1. European VAT – General Principles
EU Taxation
European VAT – General Principles
Arvind Ashta
ESC Dijon
Introduction
Territory
Taxable Person
Taxable Transaction
Place of Taxable Transaction
Chargeable event
Taxable Amount
Tax Rates
Exemptions
Deductions
Persons liable for payment of tax

2. Introduction 1967: First Directive (introduce by 1970)
1973: Nine different systems
1977: Sixth Directive on Harmonization
1991: Intra-community borders abolished
1999: Labour-intensive services
2000: Tax representation made optional
2002: Imports of radio, TV and electronic services taxed at place of consumption

3. Territory All of EU Excluded Included Canary Islands French DOMs
Monaco in France
Isle of Man in UK

4. Taxable Persons A person who engages in Exemptions Inclusions
Economic Activity
Independently
Even occasionally
Exemptions
Illegal
Free
Public bodies (except for commercial activities)
Private consumers
Inclusions
Any person buying new means of transport from another member-State
Imports : taxable person includes consumers

5. Taxable Transactions Supply of Goods Supply of Services Imports
Transfer of economic ownership
Deemed supply of goods (for self, employees)
Supply of Services
Any transaction which is not a supply of goods
Imports
Intra-Community Acquisitions

6. Place of Taxable Transaction
General rule
Where transport begins
Where Supplier has fixed establishment
Exceptions
Many services (real estate, entertainment)
Works contracts (registration number)
Imports (country of import)
Intra-community acquisitions (destination generally)

7. Supplier- OSP – Customer

8. Principal- OSP1-OSP2-Principal

9. Intra-Community Acquisitions
General Rule:
Supplies exempt, Purchases Taxed, In Destination country
Taxable Persons:
Intra-community acquisitions added to sales
But also deducted from purchases
Conditional exceptions:
Country of origin: Small farmers, consumers buying < € 10000
Mail orders, etc shipping < € 100,000 (or € 35,000)
Exceptions
Transport, Ancillary services to transport, Intermediaries in transport
Inclusion:
Consumer buying transport

10. Intra-Community Transactions

11. Triangular Sales Goods dispatched directly

12. EXAMPLE
B is French (VAT 19.6%). He purchases goods worth € 50,000 from A, an English company (VAT 17.5%), and directs that send goods directly to C in Italy (VAT 20%). The English company, bills B for the transport of € 5000 also. B bills his Italian customer, C, for € 75,000. The diagram in the above box therefore describes the situation. The taxation would depend on where B is registered.

13. REGISTERATION and VAT

14. REGISTERATION and VAT

15. Example 2: In the above triangular sale case, if the English company wants to charge the French company € 5,000 for transporting goods directly to Ireland, what would be the tax on the transport.

16. Example 2: In the above triangular sale case, if the English company wants to charge the French company € 5,000 for transporting goods directly to Ireland, what would be the tax on the transport.

17. Chargeability General rule Exceptions to general rule Chargeable event
Delivery of goods
Performance of service
Tax becomes chargeable
When authority entitled to it
On delivery of goods
On payment by customers for services
On importing (crossing customs barrier)
Exceptions to general rule
Repeated payments (for services & construction work)
At time of billing: last installment
On-account payment
Each payment

18. Tax liability Goods/services Imports Intra-community transactions
Earlier of invoice or delivery / performance
Imports
Time of importing or included in tax return
Intra-community transactions
Later of chargeable event or Invoice but before 15th of month after acquisition

19. Example: ABC Limited, a French company buys shoes from Italy
Example: ABC Limited, a French company buys shoes from Italy. Delivery is made on 20th of April.

20. Example: ABC Limited, a French company buys shoes from Italy
Example: ABC Limited, a French company buys shoes from Italy. Delivery is made on 20th of April.

21. Tax Rates Vary from one country to another Minimum 15%
One or two lower rates, at least 5%
No refunds should result
No new Zero tax rates

22. Exemptions Within the country International transactions
Public Interest
Others (insurance, credit, real estate)
No deductions allowed
Option to be taxed for some of these
International transactions
Exports
Deductibility allowed
Import of items which are exempt from domestic VAT
Temporary imports, VAT warehouses

23. Deductions Deduction of input VAT by taxable persons
Not by final customers
Not by holding companies
As soon as invoice received
If taxable and non-taxable business, proportional deductibility allowed

24. Example: A buys inputs of € 500 and sells for € 1000 to B
Example: A buys inputs of € 500 and sells for € 1000 to B. B makes a local sale for € 2000.

25. Persons liable for payment
Taxable person
If reverse charge is applied, the receiver
If identification number issued, the registered person
For imports, the importer
Taxable representative optional

26. Calculate VAT due

27. Calculation of VAT due

28. Calculation of VAT due