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IATJ 9th Assembly in Ottawa Tax Fraud in VAT/GST

IATJ 9th Assembly in Ottawa Tax Fraud in VAT/GST. Jennifer Davies Annie Rochat Pauchard Friederike Grube. Topic preview. Introduction Case Law - Legal tax avoidance versus tax abuse GST/VAT- Fraud („ missing trader-fraud “)

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IATJ 9th Assembly in Ottawa Tax Fraud in VAT/GST

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  1. IATJ 9th Assembly in OttawaTax Fraud in VAT/GST Jennifer Davies Annie RochatPauchard Friederike Grube VAT/GST-Case Law

  2. Topic preview • Introduction • Case Law - Legal taxavoidance versus taxabuse • GST/VAT-Fraud („missingtrader-fraud“) • Fraudandliability of taxablepersonsinvolved in the „chain“ of suppliesorservices • Summary andoutlook VAT-GST Case Law

  3. Introduction • Nodiscussion of casesconcerningpenaltylaw - VAT/GST-Law only • Itisestimatedthat in total about EUR 153 billions was lost in 2015 due toshortcomings in VAT collectionincludingfraud (seriousconsequencesforstatebudgets - COM 2017 – 706 final 30.11.2017) • The fightagainst „missing-trader“ fraudispart of thepolicy of EMPACT- priorities of EUROPOL 2014 - 2017 (EMPACT: European MultidisciplinaryPlatformAgainst Crime Threats ) VAT-GST Case Law

  4. Introduction: Tax avoidance/taxabuseEuropean Law • EU: Principlethatabusepracticesareprohibited • The ECJ has held on various occasions that preventing possible tax evasion, avoidance and abuse is an objective recognised and encouraged by the VAT-Directives and that the effect of the principle that the abuse of rights is prohibited is to bar wholly artificial arrangements which do not reflect economic reality and are set up with the sole aim of obtaining a tax advantage (ECJ 20. June 2013 - C-653/11 Newey, Rz 46) VAT-GST Case Law

  5. Introduction: Tax avoidance/taxabuseEuropean Law • Transactions mayberedefinedwiththeconsequencethatthosetransactionswhich do not constitute such a practicemaybesubjectto VAT/GST on thebasis of the relevant provisions of national legislationprovidingfor such liability • e.g. This principlemaybeapplieddirectly in ordertorefusetoexemptfrom VAT sales of immovablegoods (ECJ 22 November 2017 - C-251/16 Cussens) VAT-GST Case Law

  6. Introduction: „Missing-trader“ fraudin the European Union MS 1MS 2 A->--supply-->--MT-->--------C->--------D Missingtrader (MT) isthetaxablepersonwhodoes not payany VAT/GST withregardtothetransactionscarried out byMT; MTprefersto „disappear“ instead… VAT-GST Case Law

  7. Introduction: ECJ-Jurisdictiontofight„Missing-trader“ fraud • …. itisforthe national authoritiesandcourtstorefuse a taxableperson, in thecontext of an intra Community supply, thebenefit of therightstodeduction of, exemptionfromorrefund of VAT, even in theabsence of provisions of national lawprovidingfor such refusalititisestablished, in the light of theobjectivefactors, thatthattaxablepersonknew, orshouldhaveknown, that, bythetransactionrelied on as a basisfortherightconcerned, it was participating in evasion of VAT committed in thecontext of a chain of supplies • ECJ 18 December 2015 - C-131/13, C-163/13 SchoenimportItalmoda; ECJ 28 July 2016 – C-332/15 Astone VAT-GST Case Law

  8. Introduction: New concept in the EU toavoid „Missing-trader“ fraud • Proposalfor a Council Directive 25.05.2018 COM (2018)329 final 2018/0164 (CNS) – not adoptedyet • New Concept of intra-Union supplies of goods: • A supplycarried out by a taxablepersonfor a taxablepersonorfor a non-taxable legal personwherebythegoodsaredispatchedortransported, byor on behalf of thesupplierorthepersonacquiringthegoodswithinthe Union, fromone MS toanother MS… • thesupplyischargedwith VAT of the MS of destination/thesupplieris in principleliableforthe VAT, but accordingto a reverse-charge-mechanismtheacquirer of thegoodsshouldpaythe VAT in the end VAT-GST Case Law

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