rejection

179
Out of Time Claims filed with Overseas
Repayments Unit, HMRC

• Following members difficulties with claims
  returned as Out of Time, we have carried out some
  investigative work as to WHY these are not picked
  up at Face Vet stage
• This is because technically the claims are not
  out of time, it is the invoices submitted within
  the claim that are out of time.
• Face Vet Process literally checks that a claim is
  complete, i.e. Signed and dated claim ford,
  Original Invoices, Certificate of Taxable Status,
  Letter of Authority

180
HM Revenue Customs are moving! New address
from 21st May 2007

HM Revenue Customs VAT Overseas Repayments
Unit PO Box 34, Foyle House Duncreggan
Road Londonderry BT48 7AE
Tel. [phone] Fax. [phone]
181
COFFEE
182
ECJ CASE UPDATE and a few comments re
France S. DALE
183
A few comments re France

• Doctrine 3D-1323 8th Directive
• Phantom VAT numbers! DLF December
• VAT grouping Art 261B cross border.
• VAT deduction rules Decret 16 April
• Repondant under attack!!

184
ECJ cases November 2006 April 2007 C 35/05
- Reemtsma Recovery of VAT incorrectly charged. C
111/05 Aktiebolaget NN Supply and installation
of an undersea fiber-optic cable C 435/05
Investrand BV C 401/05 VDP Dental Laboratory
NV Scope of the exemption (Article 13A(1)(e))-
Subcontracting to a dental technician C 240/05
Eurodental Sarl Right to deduct- Intra-Community
transactions related to transactions which are
exempt within the MS manufacture and repair of
dental prostheses C 13/06 Commission V Hellenic
Republic Exemption (Article 13B(a)) Road-side
assistance services Insurance transactions
185
ECJ opinions November 2006 April 2007 C
409/04 Teleos plc and others Exemption of an
Intra-Community supply/acquisition- proof
required C146/05 Albert Collé Exemption of an
Intra-Community supply/acquisition-
proof required C184/05 Twoh International
BV Exemption of an Intra-Community
supply/acquisition- proof required C 363/05 JP
Morgan FCI Trust plc Exemption of the managements
of special funds Concept of special investment
funds closed-ended investment funds (investment
trust company)
186
ECJ opinions November 2006 April
2007 C-434/05 Horizon College Exemption
article 13 A (1)(i), 13 A(1)(j)-Supply of teacher
by one school to another and tuition within a
school by an independent teacher C-97/06
Navicon SA Exemption- Article 15(5) of the 6th
Directive The concept of chartering C-335/05
Rizeni Letiveho Provozu UR SP VAT refunds to
foreign businesses - 13th Directive GATS -
most-favoured-nation clause
187
ECJ CASES C 111/05 Aktiebolaget NN Supply and
installation of an undersea fiber-optic
cable The ECJ has confirmed the
Advocate-General's opinion that the supply and
installation of a cable constitutes a supply of
goods (as opposed to a supply of services). The
place of supply of which is where the cable is
installed. However, the part lying in the
exclusive economic zone, on the continental shelf
or on the seabed are not taxable. This case may
present opportunities for businesses that have
been involved in similar contracts and who may
have over declared VAT, either on the assumption
that they were supplying services, or on the
basis that the supply was one of goods but was
wholly chargeable to VAT.
188
ECJ CASES C 435/05 Investrand BV Right to
deduct Costs related to advisory services
obtained in the course of arbitration proceedings
to establish the amount of a claim that forms
part of a companys assets, but arose before its
holder became liable to VAT . The costs for
advisory services obtained with a view to
establishing the amount of a claim forming part
of his companys assets and relating to a sale of
shares prior to his becoming liable to VAT do
not, in the absence of evidence establishing that
the exclusive reason for those services is to be
found in the economic activity carried out by the
taxable person, have a direct and immediate link
with that activity and, consequently, do not give
rise to a right to deduct the VAT charged on
them.
189
ECJ CASES C 401/05 VDP Dental Laboratory
NV Scope of the exemption (Article 13A(1)(e))-
Subcontracting to a dental technician The ECJ
has held that supplies of dental prostheses made
by an intermediary who does not have the status
of dentist or dental technician are not covered
by the exemption provided for in Article
13A(1)(e) of the 6th Directive. As these
supplies are subject to VAT, the right to deduct
the